RIS News,
December 2006
Managing Customer Contact
Retailers reward customers with targeted promotions
Retailers reward customers with targeted promotions
By Mary L. Carlin
With an in-depth view of customer data, retailers are influencing buying decisions instead of just recording them, and they are striving to enhance customer interactions and the in-store experience to differentiate their businesses from the competition, satisfy customer expectations, and gain long-term loyalty. The urgency of these goals is punctuated by the fact that shoppers make 70 percent of their buying decisions once they are inside the store, as reported by AMR Research in its '21st Century Store Tech Trends Survey.'
The Holy Grail
Because of ineffective data collection and management, "retailers are mismanaging a lot of the challenges of customer contact," says retail consultant Jim Dion, founder and president of Dionco. The challenge lies in convincing customers to trust their data with you. In the future, Dion predicts we'll get better at analyzing data and anticipating customer needs for the demand chain. "The demand chain is the Holy Grail," he says.
Reward card programs are often the primary means of collecting customer data. These programs are beneficial to retailers because they tie transactions to individuals. "The very best get an 85 percent capture rate; 50 percent to 60 percent is average," Dion continues. "That data can be used for buying purposes, tailoring inventories, promotions, birthday cards, targeted couponing, and anticipating customers' needs. Interactions between products and promotions can produce five times more pull than marketing for just one. We all cast a data shadow, and it's getting longer."
Software for these programs comes in modules for the POS and in packages. "It's a niche business," says Dion. "CRM investments have one of the fastest paybacks, within six to eight months, and the ROI will stay and even grow."
According to Dion, retailers who have successfully executed customer-centric loyalty programs include: Saturn for its prolonged customer follow-up, Amazon for its product clustering for suggestive selling ('Other' customers also bought…), and CVS, "Because the others are so bad. If you lose the CVS Extracare card, they can use your telephone number to pull up your data in two seconds, at the point of sale."
Appreciation and Retention
A number of retailers are hitting the mark with their interactive loyalty programs. Sam's Wines & Spirits is striving to take better care of its existing customers using its CRM and reward card data to segment offers and individualize customer transactions. The multichannel retailer does 70 percent of its volume in its three stores, and 30 percent via delivery, email, Internet, and telephone sales. Annual sales revenue is currently $65 million, and two of their three stores opened in the last two years.
"We stress selection and service, and build our business that way," says Darryl Rosen, president, Sam's. "The current retail trend is to take care of your existing customers better, to make them feel appreciated. It used to be about getting the sale, but now the focus has shifted to what happens later." Sam's Wines & Spirits uses Magstar's Total Retail suite of retail systems in-store, which includes a frequent buyer program to accumulate points and give credits in real time at the register. Previously the retailer mailed gift cards with accumulated points to customers, which was more labor intensive and costly. To further personalize the process, the system tracks large customer transactions and preprints thank-you notes for Rosen to personally sign and mail to those shoppers. Personalization is key, says Rosen. The retailer is using customer information to customize offers, and Rosen predicts extensive future use of this data. "We need to use data to zero in and keep customers," he says. "The next step will be report writing and trend-spotting software to overlay the data and find out a customer's average ticket size, their time-of-year spending, and when they stopped shopping with us, so we can send an appropriate promotion." As a result, Sam's perceived value and margins are up, and they've cut marketing costs by shifting from newspaper ads to catalogs and newsletters sent to rewards members only.
The Holy Grail
Because of ineffective data collection and management, "retailers are mismanaging a lot of the challenges of customer contact," says retail consultant Jim Dion, founder and president of Dionco. The challenge lies in convincing customers to trust their data with you. In the future, Dion predicts we'll get better at analyzing data and anticipating customer needs for the demand chain. "The demand chain is the Holy Grail," he says.
Reward card programs are often the primary means of collecting customer data. These programs are beneficial to retailers because they tie transactions to individuals. "The very best get an 85 percent capture rate; 50 percent to 60 percent is average," Dion continues. "That data can be used for buying purposes, tailoring inventories, promotions, birthday cards, targeted couponing, and anticipating customers' needs. Interactions between products and promotions can produce five times more pull than marketing for just one. We all cast a data shadow, and it's getting longer."
Software for these programs comes in modules for the POS and in packages. "It's a niche business," says Dion. "CRM investments have one of the fastest paybacks, within six to eight months, and the ROI will stay and even grow."
According to Dion, retailers who have successfully executed customer-centric loyalty programs include: Saturn for its prolonged customer follow-up, Amazon for its product clustering for suggestive selling ('Other' customers also bought…), and CVS, "Because the others are so bad. If you lose the CVS Extracare card, they can use your telephone number to pull up your data in two seconds, at the point of sale."
Appreciation and Retention
A number of retailers are hitting the mark with their interactive loyalty programs. Sam's Wines & Spirits is striving to take better care of its existing customers using its CRM and reward card data to segment offers and individualize customer transactions. The multichannel retailer does 70 percent of its volume in its three stores, and 30 percent via delivery, email, Internet, and telephone sales. Annual sales revenue is currently $65 million, and two of their three stores opened in the last two years.
"We stress selection and service, and build our business that way," says Darryl Rosen, president, Sam's. "The current retail trend is to take care of your existing customers better, to make them feel appreciated. It used to be about getting the sale, but now the focus has shifted to what happens later." Sam's Wines & Spirits uses Magstar's Total Retail suite of retail systems in-store, which includes a frequent buyer program to accumulate points and give credits in real time at the register. Previously the retailer mailed gift cards with accumulated points to customers, which was more labor intensive and costly. To further personalize the process, the system tracks large customer transactions and preprints thank-you notes for Rosen to personally sign and mail to those shoppers. Personalization is key, says Rosen. The retailer is using customer information to customize offers, and Rosen predicts extensive future use of this data. "We need to use data to zero in and keep customers," he says. "The next step will be report writing and trend-spotting software to overlay the data and find out a customer's average ticket size, their time-of-year spending, and when they stopped shopping with us, so we can send an appropriate promotion." As a result, Sam's perceived value and margins are up, and they've cut marketing costs by shifting from newspaper ads to catalogs and newsletters sent to rewards members only.
