Relevance Marketing in Retail through loyalty card programs

A few days ago, as I was clearing my inbox, I stumbled across an e-mail I had received from an Indian retail chain. It was regarding the loyalty card I hold with them, on which I accumulate points whenever I shop at any of their stores.

Besides informing me of the points I had accumulated in the month, it also contained a detailed history of my shopping (in terms of purchases that month as well as a proportionate split of categories purchased over a 1 year period). The researcher in me was fascinated at this accumulation of interesting data on consumer spend patterns.

My interest piqued, I dug a little deeper going through other mails (ignored earlier as spam) from this retailer. I discovered other mails offering bonus points if I purchased a specific brand of baby health food drink (which I purchase regularly at their store) and adjacent marketing in the form of free child nutrition counselling from the same brand!

This retailer was well and truly on the path of creating ‘relevance marketing’.

As India’s modern retail revolution marches forward, most large outlet chains are struggling to bridge the gap between reward and relevance. Most choose to stop at reward points that can be redeemed at any point in time by the card holder. This in essence limits the customer to a value proposition.

The next evolutionary leap that most retailers in India, are slowly catching on to only recently is ‘recognition’. Sifting through a huge customer population, identifying the best customers and creating a truly differentiated program for them. This is creating ‘relevance’, to the point of personalization delivered by ‘mom and pop’ store owners who know their regulars well enough to offer them tailored services i.e. based on what you shop at my store, your preferred products and services, what are the benefits that I can provide to you.

The ultimate goal for any marketer would be this scene out of ‘Minority Report’, set in the year 2054, where the character of Tom Cruise is bombarded by personalized communication as he walks through a mall to the level of even specific enquiries about his satisfaction with past purchases.

While the above might look futuristic, this future is closer than we think. In the US, Neiman Marcus, the luxury department store, is using customer data to offer is clientele an enhanced shopping experience. With the help of an app, the sales person is alerted when a specific buyer is back in the store (and who they have assisted in the past). They also have instant access to customers’ previous purchases on a tablet, enabling them to make relevant recommendations.

Just collecting data is not enough. It has to be dynamic

In India, though there exists a huge potential target base, the data currently collected by modern retail is not nearly dynamic enough to enable targeted marketing. Static data such as date of birth, anniversaries are a great way for a retailer to stay in touch, but, to be relevant it is more important for a retailer to know the purchase basket over time, who the consumer is shopping for (self, children, other family members and friends), what is their frequency of visit and shopping pattern, thereby creating an effective shopper DNA.

The real power of such dynamic data is truly unleashed when it helps create opportunities for the retailer in areas such as pricing and promotion strategies (looking at how consumers change their shopping patterns in reaction to pricing over a sustained period of time). It can also help retailers maximize shopping potential through shelf assortment strategies and product adjacencies (where one should put what inside the store).

Making it worthwhile for the consumer

Another problem with loyalty card programs in India is that because of the nature of the trade most people use a balanced approach towards what they buy from their local grocer (kirana) stores and what they buy from the organized outlets. Hence a standalone program might not be worth the while for a customer who shops at a store only once a month or maybe with even less frequency.

Reliance Retail one of the largest retailers in the country seems to have hit upon the optimal solution to counter this by offering a single loyalty card to its customers that works across all its businesses. So customers can accumulate points on a single card shopping at any of their stores ranging from (consumer durables, electronics, clothing, household essentials, vegetables/fruits, books/DVDs etc.). Not only does this present the retailer with an opportunity to cross sell but also gives customers the incentive to earn a little across multiple transactions, across various stores, which can accumulate into a meaningful reward down the line.

Big growth is projected for the loyalty cards market in India (currently estimated at Rs. 5,000 crore), almost to the tune of 60-65%, over the next 3 years. However this potential is only likely to be realized if retailers smarten up their act and provide more meaningful loyalty programs in the future.

“When the customer comes first, the customer will last”
Robert Half – Founder of RH International

This blog post has been written by ASHISH CHOUDHARI, Associate Vice-President, Brandscapes Worldwide.

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About Brandscapes Worldwide

Brandscapes specializes in marketing analytics and insight consulting for consumer goods, services and the retail sectors. We leverage the power of advanced data mining tools and the practical marketing and communication planning expertise to distil actionable marketing insights.
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