Companies are struggling to use the customer information they glean through loyalty schemes in a meaningful way
Why do loyalty programmes as a tool for engagement continue to underperform in India?
Let’s begin with just plain loyalty and first understand how it must work. Loyalty programmes are mostly launched as a part of a brand initiative. Brands start thinking about connecting with the consumer and what they can do to enhance the brand connection with her. Here, we move to the mechanics of what role loyalty is going to play within that environment. This is generally about what we call value exchange. In most instances, the first step in the reward process is about giving currency back to the consumer or may be discounts.
When you get through this stage to getting data about customers in place, one finds the more sophisticated players moving upstream. This is the second ‘R’ in the process, known as ‘recognition’. It is all about knowing who your best customers are and how you differentiate a programme for them. This, in its ultimate form, gives what we call ‘relevance marketing’. Put simply, based on what you shop at my store, your preferred products and services, what are the benefits that I can provide to you, is what is relevance marketing.
I see that across the spectrum, most Indian retailers stop at rewards. There is tremendous opportunity for those looking at proprietary programmes (each retailer having its own individual loyalty programme) to look at how they can leverage the gains from the recognition and relevance steps and how they can use them as differentiators from what they are doing today.
The buzzword today is ‘big data’. What role can loyalty programmes play in beefing up this big data repository?
Big data involves the accumulation of a very broad swath of information across an enterprise. The issue, even globally, is that there are very few companies that are utilising it. It is evolving and I think in another five-ten years we will be in a very different position. Currently, most companies are struggling to use the customer information that they have, even through loyalty schemes in a meaningful way.
Looking at the customer’s shopping patterns to understand your business from a different perspective creates dramatic opportunities for a retailer in general. For instance, we’ve worked with our clients to design their price and promotion strategies after studying the shopping patterns of the consumers and how they react to pricing in different categories. We have studied how this information can be used to focus on assortment strategies and where one should put what in the stores. All these are questions that can be answered by elements of customer information.
Freeing up this information can help create a powerful enterprise asset. The big data piece is all about visibility: how are you using the information to understand customers better.
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There is ‘big data’ and then there is the ‘right data’. Do you think Indian retailers are moving in the right direction?
The conversation we are having with many Indian retailers, in fact, is about how does one collect that bedrock of consumer information. In India, the amount of data collected is extremely low and the updation of that data is almost non existent. A large chunk of the data collected is, in fact, quite irrelevant and never updated. So that data, which is not current and dynamic, is actually worse than no data.
What we’ve found is that behavioural data is a strong predictor of future behaviour. Collecting a birth date, for example, doesn’t say much about the person. It is just a point in time. Instead if we look at the customer’s historical purchasing data, it will give you a lot more insight into what stage of life one is in. For instance, studying the purchase basket of the consumer over time can help you understand whom is she shopping for. Is she shopping for herself or for her children or other family members and friends? Such information can probably lead brands and companies to a whole new approach towards the customer in question, instead of sending her just flowers on birthdays and anniversaries.
What is the potential for coalition programmes in India?
We’ve done extensive research among consumers and found that there is a high level of interest in shared currency being used across retail touch-points. This could be because when one looks at the broader Indian population, a very small percentage uses organised retail for the bulk of their shopping needs. Most people use a balanced approach towards what they buy from their local kirana stores and what they buy from larger, organised outlets. This Indian customer who goes to an organised retail outlet once a month or maybe once a quarter is one of the reasons for low participation in standalone programmes today. A coalition programme in this scenario is a way of saying, earn a little across places and in the end get something meaningful as a reward for your efforts vis-a-vis a standalone programme where you may earn a discount but which may not be too significant owing to the low quantum of transactions.
From the retail standpoint though, many feel that managing loyalty programmes and analytics in-house is better. What can retailers gain from coalition programmes?
I think the key here is shared learning that an external provider will have by way of working across a number of categories and geographies. If retailers only stick to data analysts, they will fail to open up to the vast breadth of experience that another knowledge partner can bring to the table. They will not get a 360 degree view of their customers — for example, what car does the customer drive, how many credit cards does she have, where does she holiday, what else does does she do and what else are her key shopping patterns?
This information is possible with coalition programmes, which in turn, can help in determining information on just how the customer behaves outside stores. This is the benefit of a shared model where data is invariably shared across retailers.
In India, coalition programmes can work for two reasons — consumers’ participation in loyalty programmes will get a boost as they will see the opportunity as a part of a larger pool of opportunities. And the second advantage will be that the data pool, which sits beneath the shared currency, can provide much better insights.
Can you elaborate on how getting a 360-degree view of the customer really benefits the retailer?
Let us consider a case study. Say, the retailer is planning to bring down a premium player to India. The first question the other player will have is that how many in the database will be ready customers for the brand. Here, if you have access to data beyond just the consumer’s purchasing pattern in your store, you can ascertain the number of premium buyers in your database. The data, such as what car they have, where they holiday, their frequency of shopping at other specialised retail outlets, can help in getting a rounded profile of the consumer. This will help in finding whether the customer really fits the profile of this brand you plan to bring down.
How will foreign direct investment (FDI) in retail change the loyalty landscape in India?
With (FDI) in retail coming into the market, things will change. A number of Western retail players will enter the market. They’ve either worked in partnerships or behind the scenes with brands. To that extent, India has been insulated till date. There are some very sophisticated players like Tesco that have mastered the migration value chain in loyalty. So, every market Tesco enters, it launches a Tesco Club kind of loyalty programme. It is way high up in the recognition and relevance levels. The Indian retail community must prepare for the fact that the market is opening up and how these retailers operate. It is part of their arsenal in the markets they enter. And so if you are not looking at ways to differentiate your loyalty programme, then you may end up falling short of what may be the norm in this competitive market.
| Bryan Pearson - the loyalty expert |
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