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A key marketing objective is to increase retail footfalls. Successful mass marketing - through mediums, such as TV, billboards and in-store advertising - builds both an extensive reach and a brand image that is positive enough to increase purchase consideration. But once a customer has had a bite of your brand, marketers who specialise in targeted marketing are best suited to execute the next leg of the journey. Targeted marketers work with smaller audiences and aim to convert one-time customers to repeat purchase customers. They use data to identify the best customers in the database, and find more customers that look like your best customers. Even more importantly, they can identify those with the potential to grow their purchasing of your brand. As the chart shows, the purpose of targeted marketing is to lift and shift customer spending to lead customers to regular consumption, or retention. At the retention stage, a company can attribute a regular spending behaviour to certain customers and also classify them as profitable.
The marketing journey passes through three clear stages: mass marketing, targeted marketing and customer experience management (where customers who are sold on your brand are given more open appreciation and become real brand advocates). This journey is much like a funnel - you advertise the brand to a large base of prospective customers expecting a small number of them to proceed to product trial. An even smaller number will become frequent repeat customers, and only a handful will become brand advocates through social media and customer referrals.
Know thy customer
In India, the common practice is to collect customer birthdays as data points on which to build relationship. But personalised marketing activities mandate different sets of customer data and tools than what mass marketers use. For starters, targeted marketers can identify customers with accurate contact information and transactional data. This marks a turning point. Using this information and subsequently getting to know more about those customers drives a level of targeting and retail merchandising that goes deeper than what mass marketing can achieve.
Models for success
Modelling helps targeted marketers make sense of customer-specific data collated for a huge number of customers. It would be prohibitively expensive to make relevant offers to individual customers based on their personal situations. So, targeted marketers create financial models based on segments populated by such customer data. This allows them to create segments of customers who have similar shopper profiles, and are equally likely to respond. Then, marketers can target offers to specific segments instead of the entire customer database. Segmentation models yield lists of high-value customers. Propensity models help marketers determines, which customers might be interested in a new product line.
Individual customer spend curves inform marketers of precisely when that customer is likely to have higher purchasing power and, hence, is best targeted. Trigger-based campaigns and geo-targeting are other useful models.
Targeted marketing can help Indian brands get ahead in the competitive environments they operate in, provided they surmount the following challenges:
Balancing product marketing with targeted marketing: India's best marketers are trained in fast moving consumer goods (FMCG), and are very effective product marketers, focusing on brand building, product awareness and market share growth. When balanced with targeted marketing, product marketers get the support they need to pull the customer from awareness to retention and ultimately, advocacy.
Limited locational data: Indian brands currently have limited access to data that informs them about their customers' locations. However, with the explosion in the use of mobile devices, we can expect this to change in the near future. This will open up the option of using locational data to target a customer as she walks into a store or even into just the vicinity of a store. The only snag might be data privacy concerns, which are the biggest threat to location marketing in the West.
Limited customer behavioural data: Many companies in India boast of huge customer databases, but more than 50 percent of names in those databases are either inactive or not accurate. Furthermore, the data that is accurate is not particularly predictive from the perspective of targeted marketing because it lacks detailed information on behaviour. Brands must create strategies to pick up genuinely useful data on what individual customers are buying, when and where they are buying and what they are redeeming over time.
A new perception
A change in marketers' perception about loyalty programmes can help the cause of targeted marketing in India. At its core, a loyalty programme is a means to capture data, not just to increase brand impressions. Each loyalty member receives a transactional device - a physical or a virtual card that identifies consumer and helps track her order transactions. The good news also is that the Indian market is no where near saturated with loyalty initiatives like in other countries. For example, 74 per cent of consumers in the United States belong to at least one programme and 90 percent of consumers in Canada participate in loyalty programmes (source: the 2011 COLLOQUY Cross-Cultural Study), whereas participation in India is merely 42 percent.
A data-driven loyalty programme is the engine that can carry marketers along their customer acquisition and retention journeys.
Prepare to give, to get
But, how does one do this? Reward attainability is the number one thing that changes consumer behaviour. Essentially, loyalty programmes do just that, by dangling a carrot (reward, incentive) within each customer's reach in return for data. For instance, some customers want to exchange their points or vouchers for something that is tangible and functional, and to do so now. They want to monetise their relationships with your brands without delay. Another category of customers is aspirational. They are happy to hang on to their collected points until they can redeem them for merchandise, or something like a special, higher-end item or a trip. A third category of redeemers are typically your very best customers. They collect points or vouchers for years and redeem them only for curated experiences like family vacations.
All marketers must put a stronger focus on customer experience, in-store and through their communications. The 2009 COLLOQUY Loyalty Demographics study explored the value that different customer segments place on experience and recognition benefits like perks and privileges. It measured the gap between customer expectations and actual experiences in the programmes they participate in. The average gap between these two metrics was nearly 40 per cent. Knowing who your best customers are can help bridge this disparity. For instance, at Tanishq, Tata's jewellery brand, the best customers get opportunities to interact with senior management members and invitations to workshops regarding the nuances of jewellery making. These experiences are thoughtful and relevant to Tanishq customers. Thus, using customer analysis to define relevant experiences is not just a nice customer benefit, it is proven to increase activation rates, spend and loyalty.
Caroline Papadatos
Senior VP, International, LoyaltyOne
