Big Data to improve your loyalty marketing ?
Loyalty marketing as we know it is not as effective as it used to be. Results show that current methods seem out-of-date; consumers are looking for better results. Big Data triggers a range of possible solutions.
Traditional loyalty marketing
Loyalty marketing consists in both creating and maintaining a long term relationship with consumers. The brand needs to be in the consumer’s mind when making a purchasing decision. Do not think it is innocent that when someone says “plane tickets” you instantly think of one airline in particular. Companies want to have a strong bond with their clients in order to gain or keep their market shares. All those economic stakes led to loyalty marketing and its evolution.
The first loyalty campaign on record was the “green stamps” campaign of Sperry & Hutchinson in 1896. After that, a bonus point system was established that did not change much over the years. The principle is simple: you purchase items and obtain some bonus points which then allow you to be offered rewards such as discounts. American Airlines was the first company to offer a loyalty card in 1981.
During the 1980s, the landscape changed thanks to improved data processing. Companies are able to register their regular customers and reward them accordingly, thus creating a virtuous circle: customers purchase even more to get better discounts.
More than 40 years later, business practices did not change much. 4 out of 5 brands use the same “bonus point” system. Loyalty cards end up in a drawer as people own too many. In 1999 in France, there was one loyalty card per person on average, 6 in 2009, and 9 last year.
Consumers are not completely satisfied with their loyalty programs. Two-thirds of them think that programs lack innovation, do not distinguish “good” and “bad” customers and do not take into account seniority.
Yet, the new generation seems to share the same consumption patterns. The most loyal are elderly people; young people tend to have preferences and do not change their minds unless they are disappointed. New technologies such as smartphones changed the way of buying, but not consumer habits.
The lack of customized offers creates consumers that are less interested. Although some customers are motivated and take part in surveys, comment about shops and recommend the brand to their friends, they feel like they are not being treated any different.
A Capgemini Consulting survey also points out :
- Only 11% of loyalty programs take into account their customers’ locations or purchase history to reward them.
- Almost 80% of the programs use “smartphone” versions although only 24% allow customers to purchase via their smartphone.
- 97% are programs that consist in points gained by purchases that give you access to rewards. Now that the problems are identified, let us take a look at the solutions.
What to expect from Big Data ?
The physical loyalty card is doomed to disappear in the next few years. Everything will move online. Customers will gain by not having to look for their cards, and brands will collect purchases in real time.
Connected smart objects with billions of data points to analyse, will play an increasingly critical role in customer loyalty. Using Big Data technology allows companies to analyze consumption trends to detect specific informations about their customers in order to offer customized loyalty programs.
According to a 2015 Forbes report collecting more than 300 executives’ testimonies around the world, data process is essential if brands want their loyalty programs to be successful. The first step is to set up a Customer Relationship Management (CRM) to establish the profile of customers and identify their needs. In addition to an increased personalized approach, brands can go even further to predictive marketing.
Predictive Marketing consists in anticipating consumer behavior and expectations based on their purchase history and frequency. If brands know when the customer is likely to make a purchase, which product and at what price, then it is easier to offer a personalized experience.
In the face of consumers’ discontent, brands need to react and innovate if they want to keep their customers happy. Technologies have changed the means of loyalty marketing but it did not affect customers’ habits. Without knowing, many companies already have great value contained in their data. Now, they just have to exploit data for customer-oriented marketing.