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Comment: 21st century shopping - new realities, new technologies

In today’s ultra-competitive retail business climate, customer engagement is more important than ever... By Marc Darling of TIBCO Loyalty Lab

GENERAL MERCHANDISE

Comment: 21st century shopping - new realities, new technologies

But with margins already under pressure, many retailers feel that one of the most effective tools to promote customer engagement – a points-based loyalty programme – is economically out of reach.

While the technology and implementation of a loyalty programme won’t break the bank, the potential discounts can subtract from the bottom line, effectively taking loyalty-based “give-to-get” programmes off the list of options.

Fortunately, in the 21st century, technology can provide very effective alternatives that incorporate some of the relational components of loyalty programmes, along with aspects of CRM – all delivered via multiple channels in real time based on very precise triggers or events. Real time, event-driven marketing enables retailers to micro-target customers not only in terms of who they are, but also in terms of where they are, and what they’re doing at the moment.

This level of precision can make shoppers feel like valued customers and, most importantly, influence their buying behaviour. As with loyalty programmes, there may well be a significant give-to-get component to the tactics these tools enable. For example, they often involve discounts. But, because those discounts are made available only in instances where they have maximum impact, the net cost for achieving engagement and building revenues is much less than it would be with a conventional loyalty programme.

To put the benefits of this new technology in context, it’s worth taking a step back and comparing it to the two other types of marketing technologies that have been dominant since the 1990’s - campaign marketing and CRM-based marketing. Campaign marketing technology enables targeting, but only by the most basic parameters: age, sex, household income and the like. It can be tied to events, but only if those events are scheduled well in advance, like a Cup Final, or relate to a large segment of the population, like the back-to-school season or Valentine’s Day.

While not without success at tasks like selling merchandise or enrolling bank card members, campaign marketing is enormously inefficient. The very fact that a 1% response rate has for years been considered acceptable for a traditional (print) direct mail drop underscores this inefficiency.

CRM technology was specifically developed to provide a richer data set on customers as individuals, one that would include buying histories and in some cases relationships with other customers, e.g. husband and wife or parent and child. In terms of the catch phrase, “know your customer,” CRM was a step up.

The problem with CRM is that it was initially designed as a database – one that was primarily designed to provide information to customer sales and service reps. CRM systems were never designed to manage work flows. As a result, any system that needs to take action based on the data in a CRM database will have a bolted on quality that renders it clumsy from an IT perspective.

In any case, both of these approaches are inadequate for reacting to the needs of the 21st century shopping experience, which means dealing not only with the online/in store dichotomy, but the growing phenomenon of mobility.

For example, if a customer has browsed spring dresses online, how can a retailer take advantage of that fact when she’s in the street/shopping centre not far from an outlet? How can a sales associate make use of a customer’s buying history to cross- or up-sell her at the check stand? How can retailers target at-risk customers, such as individuals in a specific demographic that haven’t used a service in thirty days? How can loyalty efforts react to behaviour that goes beyond purchases, such as likes on Facebook or other social venues?

What’s needed is an event-driven technology solution that can integrate four dimensions of data in real time:

  • Identity – the age, sex, and other demographic data of campaign marketing, plus social data that’s now available to enrich basic identity data
  • History – transactional data from the customer’s buying history
  • Location – the customer’s location in relation to the nearest outlet, or perhaps within the store itself
  • Time – the customer’s situation at the present moment

In addition to addressing these four dimensions, an effective solution must be able to communicate with customers, e.g. offer discounts or make purchase suggestions, through all of today’s selling channels: in-store, online, via call centre, mobile and others, such as kiosks or catalogues. And, importantly, it must be able to do this in real time.

This description of retail technology isn’t an idealised view of the future. These capabilities are available now, and are being implemented in varying degrees worldwide. Although implementing four-dimensional marketing with multi-channel communications demands commitment and hard work, companies that persevere will enjoy a significant competitive advantage.

Tibco Loyalty Lab are the headline sponsor for the Retail Bulletin's 5th Customer Loyalty Conference, June 10th 2014. You can benefit from their expertise by attending this event where you will also hear speakers from Sainsbury's, Home Retail Group, Subway, Orange, Lux Fix and more. Click here for the full agenda and registration.

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