Next step in customer loyalty is tracking behaviour beyond retailers own stores
The answer to this could be in the hands of Visa Europe, which is leveraging the data from the 12 billion transactions it generates from its millions of cards – including 100 million in the UK – to give retailers a broader view of consumers’ purchasing patterns across the whole retail sector.
Ahead of presenting at the 3rd Retail Bulletin Customer Loyalty Conference 2012 in London on June 13th, Crispin Rogers, Senior Vice President for Loyalty and Merchant Analysis at Visa Europe, runs through his thinking on the topic of ‘Building loyalty through a 360 degree view of the customer’.
“You can obviously get very sound understanding of consumers’ in-store if you’ve a loyalty programme but you do not see what they do when they then drive down the road,” he says.
The idea is to give retailers a 360 degree view of customers’ activities by taking the transaction flow from Visa debit card payments (Visa processes 90 per cent of UK debit transactions) and categorise these purchases from a list of 30-plus sectors including DIY, health & beauty, and various sub-categories of food and fashion.
These purchases are then linked to the individual cardholder by their bank (and Visa member) who will then provide the retailer with the distribution channel through which they can communicate with the cardholder. In effect Visa sits in the middle of the banks and the retailers providing them with the rich data that powers this loyalty tool.
The idea is for merchants to communicate targeted offers to their customers based on their shopping behaviour across the whole retail sector and Rogers says the emergence of mobile devices will make this an especially powerful proposition.
“Mobile is the game-changer that allows us to improve the timeliness of the offers. It allows them to be sent when they are needed and for the best offers to be sent on the basis of triggers. This could be based on geo-location data or specific purchases that have been made at certain times,” explains Rogers.
To make its pure transaction data more valuable Visa has teamed up with Beyond Analysis to assign attributes that can help indicate which customers have say children, own pets, or like to travel. “This has helped us build a segmentation model so we can identify groups who’ll be more appropriate to certain offers,” says Rogers.
What makes this proposition so potentially valuable is that the core data is based on debit card purchases and for some retailers this form of payment can be up to 50 per cent of their total sales. Rogers says that this depth of data enables Visa to identify different customer segments and allows retailers to “enter a massively rich environment of fact-based data”.
Armed with the data Rogers says it is possible to prove to retailers the truism that across all retail sectors 80 per cent of sales are derived from roughly 20 per cent of customers. “Generally retailers have not grasped this and we can help them identify these customers.”
Another truism that the data proves is that these most valuable of customers tend still to have around 40 per cent ‘headroom’ of spend with the same sector. Finally and potentially most importantly, is the finding that among this group of customers there is an attrition rate of as high as 30-40 per cent, which means some of these people will switch to buying from a competitor.
According to Rogers this all goes to prove that even the most profitable customers have “headroom” and so retailers should provide them with reasons to spend more by sending offers to them. And by engaging with them retailers will also keep these people from moving to the competition.
Despite the growing amount of facts that support the case for generating more revenues from existing customers Rogers says there is still a focus by many retailers on acquiring new customers. “A lot will say, ‘can you show me the customers who do not come to us’.”
This is clearly something for Visa to work on but the success it has enjoyed to date will see it “take it to an industrial scale across Europe”, according to Rogers, although he adds that it is still very early days for the programme.
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