RESEARCH & INSIGHTS
How Shopper Data Helped to Identify Opportunity for Major Growth
Are you utilizing your customer data to optimize your assortment? Are you getting the most of your category segments? How can you identify the categories that have the highest opportunity for growth?
A major grocer turned to LoyaltyOne for help to answer these questions and to identify high potential categories where they could further grow customer spend. The grocer recognized its shopper data could be useful in recognizing opportunities and identify relevant actions to pursue these, but didn't know how.
Download this case study to find out how LoyaltyOne used data-driven results to identify a high-growth category and increase its' sales.
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The telecommunications industry, facing some of the same challenges as other commodity sectors, is beginning to take loyalty and engagement to the next level. Here are examples from several industry leaders, including Verizon and U.S. Cellular.
Earlier in February, I had the pleasure of attending the North American conference on Maximizing Customer Loyalty and Profitability in Miami. A strong cadre of big-name telecommunications and cable operators, as well as regional and international players, made a showing, and it was the perfect setting for an open exchange of ideas.
Telecoms face many of the same competitive challenges as other commodity sectors, such as grocery and fuel: How to land more customers, keep them longer, get them to spend more and choose one company over its competition … especially when that competition undercuts pricing by 90%. These firsthand stories illustrate how several major players cleared such hurdles.
THE FRENCH CONNECTION: ORANGE
Telecom giant Orange of France operated with healthy subsidies, two-year contracts and unlimited plans. Yet by the time industry rival Free Mobile launched its “almost free” offer, Orange and its two main competitors had not only lost significant market share, their business models had been entirely disrupted.
Cyrielle Moulin, director of customer relationship management and mobile, told the harrowing story of Orange’s downfall and recovery. With the keen insight that customers wanted simplicity and value above all, Orange pursued a market segmentation strategy and crafted two simple products to target precise customer profiles and attitudes. Staying true to the notion of simple, it even unlocked customer phones to free customers from the tyranny of contracts.
In the end, Orange lost fewer customers and recovered more quickly than its rivals, and its executives are now telling that cautionary tale to North American telecoms facing disruptive headwinds.
In an email after the event, Moulin explained the two products, Open and Sosh:
“At Orange, we had successfully launched a 4P-offer (internet, fixed line and TV plus up to five mobile lines) in 2010 called ‘Open.’ The idea was very simple and seamless for the customers: one contract, one bill and one customer service for the whole package. We were the first one to launch a real 4P-offer in France. Following up with the launch we conducted surveys and customers told us how thankful they were for having made their (lives) more simple with this offer.
“When we launched Sosh, in 2011, we knew one of the key points for succeeding again laid in the high-level of simplicity we could offer to our customers. As we specifically targeted digital customers, we also knew how sensitive they were with (the) Internet and its transparency. So we (built) our offer on reliability, trust and transparency and we bet on our customers’ engagement, without any contract. And it worked!”
ENGAGING THROUGH EMPLOYEES: VERIZON AND U.S. CELLULAR
Meanwhile, things are much less dramatic at Verizon Wireless, with customer churn hovering around 1%; but the pressure to lower churn while increasing revenue for each connection is a challenge. Mariano Legaz, president of the Florida region, said customer loyalty starts with employee engagement, and the only way to harness the power of the customer is by “listening, anticipating and responding to their needs.” Customer management starts before the customer has his or her first transaction, because Verizon invests in employee development with the view that “a customer remembers something free for two days, but their memory of a differentiating customer experience lasts forever.”
Kimberly Sebastian at U.S. Cellular was also on the customer engagement bandwagon, and her multichannel turnaround story yielded a 25% reduction in churn in 12 months, with a 70% increase in customer engagement while reducing average call handle times. In launching “The Belief Project,” U.S. Cellular prioritized customer retention, referrals and purchasing over the standard call center metrics of average handle time or other efficiency measures.
To ensure that customers came first, U.S. Cellular gave employees the power to solve customer problems and equipped them with the necessary tools, flexible offers and skill coaching to make it happen. It’s impressive to see such customer-focused initiatives in a traditionally product-centered vertical like wireless.
EYING THE STAR: BIG DATA
This last presentation at the conference – which was sponsored by International Quality & Productivity Center – caused quite a stir. Surprisingly, most participants at the conference were more doubtful of their own abilities to spur a customer- or employee-driven turnaround than one that relies on Big Data. In the complex and fast-paced world of telecom, nothing is easy; it seems that information is hard to manage, but customers are even harder.
For at least a decade, the vision for telecom has been convergence, but now that it’s here, Big Data has become the next big thing. Of particular interest were the presentations from cVidya on mapping data to a household and Nominum on leveraging untapped capabilities in domain name system software to build loyalty.
Of course, Big Data is not news to retailers or other customer-facing sectors, but there is an incredible amount of data being collected from mobile devices, web activity, set-top boxes, location analysis and unstructured data.
It’s no wonder marketers have stars in their eyes.
Over the past year, our specialty retailer clients have increasingly been asking whether or not they need a Prime; that is, a premium paid membership program. Most indications point to it delivering fantastic results for Amazon, even though financial and behavioral results haven’t been widely shared.
Depending who you ask, Prime members spend 68 percent, or 140 percent more than non-members. But the more important stat is that U.S. Prime membership grew 50 percent last year – a compelling indicator that the value proposition is resonating, even after last year’s $20 fee hike.
Amazon isn’t the only brand pursuing this path either. GameStop’s Pro Rewards, the New York Times’ Premier subscription, Barnes and Noble’s Membership, GNC’s Gold Card, and nearly every premium credit card product are using the unique strengths of paid memberships to their advantage:
- Creating Commitment: With dollars invested, customers inherently look to use the benefits they paid for to improve their payback. This makes whichever brand they’ve tied themselves to their preferred choice in that category – driving lift in share of wallet and significantly raising the costs of switching to a competitor.
- Instant Gratification: The benefits of memberships are generally instant. For those who do pay, free shipping, exclusive perks and big discounts can be strong, persistent mental reinforcements of a good decision. We know from our years in loyalty that earning rewards works very similarly, creating a spend lift in the months following redemption.
- Differentiated Experiences: When customers pay premiums and commit to a brand, their fees and spend lift fund more robust or higher-touch experiences that couldn’t otherwise be created: exclusive perks, big discounts, luxurious lounges, rich content and more. When trying to fight commoditization, giving customers an exceptional experience – like Prime’s rich content and guaranteed two-day shipping – adds qualitative benefits to purchase decisions that competitors may not be able or willing to imitate.
These strengths make this strategy hard to resist, but it’s hardly a panacea for every customer engagement issue. There are several considerations that may dissuade you from pursuing paid memberships. Consider the following:
Could you feasibly offer a paid benefit that overcomes the obstacle preventing your target from shopping with you more?
Some obstacles can’t be overcome. If your target customer prizes a convenient location near home/work above all else or, more importantly, if you have critical issues with your customer experience or brand value proposition, a fee-based portfolio of benefits is unlikely to change their habits.
Is your target customer even open to the idea of paying for benefits?
According to a 2014 LoyaltyOne survey of 2,000 North Americans, only 17 percent said they’d be willing to be pay for same-day delivery. Of that 17 percent, males and Millennials were more likely to show interest. All this to say, extensive research and testing may reveal that the target for your benefit wasn’t necessarily who you’d expect it to be.
Could your target consumer shop with you often enough to need or want premium benefits?
Some customers, even valuable ones, don’t shop with you often enough to want any sustained relationship. You may be better off pulsing them twice a year or seasonally with relevant product discounts than pitching them a suite of benefits they can’t foresee using.
Would having exclusive benefits (visible or covert) for only some customers align with your brand without turning off other valued customers?
This is a case of culture eating strategy for breakfast. Bricks-and-mortar retailers that look to create communal, comfortable and ultimately egalitarian shopping experiences should pay special attention. We’ve been in boardrooms where visible preferential treatment has been shot down for this very reason.
Can you create a fee-based offering that is both compelling and financially feasible?
Some benefits may require economies of scale to become profitable, and not all your fans will jump at the offer the first time they see it. You must also determine if they are willing to pay the fee necessary to ensure financial feasibility of your program. Testing small-scale and business casing with the results will require executive support and patience.
Returning to the titled question, retailers need to evaluate an Amazon Prime-like strategy. There are clearly several considerations that should alter how and if you choose to execute, only some of which are listed above. That said, finding the right strategic fit could be the difference between you and your competitors securing your customers’ future spend.
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THE LOYALTY LEAP
In his bestselling book, LoyaltyOne President Bryan Pearson draws on more than 20 years of first-hand experience. His expertise in building emotional loyalty in the information age is demonstrated through insightful stories from the trenches of the data-gathering and marketing communications fields.