RESEARCH & INSIGHTS
How next-generation capabilities are delivering winning results in the world of personalization
Today’s customers are dissatisfied with the relevance of communications, while retailers are still struggling to show demonstrably improved campaign performance. Is Big Data to blame? Sure, the increased information flow can improve marketing ROI, but it also presents the rather significant challenge of how to build the capabilities to make sense of all that data.
Fortunately, with the power of emerging technologies, neither customers nor marketers have to feel helplessly resigned to the current situation. Today, better analytical approaches and improved technologies are easing the strategic journey toward true one-to-one personalization, helping marketers move past obstacles and seize opportunities for generating sustainable growth and earning customer loyalty.
Download this whitepaper to learn more about an approach that’s more profitable than traditional campaign-based marketing.
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Do bricks and mortar cost more than bytes and channels? For Macy’s Inc., the question may not matter as much as whether the two investments, combined, sell more sweaters, suits and shoes.
Macy’s is willing to pay to find out. The nation’s largest department store chain has distinguished itself over the past few years by testing new technologies, including omnichannel distribution strategies that enable customers to order items straight from the warehouse, as well as in-store iBeacon communications.
It is part of a steadfast effort by Macy’s to be where its customers are. In mid-September, the Cincinnati-based merchant announced a series of additional technological advancements and partnerships, including the testing of same-day product delivery, participation in Apple Pay (learn more about the impact of Apple Pay on the retail industry here), and a snappy image search app that will respond to any digitally submitted photo with a similar item available at Macy’s. It’s pretty sharp stuff.
And it is expensive. Macy’s second-quarter report, filed Sept. 8, details that the cost of sales rose $139 million in the quarter, due in part to higher markdowns “as well as the growth in the omnichannel business and the resultant impact of free shipping.” Likewise, the investments in Macy’s omnichannel strategy partially offset higher income from the company’s credit card operations.
The fact that Macy’s is upping its investment, post report, makes it clear the retailer and its CEO, Terry Lundgren, expect a payoff.
And why shouldn’t it? Macy’s at this point is not only besting its peers in terms of its investment in innovations, but also in terms of risk. By incorporating the ability to order a specific product in a select size and color, at the store, online or by phone, Macy’s has removed many barriers to sale. Added services such as same-day delivery eliminate a lot of the remaining barriers, and it has upped the ante for others.
Further, Macy’s early embrace of new technologies, from iBeacon to Apple Pay, indicates the company executives are inside players with many innovators, giving Macy’s a leg up on tomorrow’s trends.
So to me the question is not about the cost of bytes and channels, but the extent to which Macy’s loyalty data is informing these decisions. The company’s Star Rewards program includes a “My Wallet” feature that stores offers and payment options online, as well as an app through which members can manage their accounts and receive Macy’s texts. This translates to lots of brand interactions, yet the program is not mentioned anywhere in Macy’s quarterly report and gets only a brief description in its annual report.
It’s a notable omission, but despite it, Macy’s clearly must be using its program data to support these initiatives. I can only imagine how customer data could help shape the offers it provides to customers and the way it prioritizes its investments in new technologies. Evidence of its potential already exists in its performance: Macy’s posted second-quarter sales of $6.2 billion, up $200 million from the year before.
That’s a lot of sweaters, no matter how they are purchased.
Watch a discussion I had recently with the Business News Network on the importance of Right Data vs. Big Data here.
In all likelihood, the rush of new iPhone 6 owners is likely to represent a tipping point for mobile payments, bringing it quickly into the mainstream, with several device manufacturers, retailers and credit card issuers having already adopted NFC technology. You may be expecting a gradual transition, but with 45% of smartphone owners replacing their device every year, I wouldn’t bet on it.
Apple is already being lauded by industry observers for developing a system that manages to keep customer’s credit card data hidden from everyone but their bank and payment company. Even Apple isn’t collecting it. This anonymous-customer payment model should address most consumers’ privacy concerns and make a seamless payment experience feel comparatively worry-free. This fact also isn’t lost on Apple Pay partners Visa and MasterCard, who are already looking to extend this ‘tokenization’ technology to their broader card networks.
For retailers, this is a positive in some ways: without the card data, they become less desirable targets for hackers and gain consumer trust by virtue of collecting less sensitive information. Unfortunately, what retailers gain in trust they may lose in insight. Credit and debit card data is a major tool for many retailers who don’t have loyalty programs or memberships to identify customers. Without it, in-store spend data looks more like a series of random transactions and less like customer-level behaviour.
While it’s unclear today exactly what information retailers will receive once card data is masked by Apple Pay, I think it is clear that the process of determining who’s buying what is about to get more difficult, and this puts the loyalty relationship center stage. It may soon be one of the only reliable ways to tell customers apart, if it isn’t already, and for those retailers who’ve chosen not to pursue these relationships, it may be time to take a second look.
For now, retailers like Walgreens and Starbucks should be solidly positioned with Passbook-enabled loyalty cards to ensure they keep rewarding customers during mobile transactions, but most retailers aren’t there yet. Just having a program isn’t enough. The loyalty card in wallet will be forgotten more, and even clumsy mobile solutions will put your customer data collection at risk. It’s clear to me that a seamless mobile checkout experience will soon be table stakes if you hope to participate in a world where payments happen in an instant.
All this said, the opportunity here is for mobile loyalty engagement with a much larger slice of your customers, and that’s something retailers need to capitalize on. Apple has focused millions of consumer eyes onto their phones (and don’t forget watches) during the in-store experience and they’ll be eager to experiment not just with Apple Pay, but with how you manage to complement it.
Luckily, the Canadian market has been given a free preview, but I reckon it will only be a short one. It would befit us all to recognize the tipping point in advance and get moving accordingly.
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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.