RESEARCH & INSIGHTS
Four key trends are converging to reshape the loyalty marketing world in 2014. Today’s consumers are demanding a variety of choices via fast and seamless global, online and in-store experiences. The rise of the peer-to-peer economy threatens to bypass traditional businesses. Shoppers increasingly recognize that sharing their data should earn them something valuable in return, but loyalty marketers are still fixated on discounts. The resulting commoditization of the value exchange demands an increased emphasis on surprise and delight for program differentiation.
These four trends are driving rapid change, and the loyalty programs that will win big in 2014 are those who mobilize now. Those that don’t respond will fall far behind.
Download this whitepaper to discover the converging trends that could potentially threaten your business this year and beyond.
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When it comes to competing against low-priced giants, specialty shops should ignore the specials and focus on the personals.
This is among the key findings of a recent report by LoyaltyOne, “Four Ways to Win for Independent Retailers.” The study reports that 89 percent of those surveyed said personal recognition is the top area in which independent merchants outperform their competitors. That outweighs the leading competitive features of large chains (one-stop shopping, at 83 percent) and e-retailers (a mobile-friendly e-store, 68 percent).
Further, specialty retailers capture more than three times consumer spending than do online retailers. Twenty-seven percent of the Canadian shopper’s dollar is spent with specialty stores, compared with 8 percent at e-retailers.
Yet the specialty shop, even with frequent visits, lags sharply behind its large competitors. About two-thirds of Canadian shopping – 65 percent – takes place at major chains. The reason: Price. Almost half of the survey respondents identified money value as the reason for choosing large merchants.
But mom-and-pop shops would make a mistake to compete on price – and it could be a critical one.
What shoppers say they like about specialty merchants is personalization and the recognition that comes with one-to-one interactions. This is not something that a price tag can cover. Independents merchants have this edge over their large competitors, but there are several other areas in which they can improve if they want to capture big-box customers. The report lists these four:
Use the connection to learn: Forty-five percent of independent retailers said they have asked customers for their feedback, but only 30 percent of consumers think retailers have done so. This could be a coverage gap, or a failure in execution. Creative solutions, like offering incentives to those who provide feedback, can be combined with affordable technology such as cloud backup services that ensure customer information is securely stored and available for staff.
Curate, curate and be local: Survey respondents said they choose specialty shops not for quantity, but for quality. In fact, 42 percent of respondents said they feel overwhelmed by the choices at large merchants. Independent retailers should see their selection as an exclusive opportunity, offering items that appeal to the immediate geography. And speaking of geography, they should take advantage that their shoppers are more likely to support local suppliers.
Be more social: Shoppers are more likely to advocate an independent brand than a large one, so indie shops should be where word-of-mouth is most prominent, and that is social media. Sixty-seven percent of small merchants in the study reported a good return on investment from their social activity. But social media shouldn’t be approached willy-nilly. Merchants should choose the outlets that make the most sense, determine frequency that won’t be tiresome and be sure the messaging is more informative and collaborative than self promotional.
Reach, but stay local: While independent merchants capture a greater percentage of the wallet than do online merchants, they are not guaranteed to maintain it. More affordable technologies can enable merchants to operate an online store – even if just to carry a few best-selling items. And while effective loyalty programs can be complex to implement, merchants can seek partnerships with other businesses that do have a program in place. They can share the data and gain greater understanding of the customer both within and outside their stores.
It is easy to succumb to the temptation of price competition, especially when operating in the shadow of a major brand. But for independent merchants, the key to maintaining an edge is in ensuring that every new service and endeavor adheres to what makes them so special to begin with: personalization.
Influence can be a magnificent vehicle in the C-suite, but if you are a chief marketing officer, you better make sure that vehicle is well powered or you risk hindsight that is more 80-20 than 20-20.
This is the basis of two recent research reports, one by IBM and the other by Forrester. According to IBM, chief marketing officers are gaining significant influence with the corner office – 63% of CEOs involve the CMO in overall business strategies, second only to the chief financial officer at 72%. Yet only about 20% of CMOs feel fully prepared to manage the recent proliferation of data that is increasingly guiding their corporate decisions.
Similarly, Forrester finds that business leaders lack confidence in their digital strategies: while 74% said their company has a digital strategy, only 15% believe their company has the skills and capabilities to deliver on that strategy. This presents an opportunity for CMOs to step up – but at the risk of failing.
That CMOs feel ill prepared to tackle the burgeoning challenge should not be surprising. The average CMO likely rose through the organizational ranks before the complexities of mobile and social communications transformed customer relationship marketing into a global, around-the-clock necessity. The result is a lot of planning and intent, but limited action.
All of us are in a foot race to keep up with the rapid reproduction of big data. Based on my own experiences bridging the gap between customer information and customer intimacy, I’d suggest a four-step process:
1) Hire a data tamer: By next year, one quarter of large global organizations are expected to appoint someone to manage data oversight, according to research by Gartner. This could put companies without a chief data officer at a disadvantage. Companies should weigh this disadvantage against the investment in appointing someone to handle this critical success element as part of a broader strategy.
2) Say hello to the CIO: Once the data is well managed, the CDO and CMO should corral their ambitions and work closely with the organization’s chief information officer. Together, they can craft a roadmap to success that will get buy-in from the CEO and board.
3) Don’t drop the phone: The sheer volume of reports, articles and trade shows dedicated exclusively to mobile communications can waylay the urge to act on it. Savvy executives won’t make this mistake. Chief marketing officers, and the chief data officers, can combine their skill sets to extract the complex ways mobile will transform the customer experience – and how to tackle it.
4) We’re all at the starting line: Executives should embrace the potential of their data, and their strategies to execute on it, while recognizing that almost everyone is in the same place. A long-range plan, in combination with a series of “here-and-now” learning experiments that shape that plan over time, is a sound strategy for rounding the curve to future successes.
This four-step process is the engine that will accelerate a data strategy into action. It also will better position companies, and the people who run them, to more nimbly respond to other challenges.
(Image courtesy of IBM)
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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.