NRF Bulletin: Personalization Done Right

Lewis and McVie at NRF

I’VE BEEN ON RECORD many times as a hater of shopper loyalty, but an advocate of intelligent personalization.

I admit my position can be construed as mincing words, but I remain stubbornly committed to the distinction. When marketers and retailers try to ascribe loyalty to their card-carrying customers they are usually delusional. When they demonstrate their commitment to those customers through good acts – by providing relevant values and experiences – they embark on a golden path.

Supermarket chains so regularly miss this distinction with their frequent shopper card programs that it is a small revelation to encounter one who seems to have it right. In a presentation at the National Retail Federation Convention and Expo this week in New York, Loblaw Companies, Ltd., the leading grocery operator in Canada, shared some insights about its PC Plus shopper program, launched last May, that suggest it belongs in that exclusive tier.

“From our best customers we capture 55-60% of their share of wallet. That leaves so much opportunity just with them,” said Peter Lewis, Sr. Dir., Customer Analytics & Loyalty at Loblaw (pictured at left in the photo above, with Graeme McVie, VP and GM at LoyaltyOne.)

That’s an insightful way of looking at the return from a frequent shopper program that truly distinguishes highest-value relationships and cultivates them accordingly. Best shoppers deserve our best efforts because they are our best prospects too.

Loblaw has embraced this approach with PC Plus, its digitally-enabled frequent shopper program, said Lewis. On a year-over-year basis, enrolled customers who used the targeted offers changed their behaviors in desirable ways:

  • They increased their number of visits by 12%
  • Their average basket size increased by 5%
  • The number of categories they purchase increased by 7%

Lewis also shared some statistics from the first 6 weeks of the program that indicated rapid acceptance:

  • 40% of sales were made using the card
  • More than 6,000 members were signed per store
  • 50% email open rate
  • 35% click-through rate on those emails

PC Plus uses analytics to deliver relevant, highly personalized offers. With thousands of offers available across the store, the mix is tailored down to the individual level, based on each shopper’s history.

“How big is the prize from personalization?” said Graeme McVie of LoyaltyOne, the company which helps Loblaw implement and operate PC Plus. “Even with best customers, opportunities exist to grow share of spend.” He shared an analysis of the 50 store categories across the top 20% of customers, which indicated a 50-70% share of spending, a finding which underscores the present value of best shoppers, but also their upside potential.

PC Plus is increasingly focused on the smartphone app as the “control center” for the shopper, Lewis said. It allows them to manage shopping lists from their phones, informs them of available offers, and allows them to accept offers in real time, even while waiting in the checkout lane moments before a transaction.

McVie added that the design of PC Plus is oriented toward “democratizing shopper insights.” Its strategy is two-fold: understand the needs of individual customers and consistently execute actions to satisfy them.

I’ve stated previously in this blog that we are entering a “post-loyalty” era, but intelligent personalization is far from dead. In fact it may just be hitting its stride at Loblaw.

© Copyright 2014 James Tenser

The End of Loyalty

Tom Fishburne cartoonIF IT EVER WAS, it’s fading fast. I’m talking about shopper loyalty and the card-based frequent shopper programs that try to pass as loyalty builders.

I’ve long been a skeptic about the premise of customer loyalty. Card based programs are more about behavioral modification, segmentation and targeting. In many instances — airlines come to mind — the net result is the cultivation of dis-loyalty and skepticism, as a consequence of added complexity, suffocating rules, suspect prices and incentives that many users can never achieve.

Now comes news that the Kroger supermarket chain has begun converting its frequent shopper card holders to a smartphone app. This is news with big numbers behind it, as 96% of Kroger shoppers presently possess a card. Its personalized marketing subsidiary, dunnhumby, is surely driving this action.

This morning, the good folks at RetailWire.com asked its distinguished BrainTrust panelists: “Will Kroger’s App Replace its Loyalty Card?”  Here’s what I had to say about it:

Welcome to the post-loyalty era.

Card programs are not quite obsolete, but they are about to be absorbed by mobile apps. While a front-runner such as Kroger/dunnhumby may be able to convert many shoppers to its proprietary app for a while, the lasting future will be defined by electronic wallet solutions that aggregate frequent shopper plans, coupons and payments on the shopper’s terms. NFC communication with the POS will likely be a key enabling technology.

An observation: The pure value of of frequent shopper data is approaching its zenith. It now diminishes slightly in relative significance as the volume of social media interaction grows. This is the mind-bending next stage in behavioral-based marketing: Things people do, say and experience outside the store may soon eclipse what happens within the four walls.

For retailers that have steadfastly bucked the loyalty-card trend (like Walmart), this may be a moment of affirmation. Or maybe they just got lucky.

© Copyright 2013 James Tenser

A Web of Truths

WATCH OUT, Shopper Marketers! You may find yourselves entangled in a web of truths of your own making.

It all began innocently enough; in 2005 when brand marketing behemoth Procter & Gamble advanced a provocative set of ideas around what it called the first and second moments of truth. Thanks to some savvy and persistent promotion, the terminology caught on fast:

  • FMOT, the first moment, refers to the brief period when a shopper selects a desired product in the store.
  • SMOT, the second moment, refers to the at-home consumption experience associated with that product.

Within the then-nascent Shopper Marketing community, this framework was a minor revelation. For brand marketers, FMOT gave credence to the argument that real marketing persuasion needed to be extended from measured media into the shopping environment. The store, it was discovered, shelters a separate marketing reality, where pre-purchase leanings are transformed into final choices.

Shopper Marketing defined a path to purchase that commences with media-induced product awareness and proceeds to interest, formation of intent, and ends with product selection at the shelf, FMOT. Once home, SMOT, or the actual product experience, takes place influencing subsequent decisions.

FMOT/SMOT was a pretty handy framework at first. But the concurrent rise of digital out of home and mobile media conspired to make things a lot more complicated, fast. The path to purchase, it turns out, is littered with hundreds of moments – text messages, in-store video ads, Web search, service encounters, Facebook apps, twitter feeds, QR codes and downloadable coupons, to name a few.

Stuck in the Moments

A few weeks ago the gleefully disruptive folks at Google seized the opportunity to coin a new Moment of Truth and promote it hard. They call it Zero Moment of Truth or ZMOT. Its premise is that interactions with search, Web, social and mobile price and product research media create a third type of online decision-making moment. The concept is a bit self-serving coming from the world’s largest seller of online advertising, but it has attracted much commentary and attention.

Almost immediately, new Moments starting appearing like so many pop-up windows on an e-commerce Web site.

In his post, “What is missing from moments of truth marketing”, blogger Joel Rubinson argues for the existence of “minus one” moments of truth that include such influences as word of mouth, in-store product visibility, and various types of advertising. Most interestingly, he proposes that these -1MOTs may occur in any sequence relative to FMOT and SMOT.

Joel’s point about the non-linear nature of the Moments of Truth is worthy of frequent repetition. Product experience is certainly a web of moments, not a fixed linear sequence. Call it WOT (Web of Truths)?

On the very same day and from an independent thought process, blogger David Berkowitz proposed adding “The Infinite Moment of Truth” to the model, which reflects his excellent observation that consumers may well describe their product and service experiences to others, relaying and amplifying the message beyond the scope and control of the marketer.

Bon MOTs

I applaud David for extending this Shopper Marketing discussion from the path-to-purchase toward the path-to-loyalty. A good thing, really, since the linkages are powerful and real. It made me think about Fred Reicheld’s 2006 book, The Ultimate Question, which proposed that genuine loyalty was best judged by an individual’s likelihood to recommend a product or service to others. Social media can super-charge this potential.

Both bloggers are smart, experienced people I know for some years and their ideas are intelligent and worthy of respect. But I must confess to an impish reaction that led me to ponder: Just how many bon MOTs can one industry handle? ZMOT; FMOT; SMOT; Rubinson’s -1MOT; Berkowitz’s IMOT…

At risk of attracting ridicule, my imp compels me to toss another acronym into the mix: XMOT, the eXtended Moment of Truth. It’s my way of stretching the Web of Truths a bit wider – not quite to infinity, but toward its potential to help us understand the multifaceted tangle of influences each person receives, reflects and responds to in their roles as shoppers, consumers, and friends.

© Copyright 2011 James Tenser

Pay Cycles: When Month Outlasts Money

I WAS STRUCK to read comments a couple of months ago by Walmart CEO Mike Duke who stated that the chain’s shoppers seemed lately to be running out of money in the waning days of the month. He cited the shrinking size of market baskets as evidence. Tough times leading to tough choices.

Separate recent reports about the worrisome state of our consumer economy observe that budget-conscious shoppers tend lately to purchase smaller package sizes near the end of their pay. This, of course, is a key contributing factor to smaller baskets. William Simon, Walmart U.S. stores chief, made reference to this “paycheck cycle” at a recent analyst meeting.

This morning a report in Bloomberg News described shoppers upping their use of credit cards for purchase of household necessities and gasoline. This is a confounding signal that looks on the surface like a rebound in consumer confidence. In fact, it seems to be concentrated at the end of the calendar month. This may be a sobering sign that many households’ flat and declining paychecks can’t keep pace with price increases.

I’ll leave the economic and social import of this behavioral trend to the true experts. But I would like to offer a few thoughts about the time-based shopper insights that allow analysts to detect and measure the trend. Looking at detailed market basket trends day by day, it seems, can reveal a great deal about short-term household economics.

Not Card-Sharp? Then Be a Basket Case
This is interesting because we hear a different tune about insights from the many advocates of frequent shopper programs, a.k.a., loyalty cards. The detailed segmentation data these programs can deliver offer a wealth of target marketing opportunities for retailers and their suppliers, along with behavioral insights so detailed and profound that we don’t always know how to apply them in practice.

This is very cool stuff and it is credited with upping sales and profits at some pretty sharp retailers, like Kroger. Card-linked data allows marketers to put together a picture of a whole customer relationship over time, evaluate it, and group customers into target-able groups. Walmart and the so-called “dollar” stores, however, do not go in for those card marketing schemes. They stick deliberately to their EDLP guns instead, and resign themselves to data-poverty.

Or so it may seem. Actually, there is a great deal that may be learned just by looking at basket trends, especially at those retailers who enjoy very large footprints and shopper penetration. Card-free chains like Walmart, Publix and Dollar General can track the transaction logs by day and by local geography to extract very meaningful insights. Even if the shoppers are not individually identified, their collective behavior reveals much about pay cycle trends on a store-by-store basis.

Here is where even “data impoverished” retailers can find basis for some global and targeted merchandising tactics. Carrying sufficient smaller pack sizes in key categories every day is one obvious response Walmart says it has pursued. Sales and events may be scheduled to coincide with payday for local large employers. Managers’ specials may be timed to hit key mid-month and end-of-month dates.

Well there you have it. It’s still a share-of-wallet game, even when wallets are growing slimmer. Walmart knows, there’s much of tactical value embedded within store transaction-logs, even where there’s no loyalty data in sight. It’s not just dollar size of baskets that may influence action, it’s also item counts, categories included/avoided, package sizes and purchase influences from outside factors.

When the month runs long, wise retailers jump on their cycles.

© Copyright 2011 James Tenser
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