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

Movin’ On Up

TENSER’S TIRADES HAS RELOCATED to this much finer neighborhood following a dispute with the old landlord.

You’ll find the entire blog (past and present) here, along with some useful new features.

If you subscribe to our RSS feed, you can update it using the link you will find at right.

Jamie Tenser

© Copyright 2012 James Tenser

The Incredible Dissolving Store

Shopper CentricI WAS ASKED RECENTLY to address a group of consumer products managers about the possible future of Category Management.

The request came at a time when I had been devoting serious thinking to several topics that at first seemed only tenuously related. Computer-generated ordering is one. Optimization of markdowns is another. The impact of social, mobile and local media is a third. Then there was this trendy concept — Big Data — that keeps getting lots of mentions, but seems to defy clear understanding.

So what was I to make of Category Management in a world where these disparate forces swirl? More importantly, what practical insights could I deliver to this audience of the best and brightest that CPG companies had on their brand and account teams? I probably couldn’t tell them much they didn’t already know. Maybe I could try to make their heads explode instead.

Thought Experiment
I challenged this audience with the following thought experiment: Try to visualize what life could be like for Category Management professionals in a world with vastly more information and a good deal less control.

The diagram accompanying this post identifies ten factors or sources of input that a Category Manager of the future might incorporate into planning decisions. Many are already familiar — optimization of assortment, price, promotion and markdowns are well-established techniques built into software suites like those from IBM DemandTec. Other vendors offer macro space planning solutions, automated replenishment, capacity planning, In-Store Implementation and competitive analytics. These factors all interact in a dizzying matrix. But wait! There’s more!

Now fold in the massive influence of social/mobile/local media and online shopping and search behaviors, which are manifest as Big Data. We are witness to the vanishing boundaries of the in-store environment, due to the advent of personal digital technology, changing consumer habits, omni-channel business models and the immense flows of unstructured and structured data that these are creating for Shopper Marketers. I call this The Incredible Dissolving Store.

Big Data postulates that we will soon be routinely mining these external data flows for relevant behavioral insights and applying those insights on a continuous basis to enable shopper success and sustain meaningful competitive advantage.

Mix Mastery
It’s kind of like the marketing mix management problem. Heck, in many ways it’s a core part of the marketing mix problem. Shopper success — and therefore, the success of our category and promotional plans — are influenced by all these factors. Simultaneously. Continuously.

The increasing intricacy of the merchandising decision process reflects the proliferation of intersecting, measurable and optimize-able factors within the store. All these new data-based influences mean the locus of power is rapidly leaving the store and distributing across your customers’ mobile devices. The shopper is always in the center — no matter where you go, there they are.

It becomes increasingly apparent that Category Management in the Incredible Dissolving Store will not be about solving the equation — it will be about tuning the system. New analytics tools make the keys to relevance more accessible and more automated than ever. The life cycle of your decisions, shorter than ever. The power resides in the network and in the hands of individual shoppers.

Category Management, like it or not, is rapidly shifting from an orderly, controlled, recursive, planning process with boundaries and well-defined metrics into a deliberately dis-orderly, multidimensional, broad, shape-shifting and organic process that incorporates planning, detection, response and continuous strategic reconsideration.

In the Incredible Dissolving Store, we need to get used to the kind of ongoing discomfort this implies and think very carefully about the metrics we use to define success. If we listen actively and shed our bias, the shoppers will tell us what those must be.

© Copyright 2012 James Tenser

 

Of Habit and Target

THE New York Times Magazine made people nervous with its February 19th cover story by author Charles Duhigg. Its chilling headline, “How Companies Learn Your Secrets,” seems to have compelled readership as a matter of personal protection. I make this inference from the number of acquaintances who asked me about it.

[Author’s Note: This column was originally published on March 13, 20122 in the TradeInsight CPG Chatter blog.]

“Creepy” was the adjective repeated most from individuals who read about how Target Stores applied data mining techniques to shopping baskets to infer which shoppers were most likely pregnant, then sent them promotional offers for pre- and post-natal products.  Motherhood is pretty personal business, so I can’t say I disagree with the folks who were offended. What gives them the right?

Focusing on this creepy surveillance was a pretty crafty editorial decision by the editors at NYT Magazine, who used the cover line: “Hey! You’re Having A Baby!” The analytics behind pregnancy detection was actually just one example from Mr. Duhigg’s just-released book “The Power of Habit: Why We Do What We Do in Life and Business.” Having a baby, as it turns out, is one of a handful of predictable moments in life when our consumption habits change big time. For eager marketers that information is, well, mother’s milk.

Even if we look past the intrusiveness of offering coupons for cocoa butter lotion to stretchy young mothers-to-be, Mr. Duhigg’s larger thesis about the enduring nature of habit remains compelling in a different, less sensational way.

It tends to strengthen my own observations of long-lasting retail shopper behaviors, such as trip planning, coupon clipping, list-making and response to promotional cues within the store. In “Shoppers’ Perspective,” research I helped co-author for CPG manufacturer Henkel USA in 2009, we learned that shoppers could be sorted into fairly stable groups based on these enduring habits. It took the pain of the subsequent economic downturn to disrupt the patterns. As a result, coupon redemption statistics turned upward to what we may hypothesize to be a new norm.

The central example of the Duhigg article – Target’s effort to target “new natals” in its promotion marketing – is interesting too, but it offers little, truly new insight about behavioral segmentation analytics. Food, drug and mass retailers have understood the buying traits of new and soon-to-be parents (and other behavioral segments) for decades, without the need for sophisticated data mining tools. These insights are easily inferred from examining the contents of shopping baskets from the store’s point-of-sale transaction records – or better, from frequent shopper data.

It is not necessary to know individual identities, but such knowledge does enable the delivery of more personalized offers and services. These may be welcomed by opt-in frequent shoppers, but can be downright creepy when they seem to be the outcome of cyber-stalking.

The NYT Magazine editors correctly surmised that an article excerpted from Mr. Duhigg’s book could quite possibly be a snooze for readers not already fascinated by human behavior, retail analytics and segmentation and targeting. So they focused – perhaps a bit unfairly – on Target’s stalker-ish behavior toward new moms.

For us retail pros, however, divining the nature of repeat behavior is solid stuff – part of our every day thought work. It reminds us that when we try to influence purchase behavior positively, we also take on the challenge of overcoming pre-existing habit.

© Copyright 2012 James Tenser
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