Chances are good that Denise Darragh, vice president of marketing at Katz Group Canada Ltd. — which owns Rexall and Pharma Plus, among other pharmacy chains — won't be sitting down for coffee with Betty Best anytime soon. Best is a composite of the Mississauga, ON-based company's most valuable customer.
But Darragh has good reason to know Betty Best well. About half of Rexall/Pharma Plus' customers belong to Alliance Data Loyalty Services' Air Miles rewards program, which offers benefits across numerous unaffiliated brands and companies. These customers spend an average of 10% to 15% more at Rexall/Pharma Plus, and customers like Best are far more valuable than average.
Why do they spend more? Because whichever of the half-dozen versions of the 2.5 million fliers distributed where they live reflect their preferences and purchase habits.
“In some way, shape or form, data reinforces decisions we have made,” Darragh says. “Analysis helps us feel good [about the company's marketing choices], or challenges us to consider whether they're the most productive use of our money.”
Rexall has turned over most of the number crunching to Alliance. When it was founded 15 years ago, Air Miles provided participating firms an opportunity to offer consumers rewards from several unrelated companies. But while the program may have started out as promotional currency, its analytics capabilities became a significant reason why companies signed on.
At the time, most retail loyalty programs were discount driven and didn't provide insights about consumers beyond RFM, according to Brian Pearson, president of Alliance Data Loyalty Services and Air Miles' CEO.
Alliance created demographic and psychographic profiles of the Canadian consumer landscape by looking at customer behavior across many marketers and adding information collected from program participants.
“We were probably a bit ahead of most of our [participating merchants],” Pearson says. Initially, the company used proprietary programs, such as the Insight clustering system, to support its own marketing efforts. Firms in the Air Miles network took the analysis they were handed without investigating other possibilities the data offered.
That didn't last. “Over time, as our partners' sophistication has grown, we've had to generate custom segmentation for them based on their business,” Pearson says, adding, “Rexall is in the top quintile, in terms of how they've applied their database to understanding what's happening in their promotional and mailing programs.”
The hunger for that level of analysis has led Alliance to develop Precima, a segmentation system due in the next few months. It will allow grocery and pharmaceutical chains to draw inferences about households based on the saying “You are what you eat.”
For instance, people who buy Cool Whip Light or diet soft drinks are probably watching their weight. Someone who loads up a cart with organic products and vitamins is into healthy eating. “If someone buys 16 items quarterly, we can predict with 85% to 90% accuracy how they cluster into various segmentation structures,” Pearson says.
This seems simple enough, but the art comes in adding psychographic and behavioral clusters that have been generated for a specific retail environment. Purchase and demographic information can give clues regarding changes in the household, such as the presence of new children.
“The key is that you begin to change the context you place your offers in,” Pearson says. Take someone who's shopping for families vs. someone who is a “healthy alternative” eater. A marketer can use the same offer — a dollar off, or double points — and by putting it into terms that speak to the individual, the relevance of the marketing material can double the purchase, according to Pearson.
Betty Best and Rexall aren't being influenced by Precima — yet. For now, Darragh has her hands full evaluating which products can be promoted to build store traffic through Air Miles, which channels are most effective at doing so, and which products aren't buoyed by the use of rewards.
“With something like soda, the price has to be right,” she says. “We can offer you all the points you want, but if the price isn't right you won't rush in to buy it in our stores. We're trying to understand price, product or points [as motivators], so we aren't spending on points when the motivator is price.”
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