COLLOQUY Corner: Track Everything, Everywhere

In last month’s column, we talked about how to begin building a multitender customer database by enrolling buyers in your loyalty or customer-retention program. Enrolling customers who have raised their hands and asked to be identified, however, is only half of the battle. Once you’re successfully tracking customer behavior, your next set of questions revolves around deciding what information you want to track and how you want to track it.

Corollary to the principle of multitender tracking is the principle of capturing transactions everywhere they occur within your organization. You should enable every customer touch point with tracking ability, capture every type of transaction, and enter all information into your database. In single-tender, subscription, or credit environments, the touch points might be few and simple to feed into the database; retailers, by contrast, typically have multiple touch points: point of sale, the customer service desk, and the Website, to name a few. Most important, you’ll want identical tracking capabilities in each of your locations and channels so that you get a complete view of customer spending across your enterprise.

Setting the rules
To track all member transactions across your retail operation, you’ll need at minimum

• an identification device or system for each member
• the ability to record the transaction amount
• a “rules engine” that operates in the background: “If customer spends x, he earns y.”

In a simple loyalty program, that’s all you need to get started. Depending on the sophistication of your POS systems and the complexity of your database, though, you can track a variety of additional information. Most critical are

• the transaction type (department, category, SKU)
• the tender type (cash, credit, debit, check)
• date, time, and location variables.

Loyalty “rules” can vary from a simple one-size-fits-all approach to the complex tactic of applying variable earning rates based on specific components of member transactions. The rules engine allows you to drive potentially profitable changes in member behavior. “Spend a dollar, earn a point” is perhaps the simplest and most prevalent rule in loyalty marketing. But “Spend a dollar at our jewelry counter on Friday and earn two points” is a much more sophisticated approach and results in greater incremental revenue from your targeted customer group. (See ”The Bonus Is the Thing.”) If a particular merchandise vendor or marketing partner is funding a percentage of that bonus in exchange for the promotional consideration, then so much the better.

Hunting and gathering
Because all customers are unique, savvy loyalty marketers collect and use personal attributes for every member in their database. For this approach to work, your members must find the value exchange compelling. You also must establish trust before they’ll open up to you and communicate program benefits that are both relevant and personalized to individual members.

You should focus on collecting two main types of customer attributes in your database:

1. Demographic information, including age, gender, number in household, presence of children, income level, and other defining characteristics.

2. Preferences, including likes and dislikes, favorite tender type, most-shopped departments, preferred sales channel, competitors they like to frequent, and any other variables that may help you understand them better.

Learning customer attributes helps you in three ways. First, you’ll identify important characteristics to drive bonuses to increase the yield from your members. Second, you’ll be able to describe your members in marketing terms understandable to external partners who are considering investing their promotional dollars in your program. Third, the information forms a foundation of relevancy that will increase program effectiveness. Why offer me a bonus for shopping in the toy department, for instance, when I don’t have children?

You can collect this information only if you ask for it. Surveys are a good way to gather data, provided you disclose exactly how you will use the answers, where the information will be stored, and who will have access to it. Good loyalty marketers engage in dialogue marketing, conversing with members at various touch points and storing the information gathered for subsequent analysis and use. Why not offer a bonus for participating in a survey? Sweetening the pot always helps.

Opting in to e-mail
Of all the optional customer data you’d like to have in your database, however, e-mail addresses are the most important. E-mail offers a low-cost platform for customer dialogue, and tools exist today that automate message delivery and track responses. You can immediately know the response rate, track the financial benefit, and recalibrate the next message. You don’t need weeks of lead time to execute a campaign; messages sent out on Thursday can lead easily to weekend business.

Large operators may use an e-mail service bureau to handle campaign execution; the costs are usually reasonable. Remember that the more personally relevant you make the e-mail offer, the higher your response rate. But your ability to personalize depends largely on the quality of your database. Collect customer preferences and transaction history, and use automated segmenting tools to craft messages appropriate for each customer group.

Because of heightened privacy concerns and the proliferation of spam, it’s absolutely critical that you adopt an opt-in e-mail policy. Customers must willingly and knowingly give you their e-mail address and grant you permission to send them marketing messages. The value exchange is key—if customers see value in your messages, then they’ll opt in. Offer no value, and you’re only sending more spam. And if you ever abuse the privilege they’ve granted to you, watch how quickly they demand that you remove them from your list.

As a corollary to your opt-in communication policy, you must craft a privacy policy. Any marketing program that collects customer information requires a carefully worded and legally vetted policy to protect member privacy; you must publish and post it in your stores, in all your brochure materials, and on your Website. You must adhere to it religiously and review it periodically to keep it fresh and consistent. A privacy policy is a prerequisite to building trust between you and your enrolled customers. It explicitly states what you will and won’t do with the information you collect, how you will store it, and for how long. The more consumer-friendly your privacy policy, the greater the trust you’ll generate.

Of course, all this tracking and database building comes at a price. You must have the technology in place to produce these basic results. You can build, buy, lease, or outsource, but you’ll have to spend some money. If you can’t afford the investment, than you can’t play the game. Consider reallocating resources currently devoted to less targeted forms of marketing to fund your program.

Why do it? Because the results are worth it. Tracking all spending allows you to develop a complete view of your customers. The resulting patterns of behavior will offer significant advantage as you seek to develop cross-sell and upsell opportunities. If customers aren’t purchasing higher-margin products and services from you, how could you motivate them to do so? You spread the cost of your loyalty program to those places where you can realize the most incremental profit, as opposed to wasting incentives on spending that you would have gotten anyway. Since different spending categories have inherently different cost/margin structures, tracking across all points of interaction allows you to align the cost of rewarding customers in a financially sound manner.

Always remember, however, that by collecting member information, you’re making an implicit promise. Consumers believe that if they give you personal information, you’ll use it to construct personally relevant offers and communications. Use what you collect, and collect only what you’ll use. And when customers talk to you, always show them that you’re listening. Don’t be the guy at the party who’s only pretending to listen to you while he’s waiting for his turn to speak.

Rick Ferguson is the editorial director of COLLOQUY, a provider of loyalty marketing services. E-mail him at [email protected] .