Dollars-and-cents ROI isn’t the only important metric for a data-driven company to consider when evaluating a loyalty program’s success.

Indeed, the true value of data lies in its ability to transform the customer experience by driving insight and benefit back into the core business model. Particularly in retail, loyalty programs will play a pivotal role in identifying customers and harnessing information to change how people shop, how they experience the store and what experiences those experiences mean in the long run.

Some firms really understand how to use the customer experience to drive their success.

Here are two examples:

Air Miles reward program

In Canada, this program has boosted response rates and relevance for one of its grocery partners by marrying SKU-level data from the retailer with Air Miles Collector card information to identify mailing targets.

Air Miles also has worked with a leading pharmacy retailer to review the company’s flier-distribution strategy. By overlaying member data with store locations, demographics, and forward sortation area (FSA) boundaries, Air Miles assigned an ROI figure to each FSA to determine which postal codes represented the highest and lowest possible returns for the retailer. (An FSA is the first three characters of a Canadian postal code.) By dropping the lowest performing FSAs from its flier program, Air Miles helped the pharmacy realize significant savings on flier printing and distribution.

Tesco

Loyalty gurus around the world hold up U.K. grocer Tesco as the gold standard of companies leveraging loyalty data to fundamentally change the way they do business. Launched in 1994, Tesco’s Clubcard helped move the company’s market position in the United Kingdom from third to first; today more than 40% of U.K. households are members.

Tesco segments member shoppers into six behavior categories and sends 5 million to 6 million unique mailings per year to its 10 million members. For its trouble, Tesco enjoys redemption rates ranging from 20% to 40%.

RICK FERGUSON ([email protected]) is the editorial director for Colloquy magazine in Milford, OH.

Many home improvements come out of a basic need. The lawn didn’t weather a tough winter? Reseed. The toilet leaks? Call a plumber. Mother-in-law moving in? Head for the hills—or, if there’s no time to run, turn the den into a bedroom.

Home and garden retailer/cataloger Plow & Hearth was born during a time many Americans had a major need: to cut down on their home heating costs during the energy crisis of the early 1980s.

Starting with a small retail store in 1980 (dubbed the “Hippie Hardware Store” by Madison, WV locals) and then a catalog in 1981, the company offered wood stoves, as well as rototillers, canning equipment, bulk garden seeds, books, and garden tools.

Today, Plow & Hearth is a subsidiary of 1-800-Flowers and a $120 million-plus business, with seven outlet and retail stores and sister catalogs such as Problem Solvers and Home.

Founder Peter Rice, who received a lifetime achievement award from the New England Mail Order Association earlier this month, noted that one way his company grew in the mid-1990s was not to vary wildly from its core product line but rather see how it could be complimented.

“Look at what you do in a different way to see how it can lead you into the next level,” he said.

Plow & Hearth was marketing products that were very functional for the home and garden. Rice knew there were other categories that would fit into the concept and make sense.

One niche was shoes like Dansko clogs and UGG boots. Another was apparel like Irish flannel pajamas and nightshirts. And food items like locally grown Virginia peanuts also became a big seller.

Even though he recently retired (if you can call taking an interim president post with sister company The Winetasting Network retirement), Rice still has a zeal for both retailing and the environment. Aside from his business accomplishments, his ecological efforts have made a lasting impact on the environment as well.

Since 1991, the company has planted two seedlings for every tree used in catalog production. So far, over 1,900 acres of trees have been planted in the Culpeper Soil and Conservation District in central Virginia. Later this year, Plow & Hearth will celebrate the planting of its one-millionth tree.