Merchant environments teem with customers, products and purchases, all leaving their imprints on the retail “biosphere.” Loyalty programs provide the scientific tools to study such imprints, offering a profound opportunity to redefine how you go to market.
Scientists understand nature’s ecosystems by classifying living things into kingdom, phylum, class, order, family, genus and species. Loyalty eco-marketers similarly identify customer groups through purchase behavior segmentation. How do customers react to your retail environment? What products do they buy, in what categories?
To answer these questions, direct marketers can employ segmentation dimensions that lead to relevant communications with their most valuable customer groups. For instance, in the grocery environment, best-practice companies employ models to determine which items define, say, a Kitchen Connoisseur segment. They score products according to fit and value to this segment; for example, high scores for fresh ingredients and low scores for prepared foods.
Good loyalty eco-marketers want their studies to go beyond the what and determine the more-critical why. We do this by determining the product and service solutions that valuable customers seek. This entails identifying life stages and lifestyle elements in terms of customer activity.
Because consumer behavior changes, the best direct marketers continually test their scoring methodology and update models to segment shoppers on multiple attributes that create a true 360-degree consumer view. This life-cycle regeneration keeps the loyalty ecosystem vital and fresh, in particular by responding to life-cycle shifts.
Human life cycles don’t seem nearly as dramatic as the transformation of caterpillar to butterfly. Yet, when a family takes wing because of a big promotion, or transforms completely when a baby arrives, its purchase behavior changes significantly. To remain relevant to customers, your ecosystem must adapt to their changes. Expert analysis can identify changing needs—in some cases before the customer is even aware of the need.
Example: Maria and Joe are loyal, high-value customers. When Maria shops for groceries, her choices tell a story. As Maria begins substituting healthier alternatives for her regular purchases because of Joe’s heart attack, you now identify her as a high-potential customer in the Health Conscious segment. You adjust, adding heart-healthy product offers to the tips and recipes Maria receives. Because you know what Health Conscious customers purchase, you introduce Maria to additional relevant products and categories that drive incremental sales and enhance the emotional connection to your brand. In ecological terms, you’re maintaining equilibrium.
Such classification allows you to build a dynamic, nurturing customer habitat. Suppose your transaction analysis reveals a significant index of convenience purchases among valuable customers. Identifying this Time Starved segment allows you to design cross-functional strategies to drive a better experience for customers who won’t spend time shopping.
Employ the “community” aspect of ecosystems: Study how much legwork these customers engage in to make such key Time Starved purchases as prepared foods. Are you making them walk across the store, or are you placing their products near the express checkout? As you analyze each eco-segment—Timed Starved, Kitchen Connoisseurs or even the Beer and Pretzel crowd—work with operational teams to create product adjacencies—communities, as it were—that build a symbiotic environment within your retail footprint.
This level of transactional study, custom communication and experience management increases marketing costs. But your investment drives two significant results: strong emotional resonance with consumers who perceive their environment is responding to them and strong incremental margin per offer.
Needs-based segmentation is a triple win. It creates relevance, builds relationship value and drives profit. A retail environment that nurtures and adjusts dynamically elevates your loyalty efforts to customercentric habitats that thrive in the business biosphere.
Bryan Pearson is president of Alliance Data Loyalty Services (www.loyalty.com), operator of Canada’s AIR MILES Reward Program, COLLOQUY and ICOM Information & Communications.