18/11/10

By Andy Wood

Understanding consumers and their spending habits is essential to carrying out effective customer communications. By sending targeted, personalised messages a company can get more intimate with its customers and be rewarded with loyalty and increased customer value. Using customer insight in this way requires a comprehensive database.

Customer loyalty programmes provide one of the most effective ways to collect consumer data, which can be used to improve interaction and ultimately increase profitability by focusing on getting more new customers, retaining existing customers and getting existing customer to spend more often and more per transaction.
Loyalty marketing has increased in popularity over the past decade but it remains misunderstood by many firms. There are a number of traps marketers fall into when setting up loyalty marketing initiatives. So, what are they and how are they to be avoided?

Going for a creative led strategy instead of a data led strategy

Too many firms jump into a campaign with a great creative idea but completely neglect the data side. Creative is certainly important but a well designed, poorly targeted piece will not perform as well as a well-targeted, poorly designed piece in terms of response and conversions.

Research carried out last year, by our sister-company, GI Direct, found that two thirds of Britons are more likely to respond to direct marketing that reaches them at the right time, while only a third claim that design and personalisation are more important than timing in getting them to respond.


Believing you can do it yourself

Too often, firms think they can do it all themselves by investing in specialist software that they assume will do everything for them, and then get disappointed when this does not happen.

Data management software tools, no matter how intuitive, require high levels of in-house analytical expertise to get any real value out of them. And with the associated price, the system needs to be used to the fullest of its capabilities in order to get a sufficient return on investment. One size rarely fits all and firms often find they end up paying for elements they do not need.

The alternative is to partner with a data management service provider that offers a bespoke service to fit your exact requirements — which means you are only paying for what you use. This option takes away the responsibility of carrying out analysis and modelling and leaves it with the expert account team, which also means jobs get done more quickly.


Thinking that setting up and maintaining an Single Customer View database is easy and should be IT's responsibility
Regarding a Single Customer View (SCV) database as simply a collection of names, addresses and transactions that is easy to maintain and use, is a dangerous attitude to adopt.
Maintaining an SCV database is fraught with challenges, foremost of which is the matter of keeping it deduplicated in a live state. In order to create an SCV that holds each piece of data only once, a robust database design is required and it is essential that it is a relational database. It is also necessary to be able to clean addresses against the Royal Mail Postcode Address File.
Thinking that your own IT team has the skills to do this is not an option. While they are skilled at your business issues, building and running a customer database is another matter. Different skills are required for database marketing and it should not be assumed that IT staff will have them. If a user does not have a thorough database marketing knowledge, then they will almost certainly make serious missteps.

Not being able to prove the benefit and the performance
Too many firms do not keep control groups that help to prove the incremental benefit of communicating with their customers, which means that they cannot measure performance. And yet, marketing departments are always being asked to justify their budgets. Proving that what you are doing is working and beneficial to the company is essential in order to keep investors, boards, partners and other stakeholders happy. And it helps measure return on investment — which will keep finance departments happy. Even poor performance provides insight that will lead to improvements next time.


Not being robust in the defence of your activity
There will always be instances when something does not go as planned. How you analyse and react is more important at these times than at any other as the analysis can show what has and has not worked.

Do not be afraid to use the data to defend or identify whether or not something is working. It is all about making the right management decisions and the analysis can take the emotion out of it. Even if something is not precisely matching expectations, it still should be looked at objectively based on data and evidence to assess the real progress.

Conclusion

Customers have come to expect that they will be dealt with in a meaningful and personalised fashion. This expectation has meant that when companies do talk relevantly to their customers, using the information that they have collected on their profile, their preferences, and most importantly their transactions, the rewards — in terms of customer retention and increasing value to the firm — are often stellar.