Turning Nectar into Honey

Many suppliers to Sainsbury’s, Tesco and other leading supermarkets and convenience stores already take advantage of the ability to target offers to identifiable shoppers to encourage trial and repeat purchase amongst particular customer groups.

Tesco Clubcard, Sainsburys Nectar Card, and schemes like Spar’s “Shop’n’Win” (which enables suppliers to target customers via their mobile phone using i-movo coupons) have been around for many years and are now well used by all the big FMCG companies.

Whether this drives brand loyalty or simply increases promiscuity is open to debate but the reality is that the answer to this question is entirely influenced by what you send to people.

I am not talking here just about whether you send them a money-off coupon. It is true that money-off coupons do not drive brand loyalty, they only drive trial. Worse still, they encourage existing loyal buyers to become less frequent shoppers – encouraging them to wait until they get a coupon or, even more damaging if you do extensive reductions, undermining their perceptions of brand value.

At this time of year, you will see many retailers fighting for “floating customers” by offering the lowest price they can on beers, wines and spirits. That is because alcohol is a “cross-the-road” category – people will readily switch stores to get the lowest price gin, whisky, vodka, brandy and so on. And they then bring the rest of the basket with them – which is fine for the retailer but the supplier who pays for the discount gets nothing out of the deal – in most cases they would have earned much the same overall revenue and profit (or even more) by not discounting.

Price discounting is a useful tactic for driving short term volume but it hardly ever pays back for the supplier unless it is supported by other in-store activity such as Feature and Display. We know this to be true because we have been working with suppliers to measure these effects for decades.

The new frontier, is collaborative CRM.

“Marketers at many manufacturers still do not seem to appreciate that retailer data gives them the opportunity to know exactly how loyal each of their individual consumers are to their brands and to their companies within that retail channel. And not just in aggregate, but person by person.” That is the view of RedRoute CEO Steve Messenger. “Instead of using the opportunity to communicate with customers to actively manage their level of loyalty to both the channel and the brand, almost all only ever seem to use it to deliver ‘one-dimensional’ money-off coupons. This is a travesty.”

It is well known that the supermarkets have for sometime been targeting offers according to the consumer’s past purchases and attempting to get them to “trade-up” or try new products by offering bigger discounts to switchers. Tesco even went through a period of offering, at those stores facing high level of local competition, to redeem vouchers issued by other supermarkets. All this does, however, is simply encourage consumers to shop around.

According to Steve Messenger, “Instead of rewarding them for their disloyalty by sending them money-off coupons, FMCG manufacturers could dramatically increase the returns from their marketing spend by rewarding customers for their brand and channel loyalty over time, which they can do as the data allows the retailers to track spending person-by-person.” This would work, he says, by retailers and manufacturers rewarding people for their loyalty to the manufacturer’s brands, and the channel they purchase them from, retrospectively once a year or once every six months.

“It’s a clear win-win.” says Steve Messenger. “And it is the most effective way to offer differential value to consumers as you can reward loyal customers with added value items that cost you less than a price discount whilst only offering price discounts to those that are looking for them. It works for the retailer as well because they can reduce the reward costs for their loyal customers whilst still incentivising potential store switchers.”

Such cooperation is already happening in some places but we are always surprised it is not now extremely commonplace. “The manufacturers and retailers have much more to learn about how to work together to get the best out of these new data sources” he concludes.

RedRoute has been combining market research with customer transactional data for many years and have uncovered many insights from this work. “We now know that there are five key dimensions to providing effective customer loyalty management. Relevancy, Association, Accessibility, Value for money and Expected satisfaction are these 5 key dimensions. And they abbreviate to “RAAVE” – which is what you want your consumers to do about your product.

Using these five dimensions we have been able to show clients how to actively manage consumer loyalty at the one-to-one level, not just give away coupons, and have shown that the result is far more profitable both for the manufacturer and the retailer.

We have many case studies we can show, based on data from companies such as Sainsburys, Homebase (as was – Bunnings have scrapped the advantage they had), Carphone Warehouse, Viking Direct, East, Spar and many others.

The net increase we have found to exist is an increase in loyalty rate – i.e. the number of times out of ten that they choose your brand rather than the competition irrespective of short term discounts and other interventions – of more than 50%. That is a noticeable increase in brand share which not only outlasts the length of the activity but achieves it without giving away anything like same level of discount.

Sound interesting?

Then check out our web site to see some case study examples and / or contact us for more info. and we will help you turn Nectar into Honey.

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