Turning Nectar into Honey

Many FMCG manufacturers are still missing out on the opportunities afforded by retailer loyalty card data. That’s the view of Steve Messenger, RedRoute’s CAO.

“Marketers do not seem to appreciate that this data gives manufacturers the chance to know exactly how loyal each of their individual consumers within that retail channel are to their brands and to their companies, not just in aggregate but person by person” he says. “But instead of using this to actively manage their level of loyalty to both the channel and the brand almost all are simply using it to deliver 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 offers to redeem other supermarket’s vouchers at some of its highly competitive stores. All this does, however, is simply encourage consumers to shop around.

According to 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 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 Messenger is surprised it is not 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, as popularised by Clive Humby, is one but brand identification, accessibility, value for money and expected satisfaction are just as important” says Messenger.

By using these 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.