Loyalty & customer data - a chicken-and-egg problem

Loyalty & customer data

A chicken-and-egg problem

Loyalty & customer data

How can the chicken-and-egg problem be solved?

Let's talk about loyalty! No good loyalty programmes without data. But how do I get the data I need for this? What can companies achieve with a loyalty programme? What makes a loyalty programme successful? And how is customer data collected and evaluated?

In an exciting episode of the EHI podcast, Kira Wiesner from the Cologne-based retail research institute EHI and Julian Drees, Head of Loyalty at KPS, discussed these and other questions. In this blog article you will find a summary of the most important points from the podcast. 

In very simple terms, loyalty describes a customer's faithfulness to a brand. This customer loyalty is crucial for long-term business relationships. At KPS, we engage intensively with our customers in order to strengthen customer loyalty. We ask ourselves questions such as: How do I get to the customer? How can I get them to buy from me again? And how can I stay in constant contact with my customers?

Challenges

What are the differences in loyalty in retail vs. online retail?

Customer data in retail

Customers are often anonymous in retail

One of the main problems in setting up loyalty programmes in the retail sector is the anonymous customer who pays in cash and therefore leaves no data behind. According to the latest figures from EHI, the proportion of cash payments in total retail sales is falling. Nevertheless, these customers still account for 35.5 % of sales. It is therefore important to develop programmes to promote customer loyalty.

In the world of online retail, things are different and companies can capitalise on this. When shopping online, it is easy to find out who the customer is and what their interests are. This can be determined, for example, through product selection, frequency of purchases and similar data. This helps in the introduction of a well-founded and data-supported loyalty programme, which in turn allows you to gain further customer data.

One of the most important motivations for such a loyalty programme is to offer the customer added value so that they provide as much additional data as possible, which forms an important basis for the further personalisation of the customer approach. The more personalised, the more sustainable and closer the customer relationship.

Offer added value

What are the goals and benefits of a loyalty programme?

Companies generally pursue two objectives with loyalty programmes: On the one hand, there is the issue of customer loyalty and, on the other, the issue of customer data. You want to get in touch with your customers - and stay in touch with them for as long as possible.

Customers need good reasons to stay in contact with a company. Customers must see added value. Only then are customers willing to disclose their data. However, you can offer the best added value if you know your customers well. A typical chicken-and-egg problem.

Every company needs data to make business decisions. The more data, the better. In today's world, we see more and more data coming into focus and data is used to make decisions.

A loyalty programme therefore offers the perfect opportunity to enrich the database with increasingly accurate customer data in order to offer customers real added value and win them over as loyal customers. Even if you only have a small amount of customer data available at the beginning, it is worth starting with a broad-based loyalty programme and gradually expanding the loyalty campaigns in order to collect more data and get to know your customers better and better.
No loyalty programme without customer data - but no customer data without a loyalty programme. A classic chicken-and-egg problem.
Success factors of a loyalty programme

A successful loyalty programme comprises many factors that should be taken into account.

Firstly, you need to take a close look at your customers: What kind of customer base do I have as a company? Do I have many different customers or do they tend to belong to a homogeneous target group?

Then the company's product portfolio and the purchase frequency of the products also play an important role in deciding whether a loyalty programme makes sense at all.

Do I offer many products that are bought more frequently by customers? Depending on the industry, it can be more difficult to establish effective loyalty programmes. For example, if higher-priced products are offered, these are usually purchased less frequently. As a result, there are fewer touchpoints with the customer where you could award loyalty points or collect further data.

Master data and transaction data

How does data collection work and which customer data is important?

 

 

Collection of customer data for a loyalty programme

Added value plays a major role when collecting customer data. As a brand, you need to think about what incentives will motivate a customer to sign up to a loyalty programme and pull out their loyalty card when shopping. These can be loyalty points for discounts, additional services, invitations to events, VIP offers, rewards or other formats. One option is the gamification approach. Customers can compete with friends in online games, take part in prize draws or collect awards.

All of these measures help to build long-term and close customer loyalty. Initiatives such as customer referrals can also help to build an organically growing customer base. The main thing is that the loyalty programme suits the company and the customer!

Loyalty is the key between offline and online shopping. If you combine data from both areas, you can create a complete profile of the customer - a single customer view. This allows the customer to be stored in the right customer segment in the database - an important basis for personalised marketing.

When customers register for a loyalty programme, two types of customer data are collected

  • On the one hand, master data such as first and last name, address, e-mail, date of birth are collected.
  • On the other hand, transaction data is also collected. These reflect every type of interaction with the brand. Both types of data mean that a customer profile can be created from the various sources. The next question to ask yourself is: What can I do with the data?

Comprehensive data helps to identify top customers and supports companies in rewarding desired customer behaviour that is conducive to company growth. Often a lot of customer data already exists, but is stored in different systems and databases that are less accessible. It is therefore essential for a data system to store data collected across various touchpoints in a central location and assign it to the customer. The aim is therefore a single customer view.

The simplest way to use data is with scores. For example, there is the customer lifetime value, which describes how much a customer has spent on a brand in their lifetime and which value scoring they fall into as a result.

Practical example

How Harrods achieves a single customer view

Harrods Case Study about Creating a Golden Record
Harrods is a good example of the harmonisation of customer data in a single customer view. The growth of London's most famous luxury department stores' led to more and more touchpoints with customers and consequently more and more data. However, this data was less accessible. We at KPS were able to help harmonise the internal Customer Relationship Management (CRM) data and bring all touchpoints together. The company now has all customer data available in a ‘golden record’. You can read more about the project in the latest Harrods case study.

Conclusion

Loyalty and customer data are more important than ever

Whether in retail or online, loyalty and customer data are hot topics. Those who do not use a well-developed, integrated loyalty programme are missing out on the opportunity to collect customer data. Today, it is more important than ever to know your customers well. Only with a centralised and data protection-compliant management of customer data can you address your customers appropriately, interact with them and create long-term loyalty to your own brand. If you understand your customers and their needs and wishes precisely, you can create special and inspiring customer experiences. The analysis of customers' personal information and behavioural data guarantees in-depth insights and therefore a highly personalised customer approach and tailored recommendations as well as positive effects on the company's success.

It is important to take a holistic approach so that you can personalise your customer approach across all channels. A coherent loyalty strategy, customised to the company's customers, is an important success factor.

How good is your loyalty programme?

Find out and do the loyalty check with us!

 

Contact us if you want to optimise or reorganise your loyalty programme. We will be happy to support you on your way!

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EHI LAB Podcast Episode #71: How do I solve the chicken-and-egg problem?

EHI LAB Podcast Episode #71

How do I solve the chicken-and-egg problem?

Good loyalty programmes need good data. But how do I get the data I need for this? A classic chicken-and-egg problem. Listen to the podcast (in German) on which the above blog is based. 
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