Shoppers today are highly receptive to the idea of personalization

A customer relationship management (CRM) program is at its core a one-to-one conversation with your customers. It is a dialogue: you reach out and your customers talk back with their behavior. You listen, adjust and continue the dialogue. Making each customer feel recognized, valued and known is key.

The first step in making sure you start the dialogue on the right note is having quality, clean data. Customers who have been shopping with you for years, participate in your loyalty program and are high-spend customers, have certainly established a strong relationship with your company, they feel connected and loyal. Now you go about reaching out and spell their name wrong, or mess up their address or send them a marketing piece via a channel they are not keen to use. It is possible that this act would leave them feeling disappointed and annoyed, or, even worse, suddenly disconnected.

Target them with high-precision offers

Therefore the key in making your customers feel known in your CRM conversation is to always approach them with targeted offers and messages, via the correct channels. Using past purchase behavior and customized segmentation, you can even layer the targeting so that each customer dialogue is tailored specifically to an individual. This can seem like an overwhelming task, but with recent advances in technology, today it’s easy to generate exactly that at a push of a button. Of great importance here is also having a robust and strategically designed offer-bank, so that you can quickly access a readily available source of offers that are relevant to the customers you wish to target.

The following scenario illustrates how targeting impacts your customers

Custom segmentation categorizes your loyalty customers into tiers, from the most to the least valuable shoppers: the “high” ranking customers are loyal, shop frequently and spend a lot, so you want them to feel valued by your company. The best way to achieve that is by using your offer-bank to select just the right offers for each individual customer. Take a look at the following example.

Customer A, a high-value customer, shops twice per week. Each trip costs around $100, with chicken breasts, bread, sliced cheese and vegetables always being part of his basket. Once per month a wider selection of products is purchased, including napkins, paper plates, dish detergent and hand soap.

With intelligent, high precision targeting, customer A receives the following Reward offers:

  • $.50 off a loaf of bread
  • $.75 off fresh chicken breasts
  • $.50 sliced cheese

In addition, the following Grow offers are also delivered to customer A:

  • $.75 off Napkins
  • $1.00 off 2 paper plates
  • $.50 dish detergent

Finally, Customer A also receives one Basket offer:

  • $10 off $120 total spend.

All of these offers are specific to the brands that customer A usually buys; he receives the offers in the channel that he’s most likely to respond to, which has been determined by customer preference and channel testing. Furthermore, he only sees offers for things that he would usually or occasionally buy, as well as a basket offer that is a bit of a stretch for his normal basket total, but if he stocks up on some of the things he has coupons for, he can easily hit the number and take advantage of this deal. The result? The customer feels known and rewarded: he redeems six of his seven offers thus communicating back to you that they were indeed relevant to him.

Now let’s look at Customer B who is part of a different company’s CRM program. This other company does not generate targeted offers and is instead using more of a ‘shotgun’ approach of best-selling items of the same month from the previous year, as well as a couple of offers that CPGs are willing to pay for, for inclusion in the program. Customer B shops four times per week with a typical ticket spend of around $50 that usually includes cottage cheese, apples, red wine and vegetarian frozen dinners; she also grabs a salad from the deli at least once per week. She receives the following offers:

  • $3 off Ground Beef
  • $1.00 Kids cereal
  • $.50 Private Label Cottage Cheese
  • $1.00 six pack soda
  • $20 off $200 total spend.

While she would love to get $20 off her bill, she never spends more than $75 in a single trip; after that, you have lost her interest and she ignores the circular or deletes her email. Want to know why? Since the big offer was not targeted to her, she didn’t even bother to look at the other offers. She feels that the company she trusts doesn’t know or appreciate her, so the dialogue here doesn’t even get started and this high value shopper suddenly goes silent.

From Theory to Practice

There are real numbers behind these claims, which prove that personalized, high-precision targeting is prevailing in retail:

  • When testing low-value targeted offers against very high-value non-targeted offers, the redemption rate of targeted offers is up to 20 times higher
  • When targeted and non-targeted offers are combined into one communication, the non-targeted offers actually depress redemption of the targeted items by nearly 60%
  • In testing degrees of targeting, offers that are still targeted but based on varying degrees of recency and frequency, always outperform offers that are not, even if the latter are higher in value.

Once you’ve established the basis for a useful, relevant dialogue with shoppers following the aforementioned steps and best-practices, and you’ve ensured that your customers feel rewarded and appreciated for their loyal purchasing behavior, you can further boost growth by start making recommendations on other products they might like, or categories and departments they may want to shop from, but that, of course, is a subsequent “conversation”.

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