Magazine Article | November 1, 2002

Test Your Customers' Loyalty

Source: Innovative Retail Technologies

Mining customer data enables a grocery chain to shape promotions that yield measurable payback.

Integrated Solutions For Retailers, November 2002

Can you put a price on customer loyalty? Is it, in fact, priceless? Well, sure. After all, without customers, you'd be nothing, as you undoubtedly remind yourself. But, with the right CRM (customer relationship management) solution, you can put a price - an actual dollar figure - on customer loyalty.

With tools for analyzing customer data, you can determine who is buying, what they're buying, how often they're buying, and how much they're spending. You can also pinpoint who isn't buying - regularly or at all - and what might entice them. You can even determine the response rate and revenue from a promotion.

The ultimate goal of any CRM initiative is to transform customer enticement campaigns into one-to-one marketing pitches. You want to be able to offer personally earmarked promotional offers and say to existing or potential customers, "Here. Try this. We know you'll like it."

Database Power Drives CRM
At Remke Supermarkets, a seven-store chain covering the greater Cincinnati/northern Kentucky region, there was - theoretically, at least - plenty of customer data with which to target shoppers. Unfortunately, it was locked inside a homegrown loyalty system. The system had originally been built in 1996, when Remke instituted its Preferred Customer Card program, but the developer had since moved on. That left an IT staff (of one) struggling to find time to extract data. "The system could take raw POS data and pull in transactions and amounts, but it required an IT person to run queries against the database to get the information back out," says Pat Iasillo, Remke's director of CRM. "We had only one IT person for all of our store systems, so it was difficult getting that person to run reports for the shopper program."

Even after Remke purchased report writing software that could access the loyalty card database, its information-gathering efforts still ran into barriers. Foremost were querying limitations stemming from the non-relational design of the database. For instance, to generate a report showing which shoppers bought a particular item during a certain time period, the system had to check every transaction. "One time, I tried to find out who had purchased baby food within the last four months. The system ran for two days, then crashed," Iasillo says.

What Else Might They Buy?
To take its customer loyalty program to the next level, Remke decided to bring in a full-blown retail CRM product, the Allegiance software suite from Triversity Inc. Allegiance's data mining capabilities enable historical reporting, analysis, and predictive modeling - tools Remke uses to tailor its promotional offers.

Remke's marketing initiatives typically result in direct mailings of coupons or in placing inserts in neighborhood shoppers. When those approaches aren't effective, Remke can respond with other strategies. For instance, through Allegiance, Remke learned that 60% of its best customers weren't buying laundry detergent from Remke. A direct mail blast briefly boosted sales. However, given the low profit margin on detergent, the sales increase was not high enough to cover the cost of an extended coupon campaign. "Instead of continuing to make coupon offers, we switched to a merchandising approach," Iasillo says. "We changed the in-store displays and did some advertising. In a month and a half, we took that 60% figure down to 45%."

A recent campaign to promote Remke's delicatessens proved Remke's enhanced ability to determine how much revenue was generated by a particular marketing initiative. Allegiance identified all Remke customers who were not making purchases at the deli. Each was mailed a coupon for deli purchases. Two hundred households, or 23%, responded immediately. Within the next five weeks, 198 of those 200 had made additional deli purchases. "During that promotion, we brought in $12,000 in deli sales from customers who had never bought products from that department," Iasillo reports.

In addition to using Allegiance, Remke is piloting Triversity's Promo Coach product, which helps Remke take promotions to the level of the individual customer or specific household. For one project, Remke used the tools to refine its deli campaign. Promo Coach narrowed the search for potential deli customers by identifying significant overlap in the shopping baskets of deli and non-deli users. "By targeting the customers Promo Coach identified, the response rate was three times higher than when we sent out coupons to all non-deli users," says Iasillo.

As it moves forward with its one-to-one marketing initiatives, Remke plans to link its CRM tools directly to the POS. It also wants to push promotions via e-mail. "With Allegiance, we are now able to get particular promotions into particular households. But, in the end, mail is an expensive way to do that," Iasillo admits. Tying Allegiance into the POS, for instance, will enable Remke to make offers and promote products while the customer is still in the store.