Sharing Loyalty Data

Brick and mortar retailing continues to be the cornerstone of consumer goods distribution, with companies charged with evaluating mountains of data. Through this data analysis, there is great opportunity for growth, particularly through collaborative efforts between retailers and suppliers. This month, CGT sat down with Matt Germain, Client Executive for Acxiom Corporation. Germain pulls from his 16 years of marketing information experience with ACNielsen, Information Resources Inc. and Acxiom to provide perspective on collaborative analysis using retail loyalty data.

To what extent are retailers willing to share loyalty data with consumer goods companies?

While sharing loyalty card data with brands may not yet be commonplace, collaboration will likely grow as retailers continue to struggle with how to differentiate themselves with their most valuable customers, and both retailers and brands look for mutually beneficial strategies in the store aisle.

Loyalty data is information about current customers for a particular retailer, but it's important to appreciate that the benefits of this integration of information aren't limited to satisfying, retaining and maximizing the value of existing customers. While it is very important to retain and reward current customers, long term survival for both retailer and manufacturer will be dependent on continuously attracting new customers and then serving them better than anyone else.

Targeting and rewarding loyal customers is easy, but understanding and reaching targeted consumers is harder, and that's why collaboration using loyalty data can be a win-win for both parties. The profile of "most valuable customer" resulting from a blend of brand AND retailer information creates a well-defined target for marketing and product assortment planning activities intended to acquire new customers.

With retailers often hesitant to share data, how important is it to have a neutral third-party processor that helps provide a solution to privacy concerns?

It is critical that privacy and security be a top priority in any collaborative project using retail loyalty data, and one approach to ensuring that is to take advantage of a respected and trusted third-party data consultant to handle the merging and application of retailer and CPG consumer data. This protects all parties by ensuring compliance with an increasing number of consumer data protection laws, and most importantly, encourages consumers to continue to feel comfortable sharing their personal information without fear of it being misused.

A quality third-party CDI provider will be an expert at working with consumer name and address information, and will have a code or segmentation scheme for all consumers. Using a unique segmentation scheme to identify each consumer allows Acxiom to provide retailers and manufacturers with the ability to identify valuable consumer trends and speak a common language without releasing a consumer's proprietary name and address.

How can companies turn loyalty data into actionable insights?

Once the doors are opened for collaboration, there are many tangible benefits to segmenting retailer loyalty data at the store level. In the instance of store specific merchandising/planogramming initiatives, for example, various industry estimates are as high as 20 percent to 30 percent increase in Gross Margin Return on Inventory Investment (GMROI) versus a national or clustered approach.

Interestingly, in some respects, marketing and merchandising assortment decisions are already being influenced by shared data. Progressive CPG brands can pinpoint their target consumers right down to where they live using consumer segmentation tools combined with databases containing significant household-level consumer information. They can already use this information to recommend assortments and develop highly-focused marketing activities down to individual store levels. Progressive retailers are actually using much of the same information to make key store site selection and merchandise assortment decisions as well as tools to help drive cost-effective trade-area-specific marketing.

Sharing retailer loyalty data allows retailers and CPG brands to work more closely together to maximize their shared relationship with loyal customers by further tailoring product assortments. Working together can allow for development of a very specific understanding of the loyal consumer base down to each loyal consumer's life stage, and specific assortments for each store trade area can be developed accordingly.

Unfortunately, the potential for loyalty data collaboration is much greater than what is currently being realized today. I urge both manufacturers and retailers to work together to discover the potential value that can be realized by true collaboration. The one thing that I am pretty sure of is that consumer centricity in the consumer goods industry is not going away, the sharing of customer data fosters increased sales, higher spends and greater margins. Integrating attitudes, life stage and behavioral data is the next evolution in category management collaboration.

Good retailers provide unique shopping experiences in the communities they operate in. How important is it to analyze and match retail outlets to the portrait of your most valuable customer?

As consumers, we have all experienced retailers that do this well -- we feel comfortable in the environment, we find the brands we're looking for, we find the products we're looking for, we find the prices we're looking for, we connect with various promotions and feel good about saving money on a regular basis, and we don't even consider the possibility of trying the place across the street. And we take it all for granted.

Clearly, of course, this isn't by accident, as each retailer strategically positions itself in a unique fashion and attempts to deliver that positioning via tactics that are intended to connect with their target audience. It's become a more challenging exercise, however, as the consumer market continues to shift from a small number of large homogenous masses to a larger number of smaller, more tightly-defined segments. And this has had an impact on retailers as well as CPG brands.

In fact, delivering a successful shopping experience requires both retailer and brands to be on the same page, sharing a definition of "most valuable customer", and attacking the same opportunities with combined strategies.

Luckily, it's increasingly easier to accomplish a neutral definition using available third-party segmentation and household database tools and analytics, and defining the customer can be even more specific when a retailer's loyal customer data is added to the analysis. Both retailer and manufacturer can then truly understand who those customers are and what guides their behavior.

Working together to deliver the best possible experience, the retailer and brand can define optimal product assortments, pricing and other in-store experiences that match their targets.

What tangible benefits can consumer goods companies realize by doing more consumer analysis by store?

Some examples from recent Acxiom retailer programs in a range of channels and product categories include:

Significant sales increases have been measured -- 25 percent growth in one case, $90 million first-year increase in another.

Increased cross-shopping 27 percent between lines of business.

Media costs have been reduced by as much as 25 percent by linking "most valuable customer" profiles to prospects and focusing spending on well-targeted advertising zones.

Category analysis and assortment recommendations yielded an 8 percent improvement in working capital.

443 percent increase in GMROI via category analysis, consumer profiling, trade area scoring and new store-level assortment recommendations.