Is it Loyalty or CRM?
If you're like many retailers, you started thinking about customer relationship marketing (CRM) in terms of a loyalty program tied to a private label credit card. Later, you might have converted it to a tender-neutral program. Today, you may be pulling in customer data from myriad sources not even related to that loyalty program. And you may find yourself facing a complex array of questions, not the least of which is, "What is this thing we've created?"
If you're confused, imagine how your customers feel. Before you can help them and ultimately help your company maximize its CRM and loyalty efforts, you first need to get a firm grasp on these two distinct disciplines.
Defining CRM: CRM is an overarching strategy that leverages collected data about a customer to drive specific behaviors. It involves managing all touchpoints between your store and your customers, with the goal of strengthening relationships, increasing customer loyalty and extending customer lifetime value (CLV).
CRM encompasses everything from lifecycle, retention and attrition programs to database marketing and customer service. It likewise gathers customer data from each of these touchpoints, as well as from sources such as layaways and opt-ins for your email and direct mail lists.
Defining loyalty: Loyalty programs are a subset of CRM. A good loyalty program buys customer information and earns loyalty, while a poor one simply attempts to purchase customer loyalty.
Your loyalty program should provide a reason for customers to identify themselves in every transaction, a conduit for you to dialog with customers and it incent customers to consolidate their category purchases with you.
Your big-picture CRM initiatives should help you accomplish the following:
- acquire new customers;
- deselect or "fire" unprofitable customers;
- recover lost customers;
- adjust pricing strategy for greater profitability;
- respond to competitive challenges;
- select stock lines more effectively;
- optimize merchandise planning;
- cut promotional and advertising costs; and
- select new trading sites based on profitable customer profiles.
Narrow it down to just the loyalty program portion of CRM, and those efforts should help you do the following:
- motivate customers to consolidate their category spend with you;
- drive customer traffic with nonpromotional techniques;
- identify and target (i.e.,market to) best customers;
- retain existing customers;
- move customers up the recency/frequency/monetary ladder;
- increase CLV;
- build long-lasting customer relationships; and
- create advocates from loyal customers.
Most retail organizations that have a loyalty program within their CRM opt to have parallel structures. A typical hierarchy might start with the vice president of marketing, who manages a director of loyalty and CRM. From there, the structure typically splits into separate loyalty and CRM branches, each with their own strategy and analysis sections. The CRM branch responsibilities might include the following:
- acquisition/traffic-driving promotions;
- communication selection;
- communications segmentation;
- identifying lifecycle and nonloyalty triggers;
- lifecycle and trigger communications management; and
- marketing budget management.
The loyalty branch responsibilities might include the following:
- loyalty promotions;
- loyalty segmentation;
- partner/vendor support;
- program benefits;
- targeted messages;
- identifying loyalty triggers; and
- loyalty budget management.
Responsibilities shared between the two might include customer insights, promotion optimization and segmentation.
A Solid Foundation
Understanding these essentials — and seeing how loyalty fits into CRM — is a good start … but don't stop there. The next step is to apply this lens to your own systems and make sure they're well organized to keep the delineations clear, while allowing each discipline to leverage from the other. From there, you'll be on solid footing to continue progressively pushing your initiatives forward, to the benefit of your company and your customers.
Sandra Gudat is president and CEO of Customer Communications Group, a full-service loyalty and marketing agency.