How Personalization Can Go a Long Way to Creating Customer Loyalty
The world of retail has certainly changed over the past hundred years. What started as small local shops that knew their customers by name and hand-picked products for them has morphed into national chains that see hundreds of shoppers an hour. Due to scale and shrinking margins, personalized service had largely faded from the retail experience.
Retailers knew better than to drop personalized service all together, however. Loyalty programs ranging from free coffees to discounts on jeans saturated the market as retailers tried to drive customers back to their stores and differentiate themselves from their competitors. Even online, retailers like Amazon quickly discovered how powerful a little personalization can be. Through product recommendations based upon past purchases and browsing history, long-tail sales account for nearly one-third of Amazon's revenue, making the online retailer the one-stop shop for millions of loyal customers.
However, with the average household subscribed to 18 loyalty programs but only active in four, loyalty programs have ceased to be a way to add personalization back to the retail experience. Retailers now need to support more loyalty members than ever, which means reward value has decreased. Retailers are spread too thin to run the analytics to see what their customers really want. One study found the top complaints from consumers about today's loyalty programs included too many terms and restrictions for redemption and rewards lacking real value — resulting in loyalty cards sitting in wallets unused.
These complaints have created a new market opportunity for the evolving world of retail loyalty. Third parties have emerged to fill a much-needed gap for retailers. Using credit and debit card activity, these companies focus on giving retailers more insight into their customers’ shopping preferences to help revamp the traditional loyalty program.
It's been estimated that a 10 percent increase in accessibility to quality customer data can translate into an additional $1.2B in retail sales. This gold mine of data may not just be sitting on retail's side of the fence, however. Banks are storing more than 619 petabytes of data on consumers, almost twice the data retailers have. This transactional data, accessed through a technology innovation embedded on consumers’ bank statements, is helping drive returns and positively impact customer retention.