Sunday, 16 March 2014

Sales Promotion Comes of Age

Target

I was speaking at the Retail Business Technology Expo last week and what was interesting is how payments, coupons and loyalty have all merged into a single entity.

Whether you were a POS vendor or a payments solution, everyone had a solution that included coupons and loyalty.

It’s interesting because coupons and loyalty have traditionally existed in separate universes.

Sure, a retail loyalty program may have sent out coupons and increasingly these may have been targeted to the member based on previous purchases.  However, coupons have tended to exist in the world of Sales Promotion rather than Loyalty Marketing.  Whilst both below-the-line activities, they have always had different aims.

Sales promotion is normally used for a push of a particular product or service.  Typically in support of a wider advertising campaign, a sale promotion is short term with specific aims - to get (more of) the product moving.  Indeed, the latin for promotion (prōmovēre)  means “to push onward”.

Due to the typically short term nature of many sales promotions, any customer data collected is normally transitory - being used to facilitate the promotion itself with additional calls to action, encouragement to continue with the promotion and identification of winning behaviours.  Once the campaign is complete however the data is typically lost - either immediately or simply due to the data ageing over time as there is no real reason to continue a dialogue.

Indeed, I remember conversations in the past when asking clients if they had a customer database where they referred to the competition entries currently lying dormant in a mailing sack in the corner.

Loyalty on the other hand is in it for the long term.  It’s not typically concerned with that single purchase and is instead aimed at getting a continued and regular purchase pattern.  By definition, to be a loyalty programme it needs to be able to both identify the customer uniquely AND be able to see customer behaviours (e.g. purchases).  This tends to necessitate having up to date data and frequent communications with customers.  It also tends to lead to insight driven decisions, promotions and communications.

As a loyalty marketer, you tended to feel you occupied a higher ground when it came to customer led marketing.  Looking down on sales promotion as it stuffed product into random customers baskets for free (really, how hard is buy 1 get 1 free!), with many of these being the very same customers who were going to buy it anyway!

However, what sales promotion did have which loyalty didn’t was that immediacy.  That ability to change customer opinion there and then.  To be able to shift product sales immediately, typically at point of purchase (or decision).  Sales promotion was glossy, it dangled from the shelf edge and lit up the packaging.

Loyalty on the other hand tended to be after the fact.  After the customer had made the decision and paid for the goods the loyalty programme would wake up and suddenly recognise that great decision you’d already made without us.  Sure we could communicate with you later and hope you remember our messages as you walk around the store, but we just weren’t as “shiny” as the sales promotion guys.

That really is all changing though and so are the rules that go along with it.

Sales promotion is tending to run via social media tools and smartphones.  Customer data flows from the moment they connect with the promotion.  Even when the promotion ends, the conversation continues through branded social media campaigns.  Whereas before it was a random affair, promotions can now be targeted based on previous purchases, previous campaign usage, friends campaign usage.

Just take a look at Target Cartwheel to see this in action.  

The customer signs-up using their Facebook account (now they know who the customer is and how to talk to them), then they select the coupons they want to use (purchase intent), then they let the customer scan their single “barcode” (sounds very much like a customer loyalty id) to make savings (and obviously link ALL their purchases to their customer account).

While they could have stopped there and had a very capable mobile coupon app, they’ve gone further and included gamification features as well.  New customers start off with just 10 coupons slots; however over time the customers can earn badges which help to unlock additional coupon slots to get even greater savings.  These badges are awarded for various behaviours including sharing the app and offers socially, using in-store features like self-scanning and through frequency of usage (based on amount saved).

Is this sales promotion or loyalty?  Well, it’s both and it means the customer gets the best of both.

Target get to know the customer uniquely, see their behaviours, target further offers and encourage frequent usage - that pretty much sounds like a loyalty program to me.  The offers though are still good old fashioned sales promotions providing money off, BOGOF, etc. and will be largely funded by the manufacturers.

Retail loyalty is changing as mobile, payments, coupons and loyalty all seamlessly blend together.  This is great news for consumers but will create a real battle in the industry as these areas increasingly converge.

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