Bringing a loyalty program online

Galina Yashchuk, Marketing Director of the company “Azbuka Vkusa”, a premium grocery chain, wrote a column about how to develop proposals and personalized offerings to help increase the effectiveness of loyalty programs.

The integration of mobile technology into loyalty programs is a noticeable trend with promising perspectives for businesses. Traditional loyalty cards are gradually giving way to mobile applications and virtual cards — these provide a wide range of instruments for data collection. Working with big data helps to analyze customer behavior and create personalized offers that meet customers’ expectations.

For the Russian retail market, this practice is relatively rare, as many retailers do not try to build truly long-term relationships; instead, they seek to promote goods not needed by a customer.

Research

Before starting the updated club program “Vkusomania”, “Azbuka Vkusa” conducted detailed customer segmentation to understand the shopping motives and typical behaviors of its clientele. We identified over 10 key customer segments, as the person who comes for a basket full of food once a week differs substantially from the one who comes to the supermarket once a month to buy a certain brand of wine.

Those whom we call loyal traditionalists represent a highly profitable segment. They come to us every two days and purchase an average amount of goods. Their shopping basket is diverse, but they will prefer to buy only necessary products, as “”Azbuka Vkusa” is their closest grocery store. So-called gourmet visitors come twice a quarter, and irregularly at that. Their bill is usually quite high and their basket is varied, with an emphasis on expensive products.

A significant part of our clientele can be called “repetitive” customers; they come quite often, but for a certain item. This audience is very receptive to additional purchases. For example, if a person is accustomed to buying our cakes, they are likely to also buy a bottle of wine if he is reminded through a personal offer. If he buys gourmet sausages, he can be offered tapenade, pate, and sauces which can rarely be found in other stores.

A personalized offer may involve the purchase of a particular product. If a person often buys yogurt, they can be sent a special offer which significantly increases their bonus points with the purchase of curds or yogurt. This could also involve increased bonus points for an action like filling out a questionnaire. Offers are formed on the basis of the average check amount, frequency of visits, the number of goods that people buy, and other parameters.

We developed the application “Vkusomania” with the use of focus groups, which is a very important part of preparatory work. At meetings with buyers and opinion leaders, we sometimes received unexpected answers that have helped us to make necessary changes before the start of the program.

For example, it became clear that for many customers, it was very important to be able to bind several cards for family members to one account. The idea of ​​opening an affiliate bonus program with banks or gas stations was no cause for joy, but the same program with an airline was met with enthusiasm. Gathering collectable stamps for many was almost an end in itself: even if people weren’t interested in the current prizes, they wanted to save for the next level. At the same time, many were very happy that we could arrange for a coffee subscription for bonuses.

Transfer

When updating any loyalty program, it is important to retain existing customers by showing tact and offering the customer something at a higher level. Therefore, “Azbuka Vkusa” decided to build around the existing main communication collectible loyalty program, “Vkusomania”, through which customers could accumulate stamps for purchases and redeem them for high-quality cookware and household goods.

About 15% of regular online buyers were using “Vkusomania” — an impressive figure, not only for Russia, but also for the global retailers, given that the functionality of the application was limited to collecting stamps. For comparison, throughout the UK, 25% of online purchasers use applications.

If you look at other categories of goods, it is clear that this figure has room to grow: retail applications are used by 63.6% of customers of the American department store Kohl’s, 61,7% of Victoria’s Secret buyers, and 56,6% of H & M customers. According to Forrester, there are huge prospects in the mobile channel. The time spent in applications of retailers, travel companies, and banks represents 10–15% of an average user’s time. Only 14% of companies are using mobile technology to provide a more comfortable environment for shopping. At the same time, statistics show that the smartphone is with 73% of people at all times, and they check it up to 200 times per day.

The updated “Vkusomania”, in addition a gathering of brands, is a collection of bonuses for almost all purchases (excluding tobacco due to legal restrictions). Additionally, the buyer’s bonuses are transferred from the old discount card to the new “Vkusomania” loyalty card.

Another plus is that there is no need to carry plastic cards; the barcode is read directly from the mobile display in a store.

Tools

Over the years, many retail operators have had time to accumulate an impressive array of information. However, in addition to gathering information, it is important to organize and process it. This cannot be done without a good CRM-module which reveals the patterns and logic necessary to predict buyer behavior.

This was actually our overriding concern at the creation stage of updating “Vkusomania”. At one time, even the list of promotional products in the network was configured manually, but now the list of promotional campaign participants can be formed by filtering a customer base of more than 100 indicators. “Azbuka Vkusa” can continuously monitor and analyze the achievement of key performance indicators during the promotion and adjust the strategy of communication and amount of goods.

“Vkusomania” was originally built on the basis of the foreign SAS Marketing Automation packaged solution. Its main advantage is the ability to quickly implement and use the best international practices. We chose a supplier which is up to date on the latest innovations, which would ensure a flexible system that provides personalization, and works with multi-format and omnichannel sales.

Due to the complexity of the program, we needed to make a lot of improvements. The result relied on customized solutions created on the basis of Oracle CRM Siebel Loyalty. This project is at the intersection of marketing and IT: it was necessary to develop in-house modules on the basis of terms of reference established by the company’s marketers. The system now allows you to set the rules for earning and using loyalty program points, carry out their processing, manage discounts on products and pricing logic, and keep track of discount, bonus, and gift cards.

Service component, content, and intangible features

It is believed that a loyalty program is a modification of a discount program. It was important to shift the emphasis to the club nature of the program by providing program participants with a unique set of advantages which conveyed a special status. The client therefore receives only those proposals that are suited to their consumption method.

It is also important to provide buyers with a wide variety of ways to use accumulated bonuses. Besides being able to buy goods, we offer tickets to closed master classes and tastings. In the appendix, there are elements of gamification such as badges for various accomplishments. Such moments represent emotional component which fits the demands of an audience which actively uses social networks.

Results

For the first two weeks, the “Vkusomania” app was available only on iOS, and downloaded and upgraded by more than 80 thousand people. The number of virtual card number holders during this period came close to 100 thousand, while the average bill increased by more than 4%.

Developing a new customer loyalty program as fast as possible is not an end in itself for us. If you invest in training, a club program, or build kitchens to develop the take-away food segment, you should not expect a return on investment within a month.

All of this helps to build real long-term relationships with customers and create true loyalty over the long term of years or even decades, which is much more important if the company plans to have a happy and long lifespan.