Monthly Archives: July 2009

Loyalty Program Structure & Tracking

The following is from the July 2009 Drilling Down Newsletter.  Got a question about Customer Measurement, Management, Valuation, Retention, Loyalty, Defection?  Just ask your question.  Also, feel free to leave a comment. 

Want to see the answers to previous questions?  Here’s the blog archive; the pre-blog newsletter archives are here.

Q:  I’m involved in a loyalty program analytics project.  This client is a local pharmacy.  All sales are done directly in store, the web site is just for communication purposes.  The general problem we are trying to solve is the manager doesn’t have any detailed ideas about shoppers behavior apart from human observation. 

The idea is to launch a card-based loyalty program which will track sales activity and give insight into customer behavior.  The program will be points-based calculated on amount spent.  Points can be redeemed as rebates, coupons, gift certificates, or use points to buy items in loyalty program catalog.

The task is to segment customers according to their recent purchase behavior and determine the customer lifecycle.  I’ve been able to do some basic analysis using the R package and MySQL database, but am unable to detect customer lifecycle. 

Can you please give me guidance on this?

A:  What is the Objective of detecting the LifeCycle, to create a more “active” customer retention program?  Loyalty programs can be quite “passive” and often benefit from a more active overlay.  But there can be many reasons to want to understand the LifeCycle…

Q:  My 2nd task is to use the behavioral data with demographics to  build a direct marketing strategy and provide management with insight into the customer base, for example: percent new customers, % of Gold customers who passed to Silver in last quarter.

A:  Again, it would be helpful to understand how management would take action on this data.  But I suppose you are in the common position of not knowing the tactical approach, and nobody will lay it out for you (a.k.a. they are clueless)…and you don’t know the right questions to ask or how to ask them.

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The Other 3 P’s

It’s interesting most folks that consider themselves Marketers, especially of the online variety, seem to only discuss and have ideas about Advertising.  But of the 4 P’s that make up Marketing – Product (which includes People), Price, Place (channel), and Promotion – Promotion (Advertising) is the weakest element of the four.

I say weakest because Advertising cannot fix a poorly thought out Product, Pricing Strategy, or Distribution system.  It just can’t.  Yet huge amounts of money are wasted trying to do exactly that.

Perhaps this why someone feels they need to publish a book that tells people Product is important in Marketing.  To me, that’s the most circular or redundant idea for a Marketing book I’ve ever heard.

Marketing starts with Product, which should include all the audience or market segmentation studies (People) that drive the creation of the Product – defining the need.  If you do this first and develop a Product which truly fills the need, AND you get the Pricing and Distribution right, the Product will literally sell itself to the core audience.

If you can make it that far, THEN the Product can perhaps be sold to the next segment out from the core through Advertising.  All “Marketers” should know this.

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