Customer knowledge is key

In retail especially, customer data is key – however you garner it. How you might get it has evolved significantly from the "old-fashioned" (but still valid) walking the floor watching and talking to real customers to acquiring it through multiple other means such as digital data, loyalty or CRM platforms or simpler mechanics and sources such as accounts records, delivery addresses, feedback surveys or competition entries.

By the way, GDPR isn't the end of the world - existing and new data can be used if gathered correctly and/or with appropriate permissions.

Use of the word "Loyalty" is something of a misnomer but it serves as a shorthand term and at its root lies customer engagement and relationship. Nobody (except perhaps an undertaker!) has 100% share of an individual's discretionary spend so the better that engagement and relationship is the bigger share you stand to get. There is much evidence that “loyal”, or engaged, customers spend more each time and visit more often. 

Consider the multiplier effect of 25% higher spend on twice as many visits - and they may be modest metrics. And don't get hung up on what "reward" you might be giving away - the bottom line will still be positive if the customer penetration and consequent impact is modelled correctly.

But whilst "loyalty" can drive increased sales and profit it's not just about that. I was involved at the launch of Homebase Spend & Save in the early 90s which was a great vehicle for cost effective, targeted marketing and new store catchment area analysis. It pre-dated Tesco Clubcard which was additionally valuable in understanding baskets, buying patterns, product combinations and optimising in store product display adjacencies.

So, customer data informs key business decisions that have other positive effects that are less obviously quantifiable.

Factual data can establish who your best customers are and their characteristics and be the basis for sociodemographic profiling and geodemographic catchment area analysis so you can identify more. Your customers can be quite different and that understanding should inform your communications to them whether individually or in segments.

Here's a simple but real example I came across a few years ago. A garden centre's top two customers by value were each spending around £2000 a year. On closer inspection one was a landscape gardener who had actually only shopped twice and the other was an old lady who came in everyday for tea, cake and the odd card or gift – the same marketing message was clearly not going to be relevant to them both.

Knowledge of existing customers and where they live is key to finding more of the same but it doesn’t necessarily need modern profiling systems to do that – I was using a technique called “5 a side” more than 30 years ago and I'm sure it's older than that i.e. if you had a customer at No 15 Acacia Avenue it was a fair bet that 13,11,9,7 and 5 together with 17,19,21, 23 and 25 were similar people – at the very least they lived in the same type of house with the same size of garden.

However, modern profiling systems add far more depth and breadth of information using more parameters and source data but that’s one of the fundamental principles that they’re built on.

So, whether you call this "loyalty" or something else, I believe from experience that the value in engaging with customers, communicating with them in a relevant way and "incentivising" them in some way, is undeniable.