COLLOQUY Corner: Building Loyalty, Building a Database

Over the previous months, we’ve talked a lot about how to effectively recognize and reward best customers through the targeted application of bonus offers. Before you can recognize and reward customers, however, you must first know who they are. Basic customer-data capture allows you to build a customer database–the first step toward database marketing.

Of course, any chief marketing officer worth his salt has already moved well beyond the basics of database construction. Likewise, financial services marketers, e-commerce marketers, and marketers in a subscription environment such as telco or cable already collect transactional and profile data on their customers. But for retail and business-to-business marketers attempting to launch a loyalty strategy in order to build a useful customer database, a review of the basics of database construction is appropriate. For you advanced students, feel free to enjoy a hall pass, on me.

Many retailers already capture data through the use of a proprietary or cobranded credit card or other payment device. These payment vehicles help you to capture extensive purchasing data on customers who choose to transact through that payment device. For our purposes, however, we’re going to speak in terms of a multitender database—one that collects data from a loyalty or promotional marketing program regardless of whether the customer pays with cash, check, debit, or credit.

At a minimum, your database should contain names, mailing addresses, gender, and any transactional information, including the date and time of the transaction, the amount, and the product or service purchased. Telephone numbers aren’t required information. In fact, given the heightened awareness about privacy and a general public distrust for telemarketing, asking customers for their telephone number usually backfires.

You can also gather such optimal but recommended data as e-mail addresses, ages, specific customer preferences, and any additional information you can learn about their shopping habits. You don’t have to collect everything on the first try. Instead, each time the customer interacts with your brand, take the opportunity to add a specific piece of information missing from your database. It’s called the drip method, and it works.

If you’re a sole proprietor or if you market for only a few locations, then inexpensive, simple database tools such as Microsoft Access help you collect and store customer information on a personal computer. More-sophisticated (meaning more-expensive) tools integrate directly with your point-of-sale (POS) system, allowing you to record transactional data automatically. Multilocation operators with greater means and resources should consider one of the several commercially available and specialized loyalty-platform softwares and customer-tracking systems on the market.

To begin building a multitender database, you’ll need to encourage customers to enroll in your loyalty or promotional program. There are a variety of ways and means to encourage customers to raise their hands and identify themselves—too many to recount in this space. But some rules of thumb do apply:

Enroll customers on-site. The most effective way to jump-start a loyalty program is to offer customers specific benefits for enrolling. The best time to do this is while they’re in your store. All of your employees should be able to explain program benefits to customers, encourage them to join, and gather their enrollment information. Customers must understand the program benefits, know how to earn them, and be comfortable with divulging the information gathered at enrollment. You can even provide incentives to your staff for every name they enroll in the loyalty program; it’s a simple and effective way to drive enrollment.

Support the initiative with signage. Point-of-sale displays should pique interest; include takeaways and enrollment forms at your cashier counter. The enrollment form should be simple to complete. You can even collect business cards and simply attach them to the form. For the more cash-rich operators, kiosk or Website enrollment mechanisms allow customers to proceed at their own pace while saving time for your employees.

On-site enrollment allows you to identify customers who already have experience with your facilities. They’re your best marketing audience, and they represent the fastest and least expensive means to build your marketing database.

Enroll potential customers offsite. All your marketing campaigns—direct mail, broadcast and print advertising, promotional events–should carry a message about your loyalty program. Each message should direct potential customers to a Website or a brochure where they can learn more about the benefits and enroll. Because this audience is made up of potential customers, offering additional enrollment incentives could turn them into actual ones.

Your vendors and suppliers make excellent enrollment partners; make a deal with them. They may have marketing vehicles of their own that you can leverage. They may also be willing to shoulder some of the program launch costs if they see potential in partnering with you in the program. In each case, explain the program benefits to your potential marketing partners and offer them an incentive to get on board.

Use sweepstakes to spur enrollment. Every retailer has an exciting, high-value package or offer perfect for a sweepstakes tied to the launch of a loyalty program. The more valuable the offer, the greater the attention and response from customers. Sweepstakes generate excitement and spur enrollment while limiting your financial exposure.

Prizes could include a “fill up your cart” shopping day, local entertainment, or even a vacation package at an exotic destination. Leverage the offer through your suppliers—they may be willing to donate the prize in return for promotional consideration. Perhaps you can work out a trade with a local business, offering your services or access to your database (specifically to those customers who have opted in to receive promotional messages from you) in exchange for the prize.

The greatest benefit of this tactic rests with the financial control it gives you. If you give 10,000 enrolled members a discount with a perceived value of $10.00 each, the response will be negligible, and your liability great as enrollment increases. If you instead give all 10,000 a chance to win a grand prize with a perceived value of $25,000, then you’ll enjoy high response rates and fixed liability.

Sweepstakes capture the attention of your customers at a time when you need it most–at your program launch—and they generate enthusiasm and excitement. Publicize your contest in the local media and at offsite enrollment locations; the added exposure will generate even greater awareness. Publicize the winners for additional momentum. The execution is simple, the risk mitigated, the reward high. What’s not to love?

Armed with a multitender customer database, you can market directly to your customers with their history of activity and transactions at your command. This knowledge allows you to increase your marketing effectiveness by reallocating resources. The database serves as a platform to help you learn who your customers are, what they want from you, and even what locations they frequent. It also allows you to leverage the information in your partnership marketing agreements.

Provided you offer suitable value in exchange for the information, there are few pitfalls. If you use or abuse the data in ways inconsistent with customer expectations, then you may experience a backlash. Customers will expect you to use the data in a relevant, personalized fashion, offering them retention benefits consistent with their preferences, profile, and transactional behavior.

Loyalty marketers seek to identify customers, track their behavior, and segment them according to value, potential, and risk of defecting. Doing so requires you to build a relationship with your customers, which means you must offer sufficient value in exchange for their membership in your program. All consumers know value when they see it, and they’ll elect to give you the information your database needs only if they feel you’re offering suitable value and privilege in return.

Rick Ferguson is the editorial director of COLLOQUY, a provider of loyalty marketing services. E-mail him at [email protected] .