Customer loyalty as a data source

Data is the Key to Success

Companies’ own customer data is becoming increasingly essential for success, because only those who precisely understand their customers and their needs can use the appropriate measures to make them the center of their business. Loyalty programs and campaigns are an effective tool for getting the information you need. 

While the major online traders and retailers have been collecting and evaluating extensive data about consumers for years, manufacturers usually have access to little or no customer data. However, big data is becoming increasingly essential for long-term success and to gain [and maintain] a competitive edge. Traditional advertising channels are becoming less and less relevant, especially among younger target groups, and it is becoming more difficult to establish direct contact with customers. In addition, the confectionery industry, for example, is latently threatened by the kind of advertising bans that are already in place case for tobacco and, in some places, alcohol. If these industry segments also migrate to e-commerce, sales slumps of up to 30 percent are inevitable, because many of their goods are “impulse buys,” for which the final purchase decision is only made at the point of sale. So incentives for the customer to make a positive purchase decision must be introduced much earlier. However the manufacturers, who usually supply retail, often lack direct contact with the end customer. Here it is necessary to find new solutions – which don’t necessarily mean having your own brand shop, as this may lead to a conflict of objectives with retailer.

Success with smart campaigns

Michael Absolon, Vice President Digital at Arvato Supply Chain Solutions

If having your own brand shop doesn’t work out or make sense, clever loyalty measures are a well-proven means of obtaining valid customer data. “Arvato Supply Chain Solutions in Gütersloh has a large department that is dedicated exclusively to this topic and works for well-known confectionery and beverage producers,” says Michael Absolon, Vice President Digital at Arvato Supply Chain Solutions. A distinction is made here between different types of sales promotion: On the one hand, there are traditional collection promotions in which the customer collects a virtual currency within a certain campaign period and is then rewarded for their loyalty with bonuses such as merchandising items. On the other hand, the individualization of products is also an important topic that Arvato SCM Solutions has been specializing in for years.

“We started with a product where every customer could order a personal label bearing their name,” explains Absolon. “Now, all of it works with pictures as well. For example, the customer can individually design the packaging on a website and receive their unique copy from us.”

Brand manufacturers in other industries have also jumped on the personalization trend and offer their customers customizable goods. This is not just a matter of printing individual words, as an example from the fashion industry shows. “Personalized sneakers and trainers can now be easily designed and ordered online,” says Absolon. “Here, various models from the range are available for selection, which are processed using digital tools. The individualization options range from the sole, colors, and designs, to the material of the grommets/eyelets.” This is only possible with powerful IT and automated processes.

“Loyalty programs are an excellent way to collect and evaluate data in a legally compliant way and to derive appropriate measures from it, since the customer gives their consent for this.” says Michael Absolon, Vice President Digital at Arvato Supply Chain Solutions

A comprehensive picture of the customer

The customer centricity approach requires in-depth knowledge of your own customers and their needs. The basis for this is cross-channel and cross-department data collection and usage in order to generate as complete a picture as possible. “Otherwise, it's quite possible that a super online customer could be standing right in the store and is not given preferential treatment because no one recognizes them,” explains Absolon.

“So it would be good if this information was available before the sales talk begins.” However, the collection of data now has to meet high data protection requirements, which is why it is essential to obtain explicit opt-ins from customers. “Loyalty programs are an excellent way to collect and evaluate data in a legally compliant way and to derive appropriate measures from it, since the customer gives their consent for this.”

The key questions here are “what actually constitutes loyalty?” and “what measures will generate loyal customers?”

“Loyalty depends on three factors,” explains Absolon. “The most important basic requirement is, of course, that companies really do offer good services and products. This is the only factor on which Arvato Supply Chain Solutions has no influence.” Beyond this, customer appreciation plays an important role: Those who spend their money more frequently in a shop want to be recognized as good customers and treated accordingly. This starts with addressing them by name.

The third point is the positive surprise that encourages customers to actively participate in loyalty programs. In the process, it is important to always set a fresh, surprising tone. “It helps tremendously when good customers just get a little more than they ordered,” says Absolon. At their favorite Italian restaurant, this could be a certain table or an antipasti or aperitif that the customer doesn’t have to pay for. This pleases them, because they did not expect it. And if companies systematically work with this, it also ensures their customers’ trust, which in turn increases their willingness to disclose personal data. For if customers don’t share their data, they will get neither the positive surprise nor the appreciation. This is a natural cycle that companies can very deliberately influence.

Main factors for customer loyalty

Valuable knowledge from data analyses along the entire supply chain

To be able to work successfully and purposefully with big data, the customer data must also be evaluated and analyzed across all channels. Viewing the information holistically is the only way to gain a 360-degree picture that provides a comprehensive view of customers and target groups. As an experienced digital business partner, Arvato Supply Chain Solutions not only specializes in collecting data, selectively analyzing it, and transforming it into valuable customer insights; we also have a holistic end-to-end understanding and develop customer-centric operating models that range from the digital strategy and the expansion and operation of the web/online shop to downstream supply chain processes.

Focus on the end customer

An interview with Prof. Dr. Christian Kille, Professor of Retail Logistics and Operations Management at the University of Applied Sciences Würzburg-Schweinfurt.

Prof. Dr. Christian Kille currently teaches as Professor of Retail Logistics and Operations Management at the Würzburg-Schweinfurt University of Applied Sciences.

1. The end customer is increasingly becoming the focus of digital supply chains. That means evaluating and interpreting big data is also becoming more and more important. How does that affect retail logistics specialists?

They are finally being perceived as being able to increase the competitiveness of the entire business enterprise with their diverse data. Retail logistics — whether internal or external — is becoming an important pillar of a company's success.

2. In contrast to retail, manufacturers/OEMs have had very little access to the data about their end customers so far. What problems arise from this and what opportunities do manufacturers have to become more independent?

This is where the logistics service provider comes in! With their data, which is collected by different customers or even across the entire supply chain and analyzed, manufacturers now have the opportunity to gain insights into processes, preferences and challenges beyond their direct customers.

Of course, data protection and the anonymity of the individual must be respected throughout — as in the case of other companies that collect data, such as Facebook or Google. The logistics service provider can become a “Google” of the supply chain because it can access lots of data that is processed in different IT systems.

3. How do you expect retail and logistics to develop in the future?

Logistics is becoming a success factor for trade. My expectation is that the power relation might not quite reverse, but at least balance out. Logistics companies obviously have to understand this and act on it. To do so, it helps to understand digitization and the opportunities that come with it.

Read the entire interview with Prof. Dr. Christian Kille on digitization in retail here.