23 Jul 2023 » Opinion
Digital marketing requires enough customer data to be able to segment your customer base and run personalized campaigns. Quite often I find clients who tell me that they have very little data from their customers, leaving them mainly with anonymous behavioral data. In some cases, there is a fairly easy solution: a loyalty program. Let me explain the benefits you get beyond the “loyalty” part.
Why loyalty programs?
Last year, I went to a Nike outlet to buy a new pair of sneakers. I found one pair that I really liked (I still use them and I am very happy with them), with the price already discounted by 50%. However, while paying, I was offered to create a loyalty account with Nike and get an extra 15% off. I am sure you can imagine what my response was: sign me up!
If, instead, I was just offered to open an account with nothing in exchange, I would probably have declined it. I am sure you can relate to similar situations.
In other words, if I am a customer, the answers to the question in the heading are pretty straightforward. The first one could not be more obvious: I want to get free stuff or discounted prices. There might be a second one, in cases of people who feel so passionate about a brand that they want to show their loyalty to the world.
From the company’s perspective, the reasons are quite obvious too. The first answer is in the name itself: companies want to have loyal customers, who buy again and again from them. The sales and marketing costs to gain a new customer are much higher than the cost to get a loyal customer to buy again. In the long term, it is cheaper to give loyal customers some special treatment than the effort of gaining a new customer.
However, there are other reasons for implementing loyalty programs, reasons that may not be that obvious for those who are not working in the marketing business. And one of the reasons is why I wrote this post in the first place: customer data. Consider the following points:
- The digital marketing world is shifting from 3rd party data to 1st party data.
- Personalization has always been important, but now it is a must.
- Digital marketing campaigns are based on segmentation.
I am sure you know by now where I am going: all previous points require customer data. Going back to the points:
- By definition, 1st party data is data that you generate internally. I already have a post on how to capture 1st party data.
- To personalize your messages, you need your customers’ demographic, preferences… From the humble first/last name to send emails starting with “Hi Pedro” to your past purchases to generate propensity scores.
- To segment your customer base you need information about your customers.
And this is where a loyalty program comes in very handy. Not only you are trying to get repeat purchases from the customer, but also getting precious customer data:
- Personal information, provided directly by the customer. You do not need to buy it from external providers while avoiding some issues with privacy laws.
- Authenticated web behavioral data, which you gather when the user is browsing your website while logged in.
- Purchase data, both on and offline.
- Email interactions and preferences.
- Calls to call center.
- And any other information you can generate in your business.
With a CDP like Adobe Experience Platform (AEP), you can combine all that information to create a unified customer profile. The loyalty ID will become an additional identity to be added to the identity graph and any data feed with it will be included in the profile.
The price of data
The last thing I wanted to cover is the price that you are willing to pay for your customers’ data. Freebies and discounts cost money so, at the end of the day, you are buying data with them. Therefore, you should find a way to provide a figure for your data. I know, it is a difficult task, almost impossible, but I am sure you do not want to spend more money on it than what you get in exchange.
Here are a few things you may want to consider when calculating this price:
- I have written a few times about 1st and 3rd party data and how the digital marketing world has shifted from the latter to the former. With this in mind, you can use as a reference the price you would have paid to a 3rd party data provider.
- What is the increase in revenue or profit thanks to your personalized campaigns?
- How much from your marketing budget can you devote to data?
I do not expect you to get to a precise formula, but an approximation that can help you make decisions.