So, you have a Customer Loyalty Program. Now what?

Many businesses have some form of loyalty program, be it a member card or maybe just a punch card for the 10th coffee free. That's great: customers love free stuff, you love repeat business. But, you're leaving value on the table.

The basic premise of a loyalty program is that customers are rewarded for their continued, well, loyalty. That is, the more that customers buy from you, the more perks they get, even if it's only a coffee after the n-th coffee purchased. This relationship between customer and business is pervasive; from where I'm sitting, this is probably one of the more interesting use cases for data analytics and one of the tools that businesses can use to maximise their revenue per patron.

Every loyalty program has to have some tracking mechanism. Corner coffee shops typically use cards on which customers accumulate stamps towards that proverbial free coffee. More advanced retail loyalty programs use member cards with mag stripes.

The coffee card doesn't give the business much information other than that the  customer bought a specified number of coffees (not even what kind of coffee!). Not very valuable information, but it's low-tech and cheap. What would have been more interesting to the business is to have known that that customer had also occasionally bought a scone with their coffee. This would allow the cashier to upsell that scone whereas the customer might not have otherwise ordered it. There's that value left on the table.

Big box retailers may also be leaving value on the table. Let's take a real-life example: the TJX group has loyalty programs that are honored in Winners, Marshall's, and Homesense stores in Canada and, according to the TJXStyle+ web site, this loyalty program offers its users:

• Early shopping access to stores
• Advance tips on fresh arrivals
• Special offers
• 30 day returns
• The chance to enter exclusive member only contests

Interesting. At least that one line about special offers is interesting insofar that it implies that customers receive some incentive and/or that there is some sort of tracking. But, since there is no e-commerce implemented on the Winners, Marshall's, or Homesense web sites (nor is it implemented on its US cousins' sites such as TJMaxx), we are led to believe that customer purchase tracking happens at the cash register. Customers who sign up for the TJXStyle+ card or email updates on each of these sites only have to provide very basic demographic information limiting the segmentation that the vendor can perform. This forces the vendors to market to a larger segment instead of engaging customers in one-to-one marketing interactions. (Caveat: TJMaxx offers a TJX Rewards Credit Card in the US but it is not clear how they use the transaction data to promote to customers. Given how the TJXStyle+ program is implemented, the assumption is that the credit card is being used in a similar manner reducing the vendors' ability to reach individual customers.)

The point here is that, regardless of your loyalty program, if you don't capture transaction data about individual customers, and if you can't analyse it through the lens of demographic segmentation using analytic tools, you're losing opportunities to upsell, cross sell, promote, incent, and generally provide a better shopping experience while maximizing the revenue per patron. So, your opportunity cost is the unrealised sales.