Category Loyalty Marketing

What is fashion CRM?

This week I’m going to answer a question I’m asked almost every week…

“what is Fashion CRM?”

There are many great definitions of CRM online, perhaps none better than that provided by Wikipedia:

http://en.wikipedia.org/wiki/Customer_relationship_management

Their definition owes much to the work of my old friend Professor Robert Shaw who has written some good books on the topic, such as ‘Marketing Payback’.

However today, I’m going to look at this from another angle- and “interview myself” with the general questions I’ve been asked most recently:

What does CRM mean for fashion marketing?

My take on CRM for fashion is that it encompasses the tools and techniques that enable a fashion retailer to understand their customer’s behaviour better and communicate with them more effectively, perhaps through some targeted activities that don’t communicate with all customers in the same way. CRM recognises that fashion retailer’s customers each have different requirements and therefore fashion marketing should reflect this.

I’m a fashion retailer. What does that mean for my marketing team?

I believe CRM enables the retailer to begin relationships with each of these customers in a segmented fashion.

Perhaps on the simplest level, we can communicate with customers differently depending on

  • How recently they shopped (Recency)
  • How often they shop (Frequency)
  • How much they spend when they shop (Monetary Value)

This type of targeted activity is usually described as RFM or RFV segmentation.

Imagine your weekly campaigns changing, so that rather than sending a generic editorial update to all your customers, we think about designing 6 or more weekly campaigns:

  1. Customers you haven’t seen for a while (split by gender)
  2. Customers who dabble but aren’t the major spenders (again, split by gender)
  3. Your best customers (yes, you’ve got it)

Each one of these campaigns has a different goal so the messaging and imagery can be quite different. For example, you might like to tempt the low-spenders into a higher-value purchase with a short-term offer, and wrap some appropriate imagery around it.

As the customer database grows larger, the ability to refine your marketing messages more continues to grow.

We’re already sending segmented campaigns. What next?

I believe for most fashion brands, their customers have a product-purchasing journey. This starts off with an experimental purchase of something typically low-value but iconic, and then starts to move towards more items that are more recognisable as wardrobe staples. With most brands I’ve worked with, I can usually establish some signature purchases which identify a new customer is likely to become a lifetime customer and therefore is to be carefully nurtured.

Once we’ve identified these signature purchases, we can gently encourage new customers to make these purchases to rapidly convert them into lifetime customers.

Where should I begin with Fashion CRM?

Analysis of all your historic customer spend, including their profiles and purchasing history usually identifies some areas that would be best focused on:

  • Are your customers regularly returning?
  • Are you a global brand?
  • What is the demographic profile (by this we typically mean age, and social class) of my best customers?
  • How much do your customers spend?
  • Do most customers hang about waiting for you to go on sale?

The conclusions from this analysis allow you to put together a marketing strategy with a bit of CRM science behind it.

 

What does social media mean for our CRM activities?

Social media does provide you with more information about your customers and their behaviour. The challenge for most fashion labels is this information not being connected to the marketing and CRM systems so social media quite often becomes a separate channel of generic activities rather than a tool for some clever targeted marketing.

Social media gives you more channels to send targeted communication with your customer. However it is important to broadcast the right message on the right platform or you can pretty quickly start to devalue your reputation via these emerging channels. Work out what your ‘tone of voice’ and ‘attitude’ is going to be on social media. What messages go our on each platform. Should your own images of new products appear on Pinterest and Instagram, or should they simply carry images customers share with you of them wearing this season’s collection? The brands that get this right are enjoying rapid growth.

What CRM systems should we look at?

The industry leaders in CRM systems are SAP, Oracle, Salesforce and Microsoft Dynamics. There are other systems out there that integrate neatly with e-commerce platforms. Recently I’ve been impressed by the CRM functionality within Shopify at the basic level, Magento for smaller fashion labels trading in the digital space and for the premium players, Demandware. Venda and Visualsoft have also given me sufficient tools to run effective CRM activities too.

 

How does CRM impact luxury brands?

If you’re marketing a luxury label, I strongly believe that CRM becomes an essential part of your marketing toolkit. Luxury retailers are faced with the basic challenge that many tried and tested marketing activities can’t be utilised without impacting the brand. Communicating with the customer base can’t be too frequent, or too demanding. Therefore knowing that little bit more about your customers gives you the opportunity for very gentle and almost non-commercial communication. Segmenting these customers into groups by “opportunity for growth” makes your occasional email campaigns more relevant and therefore more likely to be successful.

 

What results can we expect from CRM?

There used to be a general rule of thumb to forecast your results by. In the days when Tesco Clubcard was one of the world’s leading loyalty programmes, it was generally believed that a good loyalty programme, supported by relevant CRM activities, increased revenue by between 2% and 4% and cost around 2% of turnover. I’ve been involved in programmes achieving 6% and beyond, but I wouldn’t say that is possible for everyone.

I’d say that the smarter you get with CRM and the more targeted the campaigns become, the better the results, if you have a reasonable sized database to start off with.

I’ve recently been working with a retailer on their CRM activities where the brand forecast a customer response rate of 4% to our campaigns, generating a return on investment many times over. I’d say the 4% is ambitious, but achievable given the right circumstances. We managed to achieve a 25% response rate with one particular campaign, but the targeting was highly specific and the campaign required some detailed planning.

I’ve seen another retailer increase sales through CRM of a particular product line by 415%, but again, I tend to remember the exceptional campaigns rather than the more predictable ones. How did they achieve 415% growth? By offering relevant products to a highly targeted audience with well-executed creative and good copy-writing. They effectively created a sense of urgency for purchase and a desirability that simply couldn’t be ignored.

The best way to forecast results from CRM campaigns has always been to base them on your own previous campaigns. I maintain a file of all the campaigns I’ve designed over the last 10 years so I know what I’m likely to achieve with my next ones.

 

How can I track results? How do I know it’s working for me?

Many CRM systems have inbuilt systems to help you measure return on investment. This is much easier if you’re retailing online as the eventual purchase can be associated with the original campaign. I’d suggest putting some simple Key Performance Indicators in place and watch them as you begin your CRM activities. Always hold back a control group from receiving campaign communication, so you have a base behavioural point to compare with. If your offer is to tempt customers into your high street stores, ensure the method of redemption has something that can tie the retail transaction back to the particular customer and the particular campaign.

 

Is there any point in CRM?

There’s an obvious answer to this question, given that CRM is a specialist subject for me! However, I would say- if you own a very small label with less than 5000 regular customers, there are probably other areas of marketing that would do better to receive your attention than CRM.

If I have left your questions about fashion CRM unanswered, let me know by commenting on this article or emailing me and I’ll share my answers with all subscribers.

 

Loyalty for luxury brands – honestly

If you’re representing a luxury brand there are probably few marketing phrases that make your hair stand on end:

The Marketing Audit: WHSmith

Setting the scene

The UK high street is changing. Yes, it would be naïve of me to think that I’m giving you any great insight with that statement. Retailers have needed to adapt to meet the changing demands of retailers, as everyone knows. HMV, Waterstones, Oddbins, JJB Sports, All Saints and others- regularly in the news for their financial troubles, mostly as they try to get to grips with the current retail marketplace.

So why has WHSmith pretty much stayed the same as it ever was?

What can the independents learn about marketing from major retailers?

If all the independent retailers shut down, the high street would be a dull place to be. “Not very likely though” I hear you saying, but if you wander through a typical town now, it is very different to just five years ago. Like a David Attenborough documentary, I’m highlighting that some of the creatures we love could, if we are not careful, become extinct.

Luxury retail in 2011- what’s your view?

Help! I need a loyalty programme. Is there anyone out there?

So, if you’re looking to set up a loyalty programme for your UK business and you need some assistance, who do you turn to? Who runs loyalty programmes? If you search in Google for ‘loyalty programmes’, a whole range of different businesses appear. I’ve got to know many of the major players, and I believe each of them has a value for different reasons, so thought it would be time to share my shortlist, categorized according to different needs:

Paper stamp cards: Do they encourage loyalty?

Introduction

I’m just coming to the end of another week of meetings with UK retailers of all different sizes. Whatever the size of the business, the conversation often turns to the subject of loyalty programmes as that’s where I’ve spent much of the last decade. And again, whatever the size of the business, paper stamp cards are brought up as a potential mechanism for rewarding and influencing customers. Stamp cards have been a subject much discussed in the office and I thought it time to share our thoughts.

What’s the most exclusive loyalty card?

I have been speaking at a few events over the last couple of weeks, sharing experiences from running loyalty programmes. When I ask the audience if there are any questions, I can almost guarantee that someone will say, “What’s the most exclusive loyalty card in the UK?” or “What’s the most generous loyalty programme?”

Will FourSquare change the face of loyalty marketing?

I‘ve been checking in on FourSquare now for nearly six months. When I first heard about it, I was interested to see if it could start to be used as the core for retail loyalty programmes. The potential for a mobile application to replace some of my vast collection of loyalty cards was huge.

Quick introduction

For the few that don’t know, FourSquare is a mobile application that allows the user to ‘check in’ with retail outlets, businesses, tourist attractions and so on.

Users are rewarded for checking in with:

-          a series of badges, which are unlocked to boast online credibility, such as the Barista badge for checking in at 5 different Starbucks outlets – see here

-          tips from other users for recommended eats, drinks and other experiences

-          the opportunity to link up with friends nearby who you would, without FourSquare, probably miss.

The most frequent visitor is rewarded with ‘Mayor’ status, which sometimes comes with other benefits such as a free pizza from Dominos every Wednesday.

Replacing EPOS technology?

I’ve often thought the best way to help retailers understand how loyalty will impact their in-store technology is to simply think of it as a unique customer identifier. This unique code traces an individual transaction (and importantly, the data on the ‘basket’ back to the customer). Once a retailer understands who is buying their products, they have the power to develop their product base further and also influence customer behaviour. Loyalty therefore provides marketers with a core toolkit of data to work with, persuading customers to visit more often and spend more when they do.

Now FourSquare can provide retailers with a customer’s visit frequency, and also the pattern of stores visited, but is unable to provide any data on the basket of goods purchased. This missing link means it is very difficult to segment the customers according to their purchasing history, so future communication from the retailer won’t be targeted and is unlikely to be relevant.

Verdict: Not there yet.

Based on honesty

The system of checking in is based, entirely, on customer honesty. It is easy to cheat the system – (try checking in for lunch at the Fat Duck, even though they are fully booked) and for that reason, most retailers would be unlikely to provide any meaningful rewards in return. I can’t imagine hoteliers giving free reward nights to guests who have been checking in on Foursquare only. They would need to verify the stay against actual bookings, which isn’t easy to automate. I haven’t seen any rewards on Foursquare to compete with a more traditional loyalty programme.

Verdict: Not there yet.

Privacy issues

There are natural privacy issues behind revealing your location online to the outside world. Burglars in the USA are reported to be scanning social networking sites to understand when homeowners are likely to be away (story here) However, FourSquare provides options to earn rewards but conceal your location where it might put your possessions at risk.

Verdict: Keeping on top.

Customer services

A met with a major retailer recently who was interested in providing a series of offers and rewards for their customers who sign in with FourSquare. The Marketing Director tried to get in touch with FourSquare but hasn’t heard back from them. I wonder whether a few standard packages, available online for retail’s early adopters might enable to Foursquare to quickly build relationships with more retailers. For now, perhaps they are underresourced to deal with demand?

Verdict: Not there yet, but watch this space.

Low take up

I’m now Mayor of several different locations. For some of them, I achieved Mayor status on my second visit. I spoke to the Marketing Manager of a popular London bar. He checked in twice as an experiment and earned Mayor status. Given that he has hundreds of customers every day who might have checked in- he’s decided to park any ideas about Four Square promotions for a further six months.

Verdict: Not there yet, but watch this space

Conclusions

I really like FourSquare. It’s fun to use, doesn’t take itself too seriously, and is filling a niche that nobody knew existed. However, I don’t yet see it as a viable alternative to a card-based loyalty programme. Three million worldwide users, whilst impressive, just isn’t enough for retailers to consider it a major element of their marketing strategy.

However, it must be a pointer of things to come. Facebook’s Places application is now active in the UK. Perhaps with their 23 million active UK users, there is a chance that this will soon take off and become an essential ingredient in any loyalty strategy? LinkedIn and Twitter could also consider extending their service to introduce location-based rewards too.

Another view

I asked Jeremy Davis from Chameleon Net (the web solution developers) whether he sees FourSquare as the loyalty component in future e-commerce solutions. He said.. “I think of FourSquare as a channel. The people who use it have a profile and they will be of interest to some brands. Those brands have the opportunity to engage with those people, and position themselves as innovative and forward thinking at the same time. Like any digital channel (or non-digital?), the name of the game is engagement – the closer you can move your customers towards you, the more effective you’ll be.”

“Best uses of FourSquare to date I think are brands like coffee shops, where FS can enable and empower their loyalty programmes – every 10th visit you can claim your free drink, “Come here 3 times a week? – have a coffee on us!” Bring a friend any day this week and the Croissants are on us”, etc. FourSquare offers the ability to set challenges to your customers, give out rewards, etc. And of course, if you don’t do it then someone else will and the loyalty-o-meter will swing away from you.”

For now, I’ll be continuing to check in with FourSquare and watching them closely with interest. For any clients interested in loyalty, I’d suggest FourSquare as a social media tool to be used in conjunction with loyalty programme infrastructure, but not to replace it.

Follow me on Foursquare here..

 

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