How loyalty card analytics can impact decision making in a retail organisation

Question

Using a loyalty card example from the retail industry, explain how the use of data mining and analytics can impact decision making in an organisation

Answer

Many retail companies use loyalty card programmes as a multifaceted way to enhance their competitive position. The schemes have grown in popularity to a point where most large retailers have some form of loyalty programme - for example, Boots (Boots UK, 2016). As this is the case, the loyalty benefits for any one retailer are not usually significant, as customers may just as well have a loyalty card for their rivals too. The main benefit is thus that customers give personal information on demographics and shopping habits. Loyalty cards allow a range of information to be gathered on sign-up, including contact details and demographics. This is valuable for marketing purposes, and allows a simple level of targeted advertising and promotion. More advanced information comes in the form of data recording purchasing habits. That is, when customers use a loyalty card for a purchase, the time and items are linked to that person’s profile. The company can then track what they buy, and when. This can allow them to recognise trends in purchasing, and they can look for correlations between demographic information and purchasing habits. Data mining through complex algorithms can be used to extract value from quantitative data and also more complex qualitative data, such as written feedback comments. The insights gained can guide managers to make decisions through all levels of the business. This can aid planning of stock and capacity, such as altering re-order levels or changing shift patterns and opening times. It also is invaluable for marketing efforts, for example Boots can target discounts to encourage customers to try a wider range of products (McElhatton, 2004). They can also design adverts to have specific appeal to groups, such as the most common purchasers of certain make-up products. Overall strategy can be influenced by identifying shifts in customer composition – for example Boots have expanded their offerings of convenience foods (Askew, 2012).

References

Askew, K., 2012, UK: Boots eyes convenience growth with Jamie Oliver launch (online), just-food.com, Available: [http://www.just-food.com/news/boots-eyes-convenience-growth-with-jamie-oliver-launch_id120886.aspx], Accessed: 07/09/16 Boots UK, 2016, Boots Advantage Card (online), available: [http://www.boots.com/en/Advantage-Card/], Accessed: 07/09/16 McElhatton, N., 2004, Case Study – Boots Advantage Card, campaignlive.co.uk, Available: [http://www.campaignlive.co.uk/article/231984/case-study---boots-advantage-card#], Accessed: 07/09/16