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One of the most significant shifts in the past twenty years involves data sharing, and the massive advancement in the volume and speed with which it can occur. Between the voluntary sharing of consumers’ first-party transactional and behavioral data and the proliferation of zero-party and first-party data-harvesting technology, more and more customer data is available for retailers to utilize. With a glut of information comes the question of what data is valuable and actionable and how to use the data efficiently and effectively.
To learn more about how to use data intelligently to drive business outcomes, PaymentsJournal sat down with Aaron McLean, Chief Marketing Officer at Stuzo, and Don Apgar, Director of Merchant Advisory Services at Mercator Advisory Group.
Knowing everything vs. knowing enough
The trick for businesses to get the most out of their customers’ data is to focus on wallet capacity, share of wallet, and the incremental wallet opportunity. Companies like Stuzo can support that goal with their Wallet Steering™ System and software platform called Open Commerce®. To drive that point home, McLean paraphrased some wisdom from Mike Giambattista, CEO of TheCustomer: “We are shifting right now from a big data mindset that said we want to know everything about the customer – which it turns out is not very practical, very expensive, a little creepy, and potentially also illegal – to knowing enough about our customer to be important to them where and when it matters.”
In essence, knowing every little detail about customers is not going to be helpful in the end. The most important information is that which drives loyal behavior and increases sales profitably, full stop. That begs the question: What is the right data? “It’s like the old adage that half the money we spend on advertising is wasted,” Apgar remarked, “but the problem is, we don’t know which half.” Thinking carefully about where to invest time, energy, and resources to get the highest ROI must be among a business’s top priorities.
Customer loyalty and wallet steering
Any modern customer loyalty program should be gathering data for the purposes of what Stuzo refers to as wallet steering. There are three main pieces of information that are crucial to understanding how to drive profitable incremental purchase behavior:
- Wallet capacity – the total amount of any product or category that a customer buys across all the retailers they buy from in a given period of time
- Share of wallet – the percentage of purchases that happen with any one specific retailer
- Wallet opportunity – the difference between the customer’s wallet capacity and a retailer’s share of each wallet
By examining those data points, in that order, a retailer can determine how much a customer routinely spends in total on the goods and services they buy from all the retailers they do business with, and then determine if and how much more the customer could potentially spend with a specific retail brand. McLean summarized: “We can use this wallet data to get the right message, with the right offer, to the right member, through the right channel, at the right time, to steer that customer’s purchase behavior in a way that is meaningful and relevant for the customer, and profitable for the retailer.”
Minimizing compliance risk
Merchants are often rightly concerned with storing the transaction and behavioral data of their customers. After all, in the event of a data breach, the retailer might be liable for any ensuing issues. In order to maintain peace of mind while operating with data, there are two important steps businesses should take:
- Work with certified vendors – defer risk to reliable partners with PCI DSS Level 1 and SOC 2 Type 2 compliance.
- Tokenize data – protect all sensitive information by only exposing protected tokens during payment transactions.
If both measures are taken, data security will be significantly improved, and merchants can feel more at ease using customer data to drive their business outcomes.
Providing top ROI today, not just in the future
With so much innovative new tech being offered by vendors, it can be hard for merchants to know what will boost revenue right away. Stuzo’s approach is always to differentiate by prioritizing real-time, concrete, and goal-driven solutions. “Business outcomes trump features,” McLean emphasized. “Avoid shiny objects that seem like they could be the next big innovation in consumer technology and focus on the things that will generate meaningful business outcomes at scale.”
Stuzo’s Open Commerce platform helps generate top ROI by unifying the most critical parts of the customer journey through their Activate, Transact, and Experience products. “We have successfully broken down the silos between loyalty, payments, and the customer experience – and the data the flows between all of them,” said McLean. “And we do it intelligently, in real time.”
That intelligence component is of the utmost importance. “You try to gather too much data up front, and you create a lot of friction with the customer, and you don’t get the participation you need,” explained Apgar. “Or if you just try to throw rewards at consumers consistently, just to get them to come back into the store, then you wind up discounting your margin on business that you would have gotten away with.” Analyzing data for the purposes of wallet steering can prevent merchants from flying blind on their loyalty programs and help them drive incremental sales without alienating customers with undue intrusion.
Everything begins and ends with targeted business outcomes
Each time a merchant has a reach out point, it has the potential to either delight or infuriate the consumer. All the access in the world to data and new technology will not move the needle in terms of consumer loyalty solutions without the proper strategy. “It’s time to raise the bar,” said McLean. “We need to set our standards higher.” Stuzo, for example, offers a contractual 1.5x performance guarantee when it comes to generating business outcomes for its retailer partners. “We don’t get bogged down by chasing after features just so we can be at parity with all of our competitors,” McLean continued, “because frankly, that’s just a race to commoditization, which is a race to the bottom. We compete and win on business outcomes, period.”
Instead, the emphasis from retailers should turn to selecting vendors based on their ability to generate business outcomes, rather than selecting the vendor with the longest list of features. “Typically 80% of the value from a MarTech solution comes from 20% of its feature set,” said McLean. “Merchants need to realize that their program doesn’t have to look like everybody else’s program,” said Apgar. “It needs to look like what works for you and what your consumers expect from your brand.” Data is useful, can drive business capabilities, and enables wallet steering – only insofar as it is gathered with an eye towards understanding what customers really need and how to provide it profitably. “That can drive what the targeted outcomes should look like and inform where the program needs to go,” McLean concluded. “This then sets a precedent for what kind of data can actually be used to get the program there.”