201-A Win on Both Price and Convenience

A few forward-thinking retailers have adopted predictive analytics in their loyalty programs. Among the few to use this tool today are Sam’s Club, CVS and Kroger. These programs offer both Convenience and Price advantages to individual customers. It is a true break-through innovation.

The Sam’s Club program provides a good illustration. Sam’s named this program eValues. This program offers bargains tailored to each Sam’s Club member. The member must be part of Sam’s Club “Plus” program. These “Plus” members may print out individually tailored eValues offers at a kiosk at the entrance to the store or by email or by visiting the Sam’s Club web site. Sam’s Club prepares these individualized offers by drawing on the purchasing history of the individual “Plus” members. Their purchasing history predicts what bargains and product combinations will attract the individual customer.

This eValues program is both a Convenience and a Price innovation. (See StrategyStreet.com/Diagnose/Products and Services/Customer Cost System) It is a Convenience innovation because it helps the customer find and choose products more quickly within the store. It is a Price innovation because it offers discounts on products the customer typically buys, or might buy. eValues is highly effective. The average coupon brings a response rate of 1% to 2%, but the eValues program results in customers getting the discount on 20% to 30% of the products where discounts are offered.

The stores’ loyalty programs become more relevant to their most important customers and the stores’ sales per customer visit increase. Clearly a win win situation.

Posted 7/19/10

Update:

The predictive analytics tool has become much more commonplace in business. More than 50% of businesses now use predictive analytics for such tasks as forecasting future cash flows, determining staffing needs, targeting customers, and preventing equipment breakdowns, among others.

Predictive analytics has enjoyed broad success because it increases the company’s economies of scale. This tool reduces a company’s efficiency cost by reducing wasted resources. When the tool results in increased sales in a customer transaction, it increases the company’s cost effectiveness.   See HERE for examples of efficiency and effectiveness. You can use these many examples to brainstorm cost improvement ideas in your own company.

10/22

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