Real-Time Rewards: The Gift of Customer Intelligence

NEW YORK (MainStreet)—Imagine driving up to your neighborhood supermarket. You have a routine—there are the standard groceries to pick up, plus your favorite brand of candy that you have been binging on of late. What's different but again part of a pattern is that today's a Friday, when you also like to pick up some popcorn to snack on while watching a movie. Well, guess what: the computers at the store have figured out that today is "movie night" and have sent a coupon to your Smartphone which you can redeem at the store for a 50% discount on a new flavor.

Sound futuristic? It's already happening thanks to the world of advanced analytics and big data.

"Retailers are realizing that analytics and customer intelligence have become a basic requirement to compete," says Craig Hayman, general manager of Industry Solutions at IBM. "They can now use predictive analytics on customer behavior and transactions to deliver an entirely new kind of retail experience– one focused on the individual level."

Big Blue gets Hip

IBM should know, having spent an approximate $17 billion since 2005 on a range of backend and customer-facing technologies, it likes to call "smarter commerce." Eager to shed its image of being an enterprise IT company, IBM's unveiled Ask Watson, a Siri-like app on smartphones for serious conversations around product support, troubleshooting and other elements of customer service.

Ask Watson is the offspring of IBM's pioneering Watson supercomputer that captured the public imagination when it beat two Jeopardy champions. It addresses a huge market — U.S. companies spend more than $100 billion dollars on call centers, yet last year 50% of the 270 billion plus customer calls went unresolved. IBM's tests have shown that Watson can reduce the six to eight minutes of time for an average customer call by 40% as it speeds up the search for information.

This is important, because in the era of big data there is no such thing as too much information. Also, contrary to popular perception, customers are happy to provide information.

"Our research shows nine out of ten people want this and are willing to spend 20 minutes to set up their personal information to help companies give them a better experience", says Hayman.

Just to be clear, IBM is not abandoning any of its enterprise IT roots in this makeover. It acquired Sterling Commerce in 2010 for $1.4 billion so it could help clients get better visibility about their inventories across the supply chain.

"One element of people's frustration is when you get an offer and you go to buy it and it's not there," Hayman stated in one of his interviews. "The customer walks away unhappy, and the company has wasted money marketing to you. You may end up going to a competitor. It's a triple-whammy."

The Bigger Smarter Consumer

However, the smart companies know that the world of enterprise IT as they knew it has been irrevocably transformed by big data. But what has made this data so big?

The answer is the consumer–who is smarter because he or she has access to far more information than before and can network with a much larger universe of peers and opinion leaders than was possible in the past.

The research bears this out. In 2009 the IBM Institute of Business Value surveyed 32,000-odd customers in six countries--three in the developed world (the U.S., the U.K., and Canada) and three in the emerging market (Brazil, India, and China). Use of technology in making purchases is now a given: 80% of respondents want to do this. Consumers in the emerging markets were three times more likely than those in a developed market to follow a company on a social network, with the overall respondent figure being 33%. Another IBM study revealed that 65% of 1,700 CMOs surveyed felt underprepared to serve such increasingly empowered consumers.

Just as Baby Boomers drove U.S. economic growth and trends in the past few decades, you now have the Millennials—broadly people born between 1980 and 2000—driving the future, except they are doing this at a global scale. Millennials are expected to be 50% of the workforce by 2020, are focused on instant gratification and are very demanding when it comes to expectations from brands and things like customer service. Many marketers refer to Millennials rather disparagingly as the "cheapest generation" because of their lack of propensity to buy items like houses and cars but forget to recognize that this generation tends to prize access over ownership.

This explains the success of business models like Zipcar, with its shared access model that has grown to over 700,000 members. Airbnb has leveraged the power of social media to turn the timeshare model on its head by disrupting the B2C model with a P2P service. Helping such brash startups use technology to personalize the experience is where veterans like IBM come into the picture.

"With the amount of data available, not just from transactions but including social sentiment and channel preferences, and growing at substantial rates, applying analytics to data with predictive capabilities is even more important to engage customers personally with relevance to their desires and needs," Hayman said.

Rewards—Time to Get Real-Time

The announcement in January 2013 by Google of Zavers, a digital coupon product, may have been overshadowed by the hype over more high profile products like Glass. However, it made industry watchers take notice that Google was hooking up with local retailers in New York and other states for its cloud-based, real- time couponing solution. Major retailers like A&P, Waldbaum's and Superfresh have signed up since then.

Orlando-based Fuelzee is a startup that has big plans for real-time rewards in the gas station space. Its iPhone and Android apps allow a consumer to find a station selling the cheapest gas around a particular location and also give out real-time rewards for consumers who go ahead with making these purchases. Location-based services like Loopt are also champions of real-time rewards.

Research firm Aberdeen Group's findings support the case for increased adoption of real-time rewards. In its 2012 Customer Loyalty report, Aberdeen pointed to the emerging trend of having real-time rewards being used by retailers to address the instant gratification needs of consumers. Their methodology divides companies into two groups—Leaders and Followers, and the study showed that 25% of Leaders and 16% of Followers were offering real-time rewards to members of their loyalty programs.

The study identified three chief characteristics of real-time rewards. One was to offer incentives instantly based on purchases, the second was a mobile interface with the consumer to communicate the reward and the third was an assumption of connectivity to social platforms allowing consumers to share news about these rewards with their social universe. The last point is worth emphasizing, because it shows the importance Millennials attach to "showing off" but also their collaborative nature of information gathering and dissemination.

So what is powering all the nice "touchy-feely" stuff? The answer is cutting-edge analytics technology. To emphasize its importance Hayman asks, "Do we want to send a couple with no kids a diaper coupon? Of course not! What consumers don't like is a reward for something they don't need." Figuring out individuals and their personal needs is what makes real-time rewards effective.

Let's say as a marketer you are sold on real-time rewards and the importance of a comprehensive analytics architecture driving this. But who's footing the bill for these investments?

Analyze This

The way organizations are budgeting for their technology spends is undergoing a fundamental shift. Research firm Gartner estimates that by 2017 CMOs in companies will spend more on IT than CIOs. Therefore, CMOs are under more pressure than ever before to measure and justify the ROI on these investments.

They are also being pushed into hiring a different breed of people than they used to like data scientists who are tasked with making sense of the big data that is flooding organizations.

In an IBM survey of over 1,700 CMOs, they were asked to mention the seven most important measures to gauge marketing success—63% said ROI, followed by 58% who said customer experience. Sales, which used to be a traditional metric for marketers was mentioned by less than half the CMOs (45%) who responded. Nucleus Research, a Boston-based specialist in ROI measurement, analyzed the data from 21 IBM Smarter Commerce case studies which revealed that for every dollar spent, the average return for a company was $12.05. Companies averaged a payback period of 9 months, with the lowest being 2 months and the highest 23 months.

Marketers adopting real-time rewards should also not fall into the trap of limiting themselves to just the tip of the iceberg. Getting the jump on your competition in terms of developing expertise in social media, mobile technologies and location-based services is critical to understanding the big picture and reaping those big rewards.

The consumer is smarter than ever before—is your organization intelligent enough?

--Written by Preetam Kaushik for MainStreet

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