Profiting from Business Intelligence in Retail Loyalty Programs
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- Lorraine Andrews
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1 Brochure More information from Profiting from Business Intelligence in Retail Loyalty Programs Description: This report looks at the opportunities for business intelligence vendors and systems integrators created by the growing trend among retailers to grow revenues from their most profitable customers. The report looks at the market size, including forecasts, for BI in retail, assesses the different kinds techniques in loyalty programs, the competitive landscape and recommends go to market strategies. Scope - This report outlines the factors driving adoption of loyalty in retail, barriers to entry and forecasts the potential size of market for BI in retail. - The different approaches to loyalty are discussed, along with the impact these have on technology vendors. Coverage extends to future trends. - The major vendors within loyalty in retail are assessed, along with the impact of consolidation in the BI market and future competitive forces. - Go to market strategies are listed, with recommendations on future strategies for success. Highlights of this title Current economic conditions and falling discretionary spend of customers are the principal drivers for adoption of loyalty programs by retailers. For this reason, Datamonitor believes that loyalty programs will contribute to strong growth in BI adoption in the short- to medium-term. Many retailers, and some vendors, are not aware of the competitive advantage that insights generated by a loyalty program can bestow on a retailer. This report details some of the more sophisticated techniques used within loyalty programs to deliver this advantage. While large vendors dominate the mindshare of retail CIOs, Datamonitor believes that some smaller players have achieved a higher level of sophistication within the loyalty in retail market. Key reasons to purchase this title - Understand what is driving adoption of BI and loyalty within retail, and the barriers holding some retailers back. - See forecast and current data on BI adoption in retail to better understand the market opportunity. - Find out how to adapt go to market strategies to maximize potential future sales in this area. Contents: Overview Catalyst Summary Key Messages - Economic conditions drive the need for customer retention programs; technology delivers the insight to the business - The barriers to entry range from culture, to IT infrastructure and management structures - Despite these problems, retail offers huge growth potential in the short term - Supply-side loyalty is often the principal focus - Demand-side loyalty delivers the most valuable insight
2 - The success of loyalty relies on the implementation of insights derived from the program - The most successful vendors in loyalty are not necessarily front of mind for retail CIOs - Buyers of BI for loyalty are business managers, not IT managers Market Opportunity - Economic conditions drive the need for customer retention programs; technology delivers the insight to the business - Retail is a tough business: increasing competition for a share of consumers wallets and soaring costs are making things tougher still - While consumers are becoming increasingly demanding, price-sensitive and disloyal - Retailers are increasingly adopting loyalty strategies to retain and develop existing profitable customers - Retailers need to better understand the three-way relationship between retailer, supplier and customer to ensure the success of a loyalty strategy - As an industry retail is data-rich and insight-poor - Retails historic focus has been on supply-side drivers - Demand-side understanding delivers the greatest insights - The barriers to entry range from culture, to IT infrastructure and management structures - Retailers merchandising mentality creates a short-term and low-cost approach to all aspects of the business - Technological infrastructure is far from optimum; data quality is an issue - IT managers can be an obstacle - IT infrastructure is not in place at smaller retailers - Use of customer data is of concern to many retailers - The structure of retailers is not as obstructive as culture - Despite these problems, retail offers huge growth potential in the short term - Investment in BI for customer intelligence in retail is expected to grow quickly in the short-term - Retail lags financial services, but is growing above trend - The past success of loyalty strategies is driving growth in BI investments - And IT investment budgets have yet to be cut - Future investment in BI relies on positive drivers outweighing the barriers - Investment in BI does not equate to a sophisticated loyalty program - Retail is an important growth area for BI applications Loyalty Programs within Retail - Loyalty programs vary greatly in size, sophistication and success - The most basic loyalty programs focus primarily on discounting - While the most sophisticated can predict future consumer behavior - Although both follow a similar implementation path - There are two approaches to loyalty -supply and demand - Supply-side loyalty is often the principal focus - Analysis of POS and supply chain data ensures shelves are filled with the right products - Affinity analysis of product lines helps improve cross-selling of products - External data and predictive analytics can enrich insights - But supply-side loyalty only partially helps retain customers - Supply-side loyalty - technology takeaway - Demand-side loyalty gives far more valuable insights, but is often overlooked due to its inherent complexity and business risk - Demand-side analysis relies on the accurate identification of individual customers across channels - In-store identification is driven by loyalty cards and credit cards,; but not all transactions can be linked back to individuals - Online customer identification is possible for all purchases; measuring online customer behavior prepurchase is less precise - Customers can be segmented into groups; analysis helps inform segment-specific marketing - Demand-side loyalty - technology takeaway - Both supply and demand data can be enriched using other information sources to improve insights - Data enrichment - technology takeaway - Future technologies will help shape loyalty in retail - POS as a communications device - Visualization techniques
3 - Text mining - In-store marketing - Outsourcing - Mobile marketing - Mobile BI - On-demand - The future of BI - technology takeaway Customer Impact : - The impact of a loyalty program on a business can be huge - The ultimate success of a loyalty program relies on the implementation of recommendations - Loyalty implementation - technology takeaway - Loyalty is not the last word in providing a competitive edge in retail - Retailers in the middle ground will gain the most competitive advantage from loyalty programs - Other strategies are of equal, if not higher importance - Limitations of loyalty - technology takeaway Competitive Landscape - Consolidation of BI players is a sign of a maturing market - Integration may compromise best in class and platform neutrality - And innovation may suffer - Although integration may have a positive impact - Although innovation in retail may come from different layers in the stack - Other vendors are looking to move up the stack into new areas, particularly advanced analytics - Larger vendors are front of mind for retail CIOs making BI investments - Other vendors have a stronger offering for loyalty programs - Future competition - Key purchasing decisions for retailers - Best-in-class or end-to-end? - IT spending is likely to be cut in the medium-term - BI investments should be relatively protected from cost cuts - Industry relevance is a key sales message - Go to Market - The size of retailer is an important measure when targeting - The sub-sector of a retailer is not an important targeting criterion - The buyers of BI tools are business managers; end users are from all over the business - The shape of the BI in retail market will change rapidly - Recommendations - Marketing messages should focus specifically on loyalty - Protect BI revenue stream by making loyalty work - Do not underestimate the importance of other organizations providing loyalty services - In the future the most successful vendors in retail will have the most verticalized offering - Target the middle ground - BI is expected to grow in retail above trend APPENDIX - Definitions - Methodology - Further reading - Ask the analyst - Disclaimer List of Figures Figure 1: Market forces in retail intensify pressure on individual companies Figure 2: Change in customer loyalty rates in UK retail, % change 2008 on 2007 Figure 3: Issues addressed by loyalty programs on demand and supply sides Figure 4: Common problems legacy systems pose in loyalty programs
4 Figure 5: Global penetration of BI in retail, 2007 Figure 6: Global current and predicted BI investments for customer intelligence, 2007 Figure 7: Future implementation path of BI in loyalty in retail Figure 8: Distribution of level of sophistication of tier one and two retailers loyalty programs Figure 9: Global forecast retail, wholesale & distribution BI revenues, Figure 10: Global forecast BI license revenues $m, 2013 vs. forecast CAGR%, by industry sector Figure 11: The supply and demand sides to loyalty analysis in retail Figure 12: Simple customer segmentation and relevant marketing strategies Figure 13: The loyalty value chain in retail Figure 14: Mindshare of leading vendors in the global BI solutions market in retail, 2007 Figure 15: The largest vendors relative strength in BI technology and loyalty expertise Figure 16: Characteristics of retailers with a high and low need for loyalty Figure 17: Global key decision makers for IT investments in retail, 2007 Figure 18: BI users in retail Figure 19: Future trends in loyalty in retail Ordering: Order Online - Order by Fax - using the form below Order by Post - print the order form below and send to Research and Markets, Guinness Centre, Taylors Lane, Dublin 8, Ireland.
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