Creative thinking that delivers results

09 Nov

A marketer’s path to personalization - The Starbucks Way

Category: Digital marketing
Written by: Ian Turner
personalization, digital marketing, marketing, online marketing

Marketing personalization has been an aspiration of marketers for many years, about as long as the internet has been around. Back then the benefits were obvious however the challenges were equally immense. Gaining access to pertinent data that would facilitate decision-making has always been the biggest issue in making this a reality.

21st century technology has made access to data a non-issue, however marketers now face another daunting problem, that being data overload. How can we implement a personalization strategy when we have so much data to sift through? Today’s budget constraints only exacerbate this issue. Fortunately for us, the solution may be a lot simpler than you’d think.

KISS Principle

The KISS Principle (Keep It Simple Stupid) is the first piece of advice marketers should strongly consider in solving this dilemma. Why? The natural tendency with personalization and access to data is to develop the most intricate and complex model possible for identifying customer tendencies and preferences and to then use this complicated model to design sophisticated campaigns and programs.

While this can work, it complicates things unnecessarily, making the task that much more challenging from the get-go. It also creates more factors you’ll have to monitor. A more practical approach would be to simplify your data model, selecting the most critical pieces of customer information you think would be most impactful for your business and your key drivers of success.

The Starbucks Way

Starbucks have been masters at personalization for several years, ever since they completely revamped their very popular and much heralded loyalty program, Starbucks Rewards. Customers in this program receive personalized offers and promotions on at least a weekly basis that are completely unique to them. With a few exceptions, these offers are targeted specifically at each customer.

So how can a company as large as Starbucks do this? They’ve been able to achieve this by simplifying their execution, focusing primarily on the customer’s purchase history as the critical data component, information that has been collected as part of the rewards program itself.

Starbucks knows what you’re buying, at one time of the day, how often and for how much. They then use this information to dictate future offers for you. In doing this, Starbucks has made their loyalty program an integral part of their business model.

My wife and I have very different purchase behaviours when it comes to Starbucks; she is very regular with her purchases, buying a coffee every morning and sometimes in the afternoon too while I’m more irregular and less frequent.

In spite of the fact we’re both ‘Gold’ loyalty rewards members, the offers and promotions we get are very different.  I often receive offers that entice me to make daily purchases in-store for multiple days in a row or over a given week; she never gets these because she’s already doing this. Instead, she gets upsell offers to buy lattes and Frappuccinos instead of the regular brewed coffee she usually gets.  

This doesn’t have to be rocket science

While personalization at Starbucks clearly involves a much more sophisticated model than this, it’s apparent that purchase behaviour is at the core of their decisioning tool. I think we can agree that tracking purchase behaviour is an excellent starting point for businesses looking to better understand the behaviour of its customers. It can also provide some very useful and insightful analytics!

So what can other businesses do to track customer behaviour in a similar way, particularly when they don’t have a rewards program in place? Tracking customer transactions in some way would be an excellent starting point for this. Integrating your order management (checkout) system with a CRM solution would be one way you could track customer transactions.

Kitchen Stuff Plus, a growing retailer in the Greater Toronto Area does this by asking clients for their phone number as part of the in-store checkout process. They then integrate email into the program under the guise of providing customers with discounts and offers. While KSP doesn’t currently deliver personalized offers, they have the information and knowledge to implement this if and when they so desire.

What you can do

Implementing personalization into your marketing plan doesn’t have to involve hiring a data analyst (though it could help), collecting reams of data or spending weeks if not months analyzing and deciphering this data in order to come up with a comprehensive program.

It can simply involve better understanding what your customers are currently doing with you (and of course what they’re not) and then using this information to build offers and promotions that either align with their current activity or steer them towards buying items they haven’t  been inclined to purchase from you in the past.

 

Throw in some pertinent information around customer preferences into this equation (or general survey data) and you can build a fairly sophisticated model from which to connect on a more intimate basis with your customers and provide them with unique offers. By doing so, you can demonstrate greater relevance to them. As Starbucks so ably proved, personalization doesn’t need to be a big hairy beast to be successful; it simply needs to be smart, intuitive and innovative!

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