their physical size. This leads to large stores competing
with smaller stores for trade in the same area. ‘We quickly
learned that our most valuable customers shop across
many stores in their area,’ says Helen, ‘and that there is a
lot to be gained by managing stores as local areas and
focusing on getting the overall customer offer right.’
Gaining a greater understanding of how customers
shop product areas and stores offers really valuable
insights.
However, as Helen says, ‘the real prize is in gaining a
really good overall understanding of your customers’. For
a retailer with a very broad customer base it is too simple
just to focus all efforts on the most valuable customers.
Boots build up their understanding by combining data
from a number of customer dimensions: RFM (Recency,
Frequency and Monetary value) analysis enhanced with
profitability. This helps Boots to understand the main driv-
ers of customer value and identify which customers they
should value and retain and which could be more valuable
if they focussed on them more.
Lifestage analysis– This provides insight into how a
customer’s value changes over their lifetime. Using it,
Boots can identify which are the potentially valuable cus-
tomers of the future. They can also see the point at which
a customer might become less valuable and try to prevent
this. It is also clear that some messages become very
important at certain times (for example, vitamins to people
over 35 who have realised they may not be immortal) and
irrelevant at others (what mother is concerned about cos-
metics within a couple of weeks of the birth of her child?).
This informs the mix of messages the customer receives,
for instance via direct mail.
Attitudinal insightfrom market research surveys and
questionnaires gives Boots an understanding of the atti-
tudes driving the behaviour they see on their database. It
is pointless directing a lot of marketing effort at people
whose attitudes mean that they are unlikely to become
more valuable to Boots.
This diversity of data is being used to build up a multi-
dimensional picture of customers that gets to the heart of
what drives customer value both today and into the future.
Analysis of attitudes and customer repertoires offers
Boots pointers to influencing customer value in a positive
way. This understanding of customers has many applica-
tions within Boots from the way the Boots brand is
communicated to specific cross-selling activities for store
staff. One of the first applications of this segmentation
was as a driver of the Boots relationship marketing pro-
gramme enabled by the Advantage Card.
The segmentation provides a framework for relation-
ship marketing. Specific campaigns help Boots to deliver
that framework. These could encourage customers to
shop along different themes – summer holidays,
Christmas shopping – and incentivise them to make a
visit. They may simply raise awareness of a particular new
product or service – Boots Health & Travel Cover
launched in April is a good example of this. They could be
an invitation to an exclusive shopping event where the
customer can shop in peace and perhaps earn extra
points as well.
To make all this happen Boots needed a campaign
management system that could involve customers in the
relationship marketing programme most relevant to them.
The ‘campaign management’ component has been fully
integrated within CDAS through a bespoke development
by IBM. This means that direct marketing analysts are
able to develop their target customer profiles without
having to first create a separate extract of the data and
are also able to base these profiles on the full richness of
information held within the database. Having defined
these criteria, the system will automatically come up with
a mailing list of matching card holders with no further
intervention. The system not only automates the measure-
ment of basic campaign response analysis, but also
makes the list of customers actually mailed available
within the analysis environment so that more sophisti-
cated response analysis can be performed. ‘The close
integration of the Campaign Management System within
the analytic environment of CDAS is one of its main
strengths,’ says Ian, ‘not only are we able to drive high
response rates by tightly targeting relevant customer
groups, but we are able to close the loop from initial cus-
tomer analysis, through customer selection and campaign
execution back to campaign response measurement and
further campaign analysis.’
‘When we announced the Advantage loyalty scheme
we knew that the incremental sales generated by it would
pay for the initial investment, but that the long-term value
would come from the application of customer insights
across the business,’ says Helen. ‘We are already proving
that we can add significant value from doing this. But you
do not obtain these benefits unless you get the base of
detailed information right – and couple this with an ability
to thoroughly exploit it.’Computer Weekly (2001b) Interactive Being. Computer Weekly, 2 May- Article by Lindsay Nicolle.
CHAPTER 6· RELATIONSHIP MARKETING USING THE INTERNET
Question
Based on the case study, for the scenario below,
answer these questions:
1.Summarise the potential benefits a loyalty scheme
can deliver in terms of improved knowledge about
customers.
2.Summarise changes to organisational structure and
responsibilities which may be necessary for
introduction of such a scheme.
3.Assess potential reaction to change amongst staff
and outline approaches through which this could
be managed.