Hyper-Personalization: How To Use Data To Build Loyal Customer Relationships

What does Starbucks CEO Howard Schultz know that some retailers don’t? In its most recent quarter, Starbucks reported solid earnings that beat expectations, and quarterly revenue rose a hefty 18 percent, to $4.9 billion. Schultz told analysts that investing in digital technology instead of digital ads was a factor in Starbucks’ success.

More specifically, while many retailers responded to what Schultz called a “seismic shift” in retailing in 2008 by pouring money into online advertising, Starbucks instead invested in its own cross-channel marketing technology capabilities to engage customers in new mobile platforms and social media.

As a result, the coffee giant was able to personalize its interactions with its growing customer base more effectively and create deeper customer loyalty than its competition. The nexus of Starbucks’ digital initiatives is the My Starbucks Rewards Program, which the company reported grew 28 percent year-on-year to 10.4 million members in the US alone in the latest quarter.

Howard Schultz at Starbucks’ Annual Meeting, 2015

To make customer loyalty programs work, however, you need quality omni-channel data. Starbucks stands out for its ability to use data to enhance customers’ experiences and build emotional resonance with its global brand. Its loyalty program places an emphasis on personal interaction with customers, online and in-store, which is an attitude that comes straight from the top.

Last week, Schultz asked his employees to be extra sensitive to customers given the volatility in the stock markets. In a memo to 190,000 employees, Schultz said, “Please recognize this and — as you always have — remember that our success is not an entitlement, but something we need to earn, every day.” All of this adds up. Last year, Fortune named Starbucks the world’s fifth most admired brand.

That brings me to a key point: The value of marketing technology lies in what it enables — a customer’s ability to engage with a brand wherever they are, on whatever platform they favor at that moment.

In an industry where it’s easier for digital customers to move rapidly from one company to another, loyalty is not easily gained. To earn customers’ trust in your brand, you need to leverage data.

Personalization: Does It Work?

Let’s start with the big picture. VentureBeat, in its third of a four-part State of Marketing Technology series, conducted research that shows the value of reaching out to customers as unique individuals.

The results showed that just one simple change alone — using the individual’s name in the subject line of an email — pushed the email open rate up 29.3 percent on average. VentureBeat reported that personalized website content drove page views for one company up 300 percent, and another company reported conversion rate boosts of 219 percent.

Sophisticated personalization typically involves leveraging a richer dataset, such as names and email addresses, website and other browsing history, user preferences, mobile app behavior, social data, device location history and demographics, to name just a few sources. And it requires marketers to correlate a consumer’s behavior and purchases across channels.

All this has given rise to the term, “hyper-personalization.” VentureBeat defines it as “the use of data to provide more personalized and targeted products, services and content.”

Loyalty Programs: Permission-Based Marketing

The true standard for hyper-personalization is interacting one-to-one with individuals, not segments. To anticipate an individual’s desires at any point in time, however, requires having deep customer insight, which comes from analyzing granular data.

Reward programs are frequently used to capture additional data because customers, in effect, grant brands permission to collect data in exchange for something of value.

My Starbucks Rewards Program, like many of the best loyalty programs, is tiered, and the value exchange begins immediately when the customer “signs up” and is awarded birthday drinks, coupons and customized email offers. But the loyalty program goes further in that it’s a cross-channel, multi-brand program supporting the company’s growth plans.

To do this well requires the ability to connect the dots when it comes to a consumer’s actions on and offline. The right marketing technology capabilities are foundational:

Customers today demand relevance and real value from marketing in exchange for loyalty. That’s the unspoken agreement, whether in a marketing campaign or a rewards program.

It’s all about earning the customer’s trust in your brand, and it starts with data.