Analytical by gabyion


									THE VOICE OF THE LOYALTY MARKETING INDUSTRY SINCE 1990                                              VOLUME 11, ISSUE 1, 2003

                                                                                           (käl´ a kwe ) n. 1. A conversational
                                                                                           exchange; dialogue

     Life Stages
      Is your business stuck
      in data infancy?
      Learn how loyalty analytics
      can help you grow your
      business from the toddler
      stage through adolescence…
      and on to analytical adulthood.

               Also in this issue ...
                               • Shell Stays the Course   • U.K.: Air Miles vs. Nectar
                                     • Technology Report: Doing it in Real Time
                Online exclusive ... The COLLOQUY Interview with Fabio Garcia, Banco Popular

            PUBLISHED BY

                                                                            visit COLLOQUY online

                              Doing it in Real Time:
                                           A true real-time loyalty solution means
                                       never having to say you’re sorry
                                                                                                                       By Jim Kuschill

                                                    The Holy Grail of loyalty marketers,    extra terminals cost money, they
                                                    as we all know, is the ability to       take up space at the register and
                                                    reward and recognize customers          increase the checkout time. They
                                                    in real time. But sometimes the         also require maintenance and
                                                    technical limitations of your POS       repair, perhaps an additional
                                                    world will push back the strategic      telephone line, and training for
                                                    design of your loyalty program. If      your people to use them.
                                                    your POS system can’t accept a
                                                    member number— the most basic           The only data you can realistically
                                                    technical requirement for running       expect to collect with these solutions
                                                    a program— then you’re certainly        is the transaction total— nothing
                                                    a long way from real-time loyalty.      about tender or product. Even
                                                    So how do you get there?                worse, these solutions increase the
                                                                                            potential for error and fraud from
                                                    If you have a credit card terminal      incorrectly keyed amounts. You can
                                                    separate from the POS, then you         catch a lot of fraud and associate
                                                    have a few less-than-optimal            basket details by reconciling keyed
                                                    solutions. You can limit your loyalty   transaction amounts with trans-
                                                    program to holders of your private-     action logs from the POS. But your
             In Part I of Jim Kuschill’s loyalty    label credit card. Or you can           success will vary depending on
                                                    require members to register their       how well your standalone units are
             technology audit (“Cashing Your        credit cards when they join, and        synchronized with the POS; if the
                                                    then filter your transaction log to     loyalty card terminals have different
             Reality Check”, COLLOQUY 10.4),        select the registered cards. Both       dates, times or lane numbers, then
                                                    options affect your strategy. In the    you’re in trouble.
             we learned about the challenges        first case, you’ve limited your
                                                    loyalty program to a credit-related     But let’s say that your POS system
             of reconciling loyalty strategy with   solution; in the second case, you’ve    is smarter than an Enron accountant,
                                                    sacrificed brand and program            and primed to accept member
             reality at the POS. But what can       recognition upon the altar of third-    numbers. How close are you to
                                                    party cards. Both solutions also        real-time loyalty? Do you have
             you do if your POS terminal won’t      change your ROI model— the first        an in-store network? Are your
                                                    much more than the second. And          POS devices on that network? If
             play ball? Can you still enact a       in both cases you are going to          so, do you have in-store servers
                                                    ignore your customers who pay by        that can communicate with the
             real-time loyalty program? Or are      cash or check— this is generally        outside world?
                                                    not a good idea.
             you stuck punching holes in cards                                              If your stores are networked and
                                                    There are a few additional alterna-     online, then you’re close to the
             or handing out stamps? In Part II,     tives. In very low-volume situations,   Grail (though that situation is
                                                    you might actually be able to key       currently as rare as an albino
             Jim outlines your options and          the transactions into a spreadsheet,    alligator). If your POS systems are
                                                    which you later upload into the         not networked, then real-time
             cautions against stopgap measures.     loyalty program database. You might     means a standalone terminal and
                                                    also deploy a standalone device,        all its associated problems. But if
                                                    typically a standard credit authori-    your store is networked but not
                                                    zation terminal, to communicate         online, then you might fall prey to
                                                    with the loyalty program. But the       a seductive solution that we would

COLLOQUY 10 Volume 11, Issue 1, 2003
                                                                                     visit COLLOQUY online

counsel you to avoid: the “home              If you’re storing thousands of          information to the right locations.
store” solution.                             member records at each location,        Your POS systems can talk to the
                                             then sequential data scanning           in-store server, allowing you to thank
Because customers can’t geograph-            would simply take too much              members by name, give them their
ically get to too many stores,               time. You need some sort of             point balances and even target offers
program members tend to frequent             indexed access capability, which        based on historical purchases in
the same stores regularly. When you          makes the application that much         real time. What’s not to like?
combine this knowledge with the              bigger and harder to certify.
low cost of PC disk space, the lure                                                  The most often overlooked issue
of storing member information               • The first time a member visits a       associated with the “home store”
within individual locations is strong.        store she hasn’t been to before, the   solution is the necessity of distrib-
After all, many retailers poll                local database won’t contain her       uting the loyalty program rules to
individual stores on a nightly                information, which means no point      each POS device or to the in-store
basis to collect POS or inventory                                                    server. If the rules are distributed,
                                              balance on her receipt.
information while pushing back                                                       then of course the “rules engine”
                                              Since the store really isn’t online,
price changes and reports. Why not                                                   (the software that interprets them)
                                              member actions at one store
collect loyalty program member                                                       must also be distributed. Some wags
information while we’re at it?                                                       have argued that the distributed
                                                                                     model works best— and it does in
Well, there are lots of reasons to
                                               “If your stores are networked         fact offer some real advantages.
avoid the “home store” solution.
                                                                                     Providing a point balance on a
Here are a few:                                 and online, then you’re close        receipt does reduce call center
• Will the IT group let you install a new       to the Holy Grail of real-time       volume, which likely outweighs
  application on their store servers?                                                the increase in bad-balance
                                                loyalty— though that                 confusion. You might also be able
  If so, can they install the software
  automatically and remotely? If                situation is currently as rare as    to get by without a large central
                                                                                     processing capability, although the
  not, then you probably just blew              an albino alligator.”                lack of such will degrade your
  your budget.
                                                                                     data-mining ability.
• How much data do you need to move?
  You’ll need to know how many                                                       But maintaining hundreds or even
  members buy from each store daily,                                                 thousands of copies of a program’s
                                             won’t reach the other stores until
  how many stores they frequent                                                      rules, along with the supporting
                                             the update cycle completes. What
  and the number of transactions                                                     engine, involves a “distributed
                                             happens if the member visits
  per member over a given time                                                       level of detail” of nightmare
                                             two stores in the same day? The
  period. And since you’re trying                                                    proportions. Even if you solve this
                                             second point balance is incorrect,
  to keep multiple databases in                                                      problem, you’ve nevertheless
                                             and you’re no longer working in
  sync, you’ll need a full refresh                                                   introduced hundreds or thousands
                                             real time.
  regularly— a data enema, if you                                                    of data silos that won’t be able to
  will. The time required for such a                                                 participate actively in a world
                                            • Then there’s the fraud potential.
  download is small, but unless                                                      where multi-channel information
                                              If I’m unscrupulous, I could
  you download all transactions                                                      delivery and interaction will
                                              redeem the same points a
  and post them before you update                                                    become the norm.
                                              number of times in one day by
  the store data, you’ll create               visiting multiple stores. To           All of the above can be boiled down
  synchronization problems if a               combat this problem, you can           to a fairly simple rule of thumb: if
  member transacts at two or more             either prohibit in-store redemp-       you want to do one thing in real-
  stores in a day.                            tions or dial out and check the        time, you need to do everything in
                                              master database in real time.          real-time. To do anything less
• You need to keep the data at the store
  and provide a way to access it.                                                    short-changes both your customers
                                            Let’s assume that you’ve worked
  Thankfully, even low-end PCs                                                       and your organization.•
                                            through these problems. You’ve
  now have some pretty massive              certified and downloaded your            Jim Kuschill is COLLOQUY‘s
  disk drives, so you likely won’t          application. Your local store            technology editor.
  need to add local storage space.          calculation processes are humming
  But how do you access the data?           along and sending the right

                                                                                             Volume 11, Issue 1, 2003 COLLOQUY 11

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