Personalizing Offers To Influence

A
White Paper

Personalizing Offers To Influence
Shopper Behavior & Drive Maximum Margins
How Retailers Are Integrating Promotions Platforms
With Existing POS Systems To Improve Rewards
and Build 1:1 Relationships

To grow revenue and increase share of wallet, astute players in the
retail and consumer goods sectors are turning to new personalization
tools and processes. With overall spending shrinking, leading retail
brands are working harder to maximize the potential of their existing
customer base by delivering more targeted and relevant offers. The
timing is good for this migration to more focused advertising and
promotions as new software platforms make personalization possible
in real-time while consumers are present in their stores.

Research reveals the need for personalization. For example, the
recently released Retail Horizons report from the NRF Foundation
and KPMG showed retailers are now focused on customer retention
rather than customer acquisition. The report titled, “Benchmarks
for 2009, Forecasts for 2010,” found only 49% percent of retailers
planning to focus on customer acquisition in 2010, compared to 61%
of respondents who said acquisition was a big part of their initiatives
in 2009. “Looking ahead, retailers will continue to analyze customer
shopping habits and industry trends to make the best decision
possible for their company, employees, customers and their brand,”
pointed out Kathy Mance, Executive Director, NRF Foundation.

“ Shoppers have become ‘wise’ shoppers.
Coupon redemption, for example, is up
In the following white paper we will
explore the latest trends in delivering
personalized offers at POS through
nearly 25%. ”
—Robert Passikoff, Ph. D., Brand Keys, Inc.
the perspective of leading industry
analysts. The paper will also look
at real-world scenarios of how
Personalization has been prevalent these tools and processes can be
in the e-commerce channel for successfully deployed at retail to
years and continues to be a create real-time offers and deliver
competitive priority among online nearly instantaneous campaign
retailers. According to the latest analytics.
Retail Horizons report, 49% of
The New Delivery Model
the retailers polled indicated
personalization of their website In the still turbulent waters of social
will be a major investment priority and mobile marketing, as well as
for 2010. CRM-enabled selling, retailers and
consumer goods marketers can
To realize the same cross-sell and find themselves adrift and, without
up-sell benefits within their physical the right tools, even shipwrecked.
stores that they are seeking in the This is particularly true for the ranks
online channel, there is growing of marketers trying to cross the
consensus that new personalization ocean between traditional methods
tools and processes must be and the promised land of Web 2.0
integrated directly at the Point of capabilities. Consider these two
Sale. Supporting this rising interest closely linked facts, which on their
in customer segmentation, the face seem contradictory: coupon
Retail Horizons report found that usage is up, while newspapers
more than two-thirds (67%) of – with their freestanding inserts
retailers cited customer database/ carrying coupons to millions – are
data mining as a priority for 2010. experiencing a circulation free-fall.
By tapping into new technologies In February 2010, consumer trend
that integrate real-time promotional expert Robert Passikoff, Ph. D.,
capabilities into the POS, retailers Founder and President of Brand
are reporting results that show Keys, Inc., told Retail TouchPoints:
vastly improved offer targeting and “Shoppers have become ‘wise’
redemption, tighter segmentation, shoppers. Coupon redemption,
revitalization of stagnant rewards for example, is up nearly 25%.”
programs, market share and traffic But even as Passikoff and others
spikes, reduced spend on traditional reported the rebirth of coupons,
media, and genuine gains in discounts, and the high redemption
incremental revenue.

2 • A RETAIL TOUCHPOINTS WHITE PAPER 2010

seek advice on what and where
to buy from social networking
sites, Twitter and other web and
mobile communities. The instant
gratification delivered by these
Web 2.0 websites and devices has
fundamentally altered the mindset of
consumers. They want it now. As it
pertains to product marketing and
brand loyalty, these trends reveal a
“buy my loyalty up-front” mentality.
This is in stark contrast to traditional
rate of ‘groupons’ and their ilk, constructs of the reward/loyalty
traditional media that deliver them programs that acknowledge buying
– namely newspapers and, to an behavior on the back-end through
extent, direct mail – were losing point redemption, i.e., frequent
ground to mobile and web-based flier programs.
alternatives.
But as one door closes, another
The Audit Bureau of Circulations opens. Traditional offer delivery is
(ABC) reported in April 2010 that slowly getting wise to the wired and
circulation among U.S. newspapers wireless worlds. The new paradigm
continued a troubled slide. ABC’s makes possible a 1:1 relationship
figures revealed that average between seller and buyer that was
weekday circulation fell 8.7% in the inconceivable a few short years ago.
six months ended March 31, 2010, The issue is now one of improved
compared to the same period in data capture, better interface with
2009. The circulation of coupon- CRMs, and acquiring leading-edge
laden Sunday editions fared slightly systems that put this co-mingled
better, falling 6.5 percent. But consumer data on steroids, and
despite some bright spots on the make it work together seamlessly.
newspaper landscape, ABC said the
nation’s top 25 newspapers are still The emergence of mobile devices
logging massive circulation losses. into the retail environment is
potentially the biggest game-
This effect has been well changer for realizing that
documented, as the 24/7 wired personalized dialog. The recent
household emerged, followed Yankee Group survey titled
by smart phone devotees who “Anywhere Consumers” found 73%
have abandoned paid content of consumers were interested in
(like magazines and newspapers) receiving coupons via SMS/MMS if
in droves. Additionally, wired and they were free.
wireless consumers increasingly


Given the complexity of personalized those two segments the selling
offers, industry experts insist that mechanism is very, very tricky as to
how to manage that volume versus
marketers must be able to measure margin issue.”
impact before, during and after the offer One of the biggest hurdles
is extended. to managing segmented or
personalized loyalty initiatives is that
retailers and their partners must
However, many retailers have not only factor in the outcomes of
struggled to deal with the previous campaigns, but also the
infrastructure requirements at the likely sales impact of each type of
POS to deal with SMS codes or media that’s being used for future
other codes necessary to enable campaigns.
communication between moble
Therefore, the ability to deliver
devices and the POS.
targeted offers in “trigger fashion,”
that factors in the scenarios of
Roadblocks to Effective customer response on an individual
Rewards Programs basis at the point of impact based
In survey after survey, increasing on predefined events, remains a
customer loyalty consistently significant challenge for even the
ranks as a top priority for retailers. largest consumer brands.
However, the majority of retailers Given the complexity of
still struggle with underperforming personalized offers, industry experts
rewards programs and the difficulty insist that marketers must be able
of measuring ROI on promotions to measure impact before, during
due to long lag times. and after the offer is extended. In
“Companies that are doing in order to respond to fickle consumer
excess of five million to 10 million trends, post promotion analysis
transactions, in that large Tier 1 must now be done in a matter of
bracket, have to deliver business days or even hours, not months. As
results and return on marketing one leading analyst puts it, “What
investment, as well as return on net good is a campaign if you’re unable
asset,” says Sahir Anand, Senior to almost instantaneously measure
Research Analyst for the Retail the outcome from an entire
practice at Aberdeen Group. “This business workflow standpoint,
can make an even bigger impact from offer creation, to delivery, to
in small to mid-market players. In execution and through the critical
analysis phase?”


“ Currently, customizing promotions based
on affinity and preferences is a capability
management IT systems, and
decreased wait times at registers
during peak and off-peak selling
that only 38% of retailers have. Almost periods are some of the key
50% of the rest of retailers plan to use it, benefits,” Smith said.

but are not in it yet. ” Anand is an active advocate
for a higher penetration of offer
—Sahir Anand, Aberdeen Group
personalization, redeemed through
a new generation of “smart”
Next Gen POS-Based POS software that requires only
Platforms configuration changes without new
In the recent Aberdeen Group study, hardware investments. However, he
POS to Profits: Reviving Best-in- is disappointed in the relatively low
Class Sales & Service in Retail penetration of these devices and
Stores, Anand hardwired the next processes. “Currently, customizing
wave of data capture and usage to promotions based on affinity and
the POS terminal itself. “According preferences is a capability that
to our surveys, 65% of companies only 38% of retailers have,” Anand
are capturing consumer data at the reports. “Almost 50% of the rest of
point of service. But only about 33% retailers plan to use it, but are not in
actually end up using that data for it yet. What’s even worse is the fact
segmentation to be able to identify that out of this group, only 31% can
those consumers they intend to execute more coordinated product
market towards, or to identify their promotions across all channels,
most profitable customers.” while 58% of retailers want to
be able to coordinate product
Best Buy Marketing VP Matt promotions across all channels.”
Smith reinforced the importance of
integrating data at the store level in The clear message, Anand
a quote within the Aberdeen POS maintains, is that companies want
to Profits report: “Our focus is on to improve the accuracy and
providing a coordinated, customer- targeted nature of store promotions
centric shopping experience in through viral marketing, email
all channels. To get there, one marketing, mobile marketing, and
of the crucial steps we needed extreme personalization of data.
to take was to have as much “Most of the retailers who invested
customer data flowing from our millions in paper coupons, catalogs
registers as possible. Increased and traditional direct mail are
data accessibility at the point of realizing that they need to shift their
sale, increased data output from strategy,” he says. “When they’re
the point of sale to other business doing customer intelligence analysis,
they may be seeing their wallet


“ There will always be consumers today, Tier
like inclusive retail behavior. But
who don’t “The consumer is absolutely willing
to sign up for [personalized loyalty
and rewards programs] on the
1 retailers and best-in-class retailers are Web,” says Anand. “There will
driving margin and loyalty through [highly always be consumers who don’t
personalized] loyalty programs and offers.
” like inclusive retail behavior. But
today, Tier 1 retailers and best-in-
—Sahir Anand, Aberdeen Group class retailers are driving margin and
loyalty through [highly personalized]
share increasing, but they don’t loyalty programs and offers. You
know that to be precise.” need that opt-in behavior from your
customers, and the best way to do
Among retailers who are currently
that is to show them value. Show
running anything from promising
them the value, and they’ll opt-in.”
pilot programs to full-blown offer
personalization rollouts of tightly- One of the early pioneers of this
targeted multi-channel offers are delivering offer personalization
fashion icon Kenneth Cole (who and new directions in data
Anand says increased their overall manipulation is Atlanta-based
customer database by 21% in three Sparkfly. Founded 10 years ago
months through enhanced POS as an employee discount provider,
data capture); grocery store chains Sparkfly has emerged as a leader
such as Kroger, who Anand says, in the transformation of existing
“…spend an exceeding amount POS systems, smarter CRM data
of time on campaign analytics and integration, and a vastly improved
coupon analytics that are used at consumer experience.
the point of service, against those
Sparkfly’s CEO Catherine Tabor
that are distributed prior to the
points out that the vision of real-
sale,”; specialty young woman’s
time promotional offers is beginning
clothing retailer, The Wet Seal;
to become a reality. “Imagine a
Ralph Lauren; and New York &
world where you know exactly
Company.
which of your products an individual
consumer is purchasing; when
Next Generation Retail
and where they’re purchasing; and
Marketing
based on that behavioral purchase
Personalization pilots now in the history, you can then communicate
field cut across a diverse collection a very tailored and personalized
of companies — from grocery offer to the individual consumer that
and specialty apparel chains, to will hopefully drive them back into
footwear and mixed-merchandise the store, the restaurant, or to your
big box operators, to Quick Serve product, at no incremental cost,”
Restaurant (QSR) chains. Tabor says.


Sparkfly’s Personalized Promotions Platform works as follows:
Using the retail example, Sparkfly’s patented platform
works as follows:

1. The retailer configures their POS terminals at the system level to
communicate with Sparkfly’s data servers. With the Sparkfly solution,
no additional equipment is necessary at the POS.

2. The retailer creates awareness of the new program via ads and
in-store promotions and gets customers to sign up and register online,
or by phone.

3. Once they’ve registered, Sparkfly communicates offers in a variety of
ways including mobile apps, SMS text messages, email, or by driving
users to a website or social media site.

4. Once notified that an offer has been loaded into the system,
registered users go to a store to purchase the product.

5. Registered users identify themselves right before payment
with a swipe card, mobile device, phone number, or other
method, and the POS contacts the Sparkfly server to apply
the offer.

“The information we get is the exact on the paper receipt to show that
product the person is trying to value was delivered.
purchase at this location at this time
Sparkfly’s platform goes a step
of day, and, based on that, Sparkfly
further. “We can also extend offers
determines if there are any offers
to consumers even if they’re not
available.” Tabor says. “If there are,
aware an offer is available, in a kind
we supply that back to the POS
of ‘surprise and delight’ fashion,”
terminal, the discount is applied, the
Tabor says. “That’s where we close
consumer pays with cash, credit,
the loop. We’ve captured all this
however they want, and they’re on
data about what they’re purchasing
their way. Our server receives one
and what offers they’re redeeming.
more update that says this is what
The retailer can use that data to
was actually purchased by this
refine their offer strategy to continue
person, at this location, at this time
to increase purchase frequency and
of day.” The existing POS terminal
change the customer’s behavior.”
— now enabled with the Sparkfly
solution — can also print any type Tabor’s point is easily understood by
of message the retailer might want


coalition marketing. It’s the ability to
identify the profile and combine that
with customer demand predictive
analytics that makes it work.”

Case In Point: Highly
Personalized Offers
Delivered at the POS
The slew of offer personalization
pilots currently running at retail are
proof that the technology is getting
the attention of major players.
Sparkfly’s President, Terry Bruehl,
explains how their personalization
platform can be fully integrated with
the beset marketing, merchandising a retailer’s existing rewards program,
or promotions executive. “This is and how positive results can be
different from a traditional loyalty delivered in the early going.
program that gives you points after
“Let’s say that one of the require-
you’ve made a purchase. This is
ments is to make personalization
much more proactive, designed to
easy for consumers to use, and not
drive people into stores and give
to change their behavior at all with
them instant gratification.”
regard to existing loyalty programs,
The idea of asking consumers to which are often years in the imple-
register and opt-in to discount menting and have large consumer
programs wherein merchants bases,” begins Bruehl.
and manufacturers will contact
For example, a national retail chain
them regularly is still daunting to
may wish to use Sparkfly’s platform
some, especially those who have
to make possible more upfront
seen past attempts stumble. But
marketing and traffic building using
the trend now is towards opt-in
their existing loyalty program as a
behavior, as today’s consumers
base. This scenario assumes that
seek that 1:1 relationship.
the retailer is seeing a lot of points
Another seeming barrier — that accrued, but insufficient action
may not really be a barrier at all around redemption. The challenge
— is how to tie manufacturer co- is not only to improve that rewards
op dollars to the idea of extreme program by way of usage, but more
offer personalization and targeting. importantly, to impact frequency,
Anand adds, “Companies like Mall particular items purchased, and the
Network and others are doing a lot location of those purchases.
of merchant-funded campaigns and
To this end, Sparkfly integrates its


Among key outcomes
retailers can expect are
the new ability to:
 Better segment their customers
platform with the retailer’s existing based upon types of purchase
loyalty program at the system level. (i.e., apparel, sportswear, other
No new cards or other consumer brands they prefer)
identifiers are issued, making the  Drive increased traffic from their
upgrade invisible to the consumer. loyalty program customer base
In fact, physical rewards cards are  Formulate very specific offers
ancillary, says Bruehl, as members for these test consumers using
can utilize any identifier — a phone that data
number, for example — if it’s on file.
 Test those offers not only by mea-
The only new twist is having current
suring increased frequency, but
loyalty program members self-select
by being able to impact purchase
their preferred mode of contact; op-
behavior in certain regions where
tions include SMS text messages,
the geography itself is not efficient
emails, or logging into their personal
for traditional media buys
account on the company’s consum-
er-facing website.  Realize market share increases in
less than 60 days
Program awareness can be achieved
 Accumulate more granular
through special point-of-sale
consumer data
merchandising and emails where
available, asking consumers to  Fine-tune offer strategy, timeli-
choose the types of offers they wish ness, and the number of offers it’s
to receive, and how they want to possible to run simultaneously
receive them.
 Slowly phase-out more costly
The retailer’s loyalty program general market promotions in
database is then mapped to favor of highly focused, targeted
Sparkfly’s database, the process and personalized offers, at a high-
through which existing POS er frequency
terminals become “smart,” and  See a revenue lift on top of exist-
quickly begin to feed offers to ing general market promotions,
consumers, and crucial behavioral proving incremental revenue gains
data back into the system. coming from offer personalization
Ramp-up and install time is as brief  See greater interest in and usage
as 60-90 days, after which the chain of the existing rewards program
pulls the trigger on the first pilot.
 See real-time reporting of purchase
location, SKU bought, the unique
identifier of the shopper, and other
data useful for offer creation

CONCLUSION
Targeting and segmentation are not new concepts at retail. The first
commercial algorithms appeared in the mid 1990s. But powerful new
applications advancing this science will prove to be major game changers in
2010 and beyond. This is especially true for those involved in merchandising
and promotions, as well as companies whose existing loyalty and rewards
programs need a shot of adrenaline to survive and thrive.

Just as Amazon revolutionized Internet retailing with product
recommendations and personalization, a new generation of POS software
that works on existing terminals is making special offers, discounts and
couponing more relevant to individual shoppers in the bricks and mortar
environment.

These targeted offers are helping to create incremental revenue and
increased basket size without cannibalizing margin. Leading brands are
removing the roadblocks and complexities of segmentation by integrating
real-time promotional capabilities into the POS. And while still early in
the rollout phase, retailers are reporting more effective, results-oriented
promotions, significant payoffs in redemption rates, traffic spikes during
slower day parts as well as a reduction in spend on traditional media
channels.

Sponsored By


About Sparkfly

Founded in 1999, Atlanta-based Sparkfly is a leading provider of solutions
that capture consumer purchase data and provide immediately redeemable
consumer offers. Sparkfly's platform is designed to influence consumer-
shopping behavior and drive store traffic by offering personalized
promotions and offers to the consumer at the point-of-sale. It is the only
solution that permits the creation and distribution of personalized offers
via the web or mobile devices, and then allows immediate redemption at
POS. The patented, cloud-based technology delivers highly efficient and
sophisticated campaigns using existing POS systems without additional in-
store hardware or software and is frequently used to extend the marketing
capabilities of existing loyalty programs. To learn more about Sparkfly's
Personalized Promotions Platform, visit www.sparkfly.com.

About Retail TouchPoints
Retail TouchPoints is an online publishing network for retail executives, with
content focused on optimizing the customer experience across all channels.
Tapping into the power of the Web 2.0 environment, the Retail TouchPoints
network is made up of a weekly e-newsletter, category-specific blogs,
twice-monthly Special Reports, Web seminars, benchmark research, virtual
events, and a content-rich Web site at www.retailtouchpoints.com.


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