• by Rod Witmond , September 16, 2011

A few weeks ago a good friend called to say there was a special sale happening on one of my favorite Chardonnay wines at a local grocery store. After work, I raced over to buy case at a savings of $5 per bottle. What a great deal!

Of course, there are sales and discounts occurring all the time in the Atlanta area -- most of which are meaningless to me. You could offer a 50% discount on zinfandel wines, and I wouldn't care. I don't drink the stuff. But this particular sale mattered. After all, it was one of my favorite wines, and the savings was significant. But, beyond subsidizing my purchase, this offer was particularly relevant and appealing enough to make me change my behavior: I never typically buy wine a case at a time because I like variety in my selection of wines.

Relevance is one of the most powerful aspects of any marketing message or promotion. If the message is relevant to the consumer, he'll listen. If the offer is relevant, he'll buy.

Conversely, the relevance of the consumer to the marketer is also important. If a particular consumer is a high-value buyer, someone who makes significant purchases within the marketer's category, he is highly relevant to that marketer and her objectives. If the consumer doesn't spend in the category, why would the marketer bother to try to reach him?

In today's retail marketing and promotions arena, lack of relevance is often a very big problem. Merchant rewards, via coupons and special offers through out-of-store media, are often untargeted or insufficiently targeted and mostly reach consumers who either don't care or are not really valuable to the retailer's marketing objectives.

A five dollar-off coupon delivered via a local newspaper and the web, may be clipped and downloaded by consumers who already shop with the merchant, effectively reducing profit margins while only marginally boosting sales volume. Meanwhile many highly valuable consumers, the ones who could really bring incremental sales volume to the merchant both in the short- and the long-term, will never see the offer.

How to Boost Relevance

For an increasing number of retailers, however, a new approach to out-of-store merchant rewards is providing a very effective antidote to this age-old ailment. It's called transaction-driven marketing, and it ensures with unmatched precision that marketers are reaching consumers who care about their reward offers and who are highly valuable to the retailers' marketing objectives.

Transaction-driven marketing taps into the most precise kind of consumer segmentation possible - the actual shopping behavior and spending levels of consumers. Based on analytics of debit and credit card transactions by banking customers, transaction-driven marketing allows the marketer to segment a large consumer base in a given geographic area based on where they shop, how much they spend, the frequency of their spend, and a range of other parameters. The offer is then delivered to the right consumer via their online or mobile banking statement -- a personal transaction record that is closely read by almost all consumers.

The consumer sees the offer right next to a transaction with that retailer or perhaps with the retailer's competitor. The consumer is thinking about her spending and finances at the moment the offer is delivered. Since the merchant is targeting this particular consumer because she spends frequently in the category, chances are the offer is very relevant. Because the marketer knows the consumer is valuable, the offer can also be of a higher value -- making it all the more relevant and compelling to the consumer.

Making the offer even more compelling, the consumer does not need to download a coupon and bring it to the merchant to redeem the offer or remember to enter a promotion code. She merely clicks on the offer and when she makes her purchase with the debit or credit card, the reward is credited to her account. What a great deal!

It sounds pretty sweet, doesn't it? But how well does it perform in achieving retailer marketing objectives? Real-world results achieved by merchants using transaction-driven marketing based on bank card transactions demonstrates the tremendous power of bringing new relevance to merchant rewards.

During a six-month period ending in December 2010, merchants targeting new customers who had never shopped with them before achieved a 35% and 45% share of category spend among these targeted consumers during the first and second month of the offer period, respectively. Even more exciting, these merchants retained more than 20% of category dollars from these same consumers during the next three months following the offer period.

Over the six-month period, customers spent $6.25 for each $1 they invested in rewards, an amount that continues to grow over time as new customers continue to return for additional purchases.

The icing on the cake is that it's all done without ever using personally identifiable data within the secure confines of the bank's data center. Absolute targeting and precise measurability ... all made possible without infringing on consumer privacy. I'll toast to that!

Like my friend reaching out to me, retailers who reach out to consumers based on their true preferences, purchasing and consumption patterns can be assured of bringing much more relevance to their marketing and promotions campaigns -- to the point that they change purchasing behavior. That means both happier customers and more high-value buyers. As a marketer, I call that relevant!