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Data-driven loyalty strategy delivers 12% revenue jump for Starbucks

“Implementing a data lake to drive micro segmentation, personalization and retention through the power of data driven insights”

INDUSTRY PERSPECTIVE

Research suggests that loyalty programmes can generate as much as 20% of a company’s profits. Starbuck’s and Tesco’s Loyalty programs are considered industry benchmarks in driving customer engagement and profit growth. Loyalty programs could significantly influence customer satisfaction, retention and usage frequency; thereby directly impacting top and bottom line results. According to O’Malley, as stated in the paper “Can Loyalty Schemes Really Build Loyalty”, and other experts in this area, an effective loyalty programme aims at achieving the following:

  • Incentivise new customers to buy the brand with the best loyalty scheme (Dowling and Uncles)
  • Reward loyal customers by discounts and other rewards and increase loyalty
  • Influence customers to increase RFM (recency, frequency, monetary value), cross-buy or diversify their basket of goods purchased
  • Improve per customer value—margin and lifetime duration
  • Defensive marketing—to combat competition by maintaining wallet share
  • Revenue generation from promotional activities

About the Client

Starbucks is a global coffee chain having in excess of 24,000 outlets and offers some of the finest coffees in the world, grown, prepared and served by the finest people. Starbucks India is one of the fastest growing retail chains in India that combines the global expertise of the brand with an aggressive expansion strategy to drive exponential growth.

The power of ADAPTify helped Starbucks India to track the loyalty base in real time and take corrective actions at customer segment and store level. In particular, the initiative helped Starbucks India:

  • Generate up to 12% higher incremental revenue for targeted campaigns.
  • Reduce inactivity by close to 5% and bring back lost customers.

Starbucks India’s loyalty strategy is predicated upon micro segmentation, hyper local marketing and a test-and-learn culture. From a financial perspective, Starbucks India aimed at doubling revenue from the loyalty base, with minimal increase in offer and discount costs. In addition to financial metrics, Starbucks India was looking for a solution to integrate all sources of loyalty data in a single data lake and create almost real time dashboards for monitoring loyalty metrics.

Actify Data Labs leveraged its smart data platform ADAPTify to integrate all sources of loyalty data in a single platform which was critical for creating dynamic micro segments, creating real-time dashboards, building predictive models and implementing a test-and-learn-strategy. In a short span of time the Actify team:

  • Created RFMC (Recency-Frequency-Monetary-Continuity) micro segments and found that micro segment driven personalized offers could increase campaign revenue by as much as 12%.
  • Developed a data driven definition of inactivity and identified the early indicators of inactivity which could enable proactive retention.
  • Developed marketing tactics to bring back lost customers and keep them engaged.
  • Leveraged concepts of neuro marketing to identify the right tactics that would be relevant for each micro segment.

Though data driven intelligent marketing was the corner stone of the solution, but Neuro marketing concepts like the goal gradient hypothesis, pain at loss of privilege was implemented to identify the right tactics that could simulate the desired response from a given micro segment.