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Micro marketing: Retail’s new fad

How loyalty programmes are being used to design discounts just for you.

Don’t be startled if you start receiving surprisingly well targeted ‘special promotions’ via text message from your favourite retail chain. Say, for instance, you are fond of a specific brand of coffee, but instead of retailing at R100 a jar, it’s now selling for R76 for that day only.

For retailers to promote via text message is not ground-breaking. Targeted promotions, however, are very new for the sector.

This is where the use of information about you by retail chains – such as your name, gender, the size of your average spend and what you usually purchase – comes into play. Stores are increasingly using this ‘personal’ data to design promotions for specific consumers.

A nation of bargain hunters

For years, this kind of information was a mystery to most South African retailers. But they also didn’t really need to know this much about their customers. Retail was largely a case of getting the right stock (which had been bought at a discount) to the stores.

The difficult economy is changing this. It has seen consumers become more thrifty, and this means they are habitually on the lookout for where they can get the best deal. This was the finding of the recent Price of Promoting report by Nielsen. It said 75% of local consumers now notice a change in the price of groceries against 69% in 2017.

It also found that 16% of South African consumers are now actively searching for discounts.

Local retailers have responded to these trends in two ways – customer loyalty programmes and selling more private-label goods.

Information gold mine

Information derived from loyalty programmes such as Pick n Pay’s Smart Shopper and the Clicks ClubCard, is being used to figure out who is walking through the doors and what they are buying.

Pick n Pay’s Smart Shopper has seven million members, and the group says in its annual report that it “is providing more personalised value than ever before”. For the 2019 financial year, it offered R6 billion in discounts through the programme.

Shoprite doesn’t have a loyalty programme as such, but mobile apps for its Shoprite and Checkers chains do offer information to customers about what is on special at their nearest stores.

This is just the beginning for the group. Shoprite Group CEO Pieter Engelbrecht, speaking at a presentation of the group’s year-end results earlier this week, said he wanted to mine the 27 petabytes of data to move to more targeted promotions.

Or, as he puts it, to see the group “move from shotgun to precise marketing”.

The move into micro marketing ties into retailers’ broader investment in technology. Pick n Pay and Shoprite, for instance, both employ SAP systems, which allow them to run a wide range of sophisticated services, like tracking, forecasting and stock levels.

Without this kind of technology, it would be difficult to sell goods online, as retailers wouldn’t be sure if they had certain products in stock.

These systems also enable retailers to construct detailed profiles of their customers. The eventual goal is to leverage this technology to build a “closeness” to them, says Engelbrecht.

He gives the example of consumers at a US-based retailer choosing to find out what time a local ice hockey game starts through the chain’s app rather than doing a Google search. “When you are really powerful, they come to you first.”

It may take time for South African shoppers to question how much of their privacy they are giving up in exchange for that ‘special’ jar of coffee, but that is a story for another day.

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