Today’s Special: The Push For Loyalty

A couple of days ago, I received an email from online bookseller Amazon.com. It thanked me for using their service and offered me a special gift voucher of $10 on any future book purchase.

Telling everybody about the voucher, I fast realized that I wasn’t the only one. In fact, one of my colleagues informed me that he had received a similar voucher for $16; an indication that he was $6 more valuable to Amazon.

Until now, everything has been about selling products or services online at a low price. In many cases, the fact of “just being able to buy online” has been the major reason people used the service. Now, however, we are entering the second phase of e-commerce–the phase where knowledge about a customer can be translated into real sales.

Recently, Coca-Cola’s European headquarters were invaded by local monopoly-control authorities, which were checking the company’s promotional activities. The group is accused of running overly intensive promotional campaigns in supermarkets, including offers of cash discounts to shop owners if they reach a special sales quota, buy the whole range of Coke products, or even remove competitors’ products from the shelves.

In the real world, there are regulations that will soon put an end to such attempts to gain a monopoly. Cyberspace is different. The coupon from Amazon is the first serious sign of what I believe will become an Internet promotional invasion within a few months.

Less than a year ago, U.S. authorities stepped in to put an end to an attempt to collect marketing information from a specific target group online. The concept was simple. Children were invited to play a range of online computer games for free at a U.S.-based web site. But on reaching a higher level of play, the kids were asked to answer a range of questions related to their parents’ buying patterns. What car does your dad drive? What toothpaste does your mother use? What television programs do they watch? Such information can create a platform for targeted promotions of foods, clothing and any other purchase.

The Warehouse, a New Zealand web site, was one of the first to offer customers loyalty points based on their frequency of purchase from the site. The points can at any time be converted to gifts from the supermarket.

Characteristic of all these activities is that each is opening a new chapter on the Internet, with the aim to create more loyal customers. Each customer is only a click away from a competitor, so loyalty is the most precious advantage. Tracking a consumer’s buying pattern and frequency will allow an online marketer to create individual product offerings on a tailored site.

But it doesn’t stop there. The information will probably be accessible to partner sites. Over time, this will be reflected by more and more tailored sites, all based on special offers to a potentially very valuable customer.

The Internet will customize content in the future not only by age, gender and interests, but by spending ability, surfing behavior and frequency of purchase. Very loyal customers with high spending rates are obviously attractive. Imagine the value for an airline company of a potential gold overseas flyer when selling travel at competitive prices.

British Airways tried years ago to access Virgin Airline’s customer database and contact the Virgin passengers to persuade them to change airline companies. British Airways was stoppedbut would the same activity be possible and legal on the Internet?

Consumer information is a company’s most valuable asset. In extreme cases, it allows a company to predict a consumer’s behavior even before the consumer is aware of it. It’s called Predictive Modeling and is already used by major banks and insurance companies trying to identify a pattern from millions of pieces data.

Is the customer more likely to buy a certain type of insurance or toilet paper? Knowing the consumer’s buying cycles of shavers, for example, would open the door to behavior-based promotion. Over time, companies could predict when the next need for a certain shaver would appear–and send the consumer a special offer just one day before, to ensure continued loyalty to the brand.

But what if a competitor managed to build a similar knowledge base? Would this mean that the competitor would be able to promote a better offer? Such as buy two for the price of one–the day before your offer?

I have not used my $10 coupon from Amazon. Only a few days later, Barnes and Noble sent me an even more attractive offer. Buy two books and get the third one for free… I am still considering.

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