Alexander Gornik, Mindbox’s CEO, shares his experience of creating a marketing automation platform with the CIS market share of 30%. The Idea The idea for the product transpired when my partner, Ivan Borovikov, and I had been custom software developers for large FMCG brands. 2007- 2008 witnessed a promotion peak, to include finding a code under a soda cap and then claiming your prize. […]
‘Stimulating repeat purchases is not a priority goal of our loyalty program.’ United Colors of Benetton Loyalty Program Manager Ilya Turkin discusses the company’s strategy for the CIS market
United Colors of Benetton is an Italian clothing brand founded in 1965. It has been operating in the CIS market since 1990. Benetton’s clothes are now being sold in 19 branded offline stores and more than 80 partner stores, as well as in its online store and on the largest marketplaces.
We talked with Ilya Turkin, who is responsible for the loyalty program in the Russian division of Benetton, and learned: — How the painless transition of customers from offline to online helped the brand survive the first wave of the pandemic; — Why the loyalty program’s penetration rate is not an indicator of its effectiveness; — How it’s possible to rejuvenate the brand audience based on data from a single customer profile.
Ilya, the loyalty program in the Russian division of United Colors of Benetton was launched two years ago. Why was it launched exactly then?
First of all, this is due to the fact that the brand planned to strengthen its position in the CIS market. The loyalty program allows us to get to know our customers better. It is almost impossible to plan further actions and the direction of the company’s development without profiling customer data.
Moreover, we launched the brand’s online store, so in other words, we opened a second sales channel besides retail. This has become a good trigger point for collecting customer data and getting to know our audience. We were able to collect statistics on each sales channel, develop measures to stimulate these channels and operate them correctly. As a result, the loyalty program has become an important element, strengthening the link between offline and online presence.
Does that mean Benetton’s an omnichannel company?
Yes, Benetton can be called a full-fledged omnichannel brand, because customers can purchase branded clothes both offline and online, at the same price and under exactly the same terms. The brand loyalty program operates both in the online store and in the offline retail channel. Promotions, special offers, communication with customers — everything operates the same way throughout all our channels. We never split our offline and online tools. When we interact with our customers, we offer them complete freedom of choice.
How does the omnichannel approach affect your marketing activities?
All the company’s marketing activities are centered around two areas: the marketing team, now consisting of just one person, and the digital marketing department, which includes, among other things, the CRM direction and the loyalty program. When we develop marketing activities, we take into account the omnichannel strategy, teaming up marketing and digital departments. We always keep in mind that the customer buys from us both online and offline.
Earlier you mentioned that the loyalty program allows you to get to know your customers better.
Did you manage to do this?
Yes, we found out who our key customer is. We had an understanding of which category of customers we were targeting, but the loyalty program really helped us specify the customer profile. Now we understand whom the loyalty program works for, its target audience, and the direction it needs to take.
Who are your customers?
85% are women aged 25-35. Initially, when Benetton entered the Russian market in the 1990s, the brand was well-known and was considered fashionable among young people. Now the situation has changed slightly. The brand is known, but, unfortunately, not so widely, especially among young audiences. Those who were young in the 1990s have now grown up. They remember the brand and continue to love it, but this is more of an adult audience. In this regard, we have two goals: to introduce the brand to a young audience and to increase the share of the male audience.
Will the loyalty program help you attract a younger audience?
Yes, thanks to our customer data, we can work with the youth segment separately, make them unique offers and plan advertising campaigns that appeal to the younger target audience.
According to you, it would seem that the loyalty program’s main goal for the brand is to get to know its customers better.
Surely the aim is to encourage repeat purchases?
Stimulating repeat purchases — in other words, working with customer purchasing activity — is not the main aim of the loyalty program. This is a secondary mission. The main aim is to collect information about the brand’s customers, categorize, (i.e., understand) what they buy, how often, and which product categories are more or less popular. This will allow us to offer the customer the right product at the right time.
Additionally, we do have a third goal — working with the churn segment. On top of attracting customers to the loyalty program, it’s important that these customers do not end up in churn. As a result, we’ve launched a number of promotional and communication campaigns to remove customers from churn. In 2020, we reduced the volume of this segment by about 10% compared to the previous year.
When it comes to other metrics, what are you focusing on?
For the first year, the main KPI was the number of loyalty program participants in the database. We wanted to attract 200,000 customers.
Did you succeed?
Yes, we did and we have been continually increasing this number. At the end of 2019, we had 200,000 participants, by the end of 2020 we attracted more than 400,000, and by the middle of 2021 we expect to reach half a million customers.
Do you already have other KPIs, which don’t just focus on the number of participants?
In 2020, in the second year of the loyalty program’s existence, our goal was not to achieve a particular indicator, but to learn how to correctly calculate the effectiveness of the loyalty program.
Now that we’ve made the key metric clear to all employees and company management, everyone is ready to focus on it. This key metric is Lifetime Value per customer (LTV) calculated per year and per month. We compare this indicator with a control group that doesn’t receive any communications. LTV is our main indicator, on which we’re going to base our 2021 goals.
Am I right in presuming that you don’t keep track of the share of loyalty program participants in turnover, as well as the percentage of identified customer receipts?
We do track them. However, these indicators do not guarantee the success of the loyalty program. We see that the share of loyalty program participants represented in our orders and turnover is constantly growing year by year, even month by month. If in 2019 the share of the loyalty program in turnover was somewhere around 40%, then in 2020 it was already more than 70%.On the one hand, these figures seem pretty good.
However, on the other hand, we are seeing a drop in traffic in offline stores due to the pandemic. In other words, the increase in the share doesn’t indicate that everything is fine. That’s why it’s important to measure income per participant and LTV per customer in addition to analyzing the share in turnover and the average order value of a loyal customer(compared to the same indicator of an ordinary customer). We compare this figure over time and with the control group to see how much we really earn from the loyalty program. It is impossible to unify a client segment, launch communications and promotions and expect it all to function flawlessly. Segments are changing and buying behavior is being transformed. The pandemic is a striking example of this.
You’ve touched on a relevant topic.
Will you share with us how you survived the first wave of the COVID-19 pandemic?
The omnichannel approach and the loyalty program helped us survive the first stage of the pandemic. I hope they will help us overcome all other crises because we have the opportunity to communicate with loyal customers and ensure the transformation of customer behavior, i.e., the transition of customers from offline to online. It was important for us to make this transition as simple and as painless as possible for the customer.
We wanted to make sure that for a customer who was used to buying offline, their first order experience in our online store would be as pleasant as possible in every aspect, including participation in interesting promotions, using points from their account without any issues, and receiving their order literally the next day.
You stressed the importance of communication with customers. What communication channels do you use?
Our main communication channels with customers are email and SMS.The email channel is used for promotional and service communications. The SMS channel is mainly used for transactional messages and less often for promotional activities within the framework of major promotions. We use mobile push notifications, which we send through our partner application “Wallet”.
In the future, we want to move away from the SMS channel as much as possible. We aim to use web push notifications, mobile push “Wallet” and our own mobile application more actively, which we plan to launch in the first quarter of 2021.
Are you planning to integrate it with Mindbox?
Yes, because Mindbox is a data repository for all loyalty program participants and a single center for managing communications and promotions, focused, among other things, on customers who do not participate in the loyalty program.
Do you mean to say that it is a tool for managing the entire customer base, not only loyal customers?
Yes, the CDP platform allows us to collect data about customers, both loyal and ordinary, and to stimulate their buying behavior through communication and promotional campaigns.
The first advantage of Mindbox is that the platform is a necessary basis for our analytics. Every day we collect customer data, such as profiles or purchases across all channels and build custom reports in Power BI. Moreover, we collect data separately from the website and from offline stores, which is broken down for each point. As part of a single report, we compare the behavior of loyal and ordinary customers. In other words, we compare data from Mindbox with our total sales. As a result, we see the big picture and how the loyalty program operates against this background.
You have been working with our platform for two years. Can you tell us about its pros and cons?
If we speak about the advantages of Mindbox, we should first of all note the flexibility both in terms of promotions and in terms of communication with customers, the ability to configure promotional and communication mechanics in just two clicks. The platform is tailored to the omnichannel experience — that is, we are able to view customer purchase history in both the offline and online channel — this is the second big advantage. The third advantage is a very friendly interface that allows you to independently configure communications and promotional campaigns, for example, when it comes to simple mechanics. The fourth advantage is the flexibility of integrations. This is important because data from all channels, whether it’s a Wallet application or a seller’s app, should be integrated into Mindbox so that all this information can be analyzed and, as a result, a unique communication customer strategy can be launched.
What about the cons?
Well, we see two minor disadvantages. The first is the lack of customized analytics in Mindbox. We receive reports related to customer purchasing activities and the efficiency of certain customer communications. However, it isn’t really convenient to work with these communications, since they are not adapted to the specifics of the business. So, as I have already told you, we take the data from Mindbox and work with all the analytics ourselves.
The second disadvantage is that the Mindbox manager leads several projects and assists with complex tasks, but all basic promotions and communications are configured by the client. Although there is a silver lining. I have already talked about the friendly interface and the fact that most promotional mechanics and communication chains can be easily configured independently.
Let’s talk about next year’s plans. What else can your customers expect besides a mobile app?
Our priority for the next year is to move away from monetary stimulation of the customer base (distribution of bonus points and discounts) and toward non-monetary stimulation through personalization, unique services, and gamification. For example, we are thinking about launching a subscription to paid services and a game for loyalty program participants with the chance of winning prizes from partner companies.
We also have a network of partners. These are individual legal entities that purchase brand clothing and sell it in retail stores located throughout Russia and CIS countries. The total number of these entities has surpassed 80. One of our tasks for next year is to connect our partners to the loyalty program. We want to help them stimulate sales by working more effectively with their customer base.