You already know your customers. But you may still be making a very common mistake and sending promotions to your customers as if they ARE all the same.
Many convenience stores send out one promotion to their entire customer base. At best, that promotion make entices a few people, while it doesn’t interest (or even alienates) others.
At worst, the promotion could cannibalize profits and jeopardize the entire purpose of the campaign.
Cannibalization refers to when a promotion works against you and “eats away” at your profits.
Promotions that Cannibalize Profits
Here’s an example. A c-store wants to re-engage its lapsed customers and decides to run a campaign that offers a buy-one-get-one-free fountain drink offer if they visit within a week.
But lapsed customers only make up one portion of the restaurant’s total customer base. It also has Platinum customers or customers who visit very regularly, Gold customers, or customers who visit somewhat regularly, Silver customers, who visit sporadically, and Bronze customers, who visit only occasionally.
When this c-store sends out their promotion, two great things happen: They see a spike in visits (and spend) from their lapsed customers, as well as a bump from their Bronze customers.
But a few not-so-great things—and expensive—things happen, too.
Remember that the Platinum customers who visit very regularly, the Gold customers who visit somewhat regularly, and the Silver customers who visit sporadically also got that offer.
By sending out that promotion to all of its customers, this c-store saw a large percentage of people that would have already visited and paid the full price come in and use that promotion instead.
That means the promotion lost this c-store money some money. And, conceivably, depending on the size of each group, it’s very possible that a promotion could cannibalize all profits and even end up costing a c-store money!
Discover Whole New Segments
People can try to segment on our own but, of course, we’re only human. Computer segmentation can discover new groupings that a person would never be able to detect.
For example, if a c-store wanted to promote a new nachos offering, they might think to promote it to people who regularly purchase snacks.
But data analysis might reveal groups within that segment that make a lot of sense to target to—people who always choose salty snacks, and people who come in and purchase bulk foods to share—as well as people not to target, like people who purchase snacks but only ever purchase sweet snacks.
Behavioral segmentation allows for all kinds of data analysis, including things like types of food purchase, other items purchased, items purchased together, time of day of visits, visit days of week, the frequency of purchasing specialty items, time between visits, visits around special events holiday, mobile ordering in-app, mobile app usage, the form of payment, promotion redemption—and many more.
Being able to target people at this level has two main benefits. First, it can help a c-store realize more profit. And, second, it can help them fulfill the promise of their loyalty program and help people feel more recognized and valued.
It’s clear that segmenting is important…but just how does a c-store go about implementing it?
We answer this question and more in our on-demand webinar “Why Segmentation is Essential to Your Promotional Strategy.”