Contents:

Overview Catalyst Summary Key Messages - Economic conditions drive the need for customer retention programs; technology delivers the insight to the business - The barriers to entry range from culture, to IT infrastructure and management structures - Despite these problems, retail offers huge growth potential in the short term - Supply-side loyalty is often the principal focus - Demand-side loyalty delivers the most valuable insight - The success of loyalty relies on the implementation of insights derived from the program - The most successful vendors in loyalty are not necessarily front of mind for retail CIOs - Buyers of BI for loyalty are business managers, not IT managers Market Opportunity Key takeaways - Economic conditions drive the need for customer retention programs; technology delivers the insight to the business - Retail is a tough business: increasing competition for a share of consumers wallets and soaring costs are making things tougher still - While consumers are becoming increasingly demanding, price-sensitive and disloyal - Retailers are increasingly adopting loyalty strategies to retain and develop existing profitable customers - Retailers need to better understand the three-way relationship between retailer, supplier and customer to ensure the success of a loyalty strategy - As an industry retail is data-rich and insight-poor - Retails historic focus has been on supply-side drivers - Demand-side understanding delivers the greatest insights - The barriers to entry range from culture, to IT infrastructure and management structures - Retailers merchandising mentality creates a short-term and low-cost approach to all aspects of the business - Technological infrastructure is far from optimum; data quality is an issue - IT managers can be an obstacle - IT infrastructure is not in place at smaller retailers - Use of customer data is of concern to many retailers - The structure of retailers is not as obstructive as culture - Despite these problems, retail offers huge growth potential in the short term - Investment in BI for customer intelligence in retail is expected to grow quickly in the short-term - Retail lags financial services, but is growing above trend - The past success of loyalty strategies is driving growth in BI investments - And IT investment budgets have yet to be cut - Future investment in BI relies on positive drivers outweighing the barriers - Investment in BI does not equate to a sophisticated loyalty program - Retail is an important growth area for BI applications Loyalty Programs within Retail Key takeaways - Loyalty programs vary greatly in size, sophistication and success - The most basic loyalty programs focus primarily on discounting - While the most sophisticated can predict future consumer behavior - Although both follow a similar implementation path - There are two approaches to loyalty -supply and demand - Supply-side loyalty is often the principal focus - Analysis of POS and supply chain data ensures shelves are filled with the right products - Affinity analysis of product lines helps improve cross-selling of products - External data and predictive analytics can enrich insights - But supply-side loyalty only partially helps retain customers - Supply-side loyalty - technology takeaway - Demand-side loyalty gives far more valuable insights, but is often overlooked due to its inherent complexity and business risk - Demand-side analysis relies on the accurate identification of individual customers across channels - In-store identification is driven by loyalty cards and credit cards,; but not all transactions can be linked back to individuals - Online customer identification is possible for all purchases; measuring online customer behavior pre-purchase is less precise - Customers can be segmented into groups; analysis helps inform segment-specific marketing - Demand-side loyalty - technology takeaway - Both supply and demand data can be enriched using other information sources to improve insights - Data enrichment - technology takeaway - Future technologies will help shape loyalty in retail - POS as a communications device - Visualization techniques - Text mining - In-store marketing - Outsourcing - Mobile marketing - Mobile BI - On-demand - The future of BI - technology takeaway Customer Impact Key takeaways: - The impact of a loyalty program on a business can be huge - The ultimate success of a loyalty program relies on the implementation of recommendations - Loyalty implementation - technology takeaway - Loyalty is not the last word in providing a competitive edge in retail - Retailers in the middle ground will gain the most competitive advantage from loyalty programs - Other strategies are of equal, if not higher importance - Limitations of loyalty - technology takeaway Competitive Landscape Key takeaways - Consolidation of BI players is a sign of a maturing market - Integration may compromise best in class and platform neutrality - And innovation may suffer - Although integration may have a positive impact - Although innovation in retail may come from different layers in the stack - Other vendors are looking to move up the stack into new areas, particularly advanced analytics - Larger vendors are front of mind for retail CIOs making BI investments - Other vendors have a stronger offering for loyalty programs - Future competition - Key purchasing decisions for retailers - Best-in-class or end-to-end? - IT spending is likely to be cut in the medium-term - BI investments should be relatively protected from cost cuts - Industry relevance is a key sales message - Go to Market Key takeaways - The size of retailer is an important measure when targeting - The sub-sector of a retailer is not an important targeting criterion - The buyers of BI tools are business managers; end users are from all over the business - The shape of the BI in retail market will change rapidly - Recommendations - Marketing messages should focus specifically on loyalty - Protect BI revenue stream by making loyalty work - Do not underestimate the importance of other organizations providing loyalty services - In the future the most successful vendors in retail will have the most verticalized offering - Target the middle ground - BI is expected to grow in retail above trend APPENDIX - Definitions - Methodology - Further reading - Ask the analyst - Disclaimer List of Figures Figure 1: Market forces in retail intensify pressure on individual companies Figure 2: Change in customer loyalty rates in UK retail, % change 2008 on 2007 Figure 3: Issues addressed by loyalty programs on demand and supply sides Figure 4: Common problems legacy systems pose in loyalty programs Figure 5: Global penetration of BI in retail, 2007 Figure 6: Global current and predicted BI investments for customer intelligence, 2007 Figure 7: Future implementation path of BI in loyalty in retail Figure 8: Distribution of level of sophistication of tier one and two retailers loyalty programs Figure 9: Global forecast retail, wholesale & distribution BI revenues, 2007 - 2013 Figure 10: Global forecast BI license revenues $m, 2013 vs. forecast CAGR%, by industry sector Figure 11: The supply and demand sides to loyalty analysis in retail Figure 12: Simple customer segmentation and relevant marketing strategies Figure 13: The loyalty value chain in retail Figure 14: Mindshare of leading vendors in the global BI solutions market in retail, 2007 Figure 15: The largest vendors relative strength in BI technology and loyalty expertise Figure 16: Characteristics of retailers with a high and low need for loyalty Figure 17: Global key decision makers for IT investments in retail, 2007 Figure 18: BI users in retail Figure 19: Future trends in loyalty in retail