I recently read an article about a company that has created software
that allows merchants to use credit card transactional data to find characteristics
about the businesses best customers. The article talked about how Tranzlogic
was offering this service as part of their credit card processing business. In
a way, this is a service they offer in return for the credit card processing
business.
The question that I started to have was why business would
want to know about their best customers. It stands to reason that the business
would know about their best customers because they continually come through the
doors. Now I’m not saying that a business can’t use all the information about
their customers, this is intended to allow them to better incentivize rewards
for their best customers. What I am asking is wouldn’t they want to know about
the customers they’re not getting.
If I am a business owner, I want to expand the customer base
of my transactional business to grow my revenue stream. So the question I have is why wouldn’t a
company that processes credit card transactions give their customers information
about the customers they’re not getting. If they know more about the customers
that they are not getting they could incentivize their services to target those
potential customers.
The article is available here: http://www.fortmilltimes.com/2013/03/19/2565297/merchants-can-leverage-transactional.html
I'm with you on this. If I am a business owner, I would want to know why John Doe goes to some business down the street rather than my own. I may can shed a little understanding on this subject for you though. Here is an example I've personally dealt with while working at my dad's independent pharmacy back home.
ReplyDeleteFor example, in a pharmacy setting. You have a customer who is a sickly person, or maybe has a large family, and this person may purchase 7 prescriptions a month. Suddenly, their doctor adds a new drug, not available on their insurance, that can be purchased at another pharmacy for cheaper than you can provide. As a business owner, because the customer also purchases a lot of other drugs, it may be in your best interest to take a loss on that one drug in order to keep the customer returning to your business.
I understand the idea that a business person needs to be in tune with its customers, but the example that you use is better explained by creating a customer interaction and experience that has the customer sharing their situation. And a credit card company using transactional data from your store would not be able to share this kind of situation with you fast enough for you to propose taking the loss for that customer.
ReplyDeleteI understand what you are saying, but the point I was trying to make is this: if I were your father and I wanted to gain the business of the pharmacy patrons from down the road, I would want to know what they were doing down the road that is attracting a customer that needs seven prescriptions filled a month. In short, what are they doing that I need to be doing so that I can improve my business.
Now, it would be hard to convince the store down the road to give me insights from their transactional data that would decrease their customer volume for my gain. But, I would expect that a company like the one I was reading about would have access to data of pharmacies in many different areas. And they could look at models of customers and group them into either the customers I am already reliably seeing and the customers I am not seeing. Then traits foo the customers I am not seeing could be explained to me so that I could improve my services or prices and get more of those customers.
I think this might actually work better for a more service centered business. Imagine an air conditioning mechanic, many have started to accept more credit cards with the now wide spread availability of app based mobile credit acceptance services like square and paypal mobile, who needs to convince customers less frequently to use their service but still needs to constantly bring in new customers.
A credit card processing company might be able to show the air conditioning mechanic a better way of offering his services based on their ability to look at data from other businesses. I was kind of thinking along the lines of the success that companies like four square have had in driving customers to businesses.