Canadian Tire Store

LAS VEGAS — As loyalty programs go, the iconic Canadian Tire money is hard to beat. Good as cash at any of the retail chain’s stores and gas bars, the coupons are mainstay in any Canadian’s auto glove compartment, tool box and even childrens’ toy chest.

However, the home and hardware retailer is betting the bucks on a major analytics-driven push that will see plastic card and mobile app versions of the loyalty program running alongside the coupons next week.

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“I want to make this clear we are not retiring Sandy McTire (the Scottish character that began appearing on Canadian Tire money around 1961),” Mark Merritt, the chain’s vice-president of credit risk management and customer analytics. “Those that do not sign up for the program or those that still want to use the original Canadian Tire money can still do so. It’s just that now, there’s another option.”

Interviewed at the SAS Institute Leadership 2014 conference on analytics here, Merritt said the idea to update the loyalty program has been knocking around the retailer’s c-suite for a few years. The emergence recently of more powerful data gathering and analytics software and the increase in  mobile shopping has made the shift possible.

“The Canadian Tire is a great loyalty program tool, but once it’s in our customers’ hands we have no idea where it goes and what happens,” said Merritt. “For instance, we don’t know which customer bought what product with it and when.”

The company wanted a program that could gather more information about their customers’ buying habits. The idea is to be able to “predictively” approach customers with offers of goods and services that they are likely purchase even before they enter a Canadian Tire Store.

Under the new program, customers can either apply for a program card or key fob or download the Canadian Tire Mobile App on their mobile device. Customers can earn e-Canadian Tire money in an account by purchasing merchandise or automotive services at the retailer either by cash or using a  company MasterCard. Just like the paper money, the digital version has no expiry date and it can be shared with other program members.

Testing of the program began two months ago in Nova Scotia two months ago.

At the backend, each time a program member collects e-Canadian Tire money, uses it to purchase product or shares the coupon with someone the retailer now has access to data such as purchase date, what was bought, store location and other data – data impossible to collect with the old loyalty program.

Canadian Tire uses Base SAS software, a fourth-generation programming language for standard data access and reporting. For the last 10 years, the retailer has also been using SAS Enterprise Miner for model development.

During the last two years, Canadian Tire has also been using SAS Marketing Optimization, a client-server application that enables marketers to determine the best set of customers to target for a campaign and SAS Real-Time Decision Manager to enhance customer interaction with the use of marketing campaign simulation, credit risk modeling and development of different offers.

Merritt said Canadia Tire also plans to deploy SAS Visual Analytics by 2015. The software will help analysts interact better with senior managers. The data visualization tool aids analysts in representing data in a more accessible manner for non-technicians to understand. The software also allows easy distribution of reports and models via the Web and mobile devices and allows recipeints to slice and dice information using filters and drill-down features.

Analytics software helps Canadian Tire crunch the numbers and build a profile of its individual customer’s product preferences, shopping patterns and behaviour.

Predictive analytics tools further help the store anticipate the customer’s needs “and if you allow us, we can send special offers on items that you might have purchased in the past or might need,” said Merritt.

“If we see you have recently purchased some paint, that might imply you are doing some renovation and we might offer you a deal on other related stuff,” he said.

This method of using predictive analytics is increasingly being used with success by many retailers and other businesses to better understand their customers according to Clayton Christensen, professor of business administration at the Harvard School of Business.

In a conference keynote here about disruptive innovation he said the traditional business maxim of “listening to your customers” is not always applicable or effective.

“If you ask your customers what they want, they will most likely tell you something like better products and services,” he said. This could result in the development of a better product or service but it does not guarantee profit because the information does provide insight into what incents people to purchase the product or service.

He said new data collection and analytic methods and tools now enable companies to gain a deeper understanding of their customers.

The idea, Christensen said, is to view customers as “having a job to do” and that they are “looking to hire” a product to help them accomplish it. He also said collecting data is just one part of the equation.

For example, a United States-based ice cream company wanted to find out how to sell more milkshakes. The company knew they tended to sell most during the early hours of the morning, but didn’t know why. Another assumption was it needed to compete against restaurants selling milkshakes.

Further investigation revealed buyers wanted something they could consume while driving or on transit to work. Donuts or fruits were options, but these tended to be messy and clumsy to handle in a car.

“They found out that their competition was not MacDonald’s or Wendy’s but bananas, apples and donuts,” Christensen said. “The customers were looking to ‘hire’ something that just went klunk in their stomachs for that morning commute and it needed to last them during that drive or ride while they had nothing else to do.”

The company decided to make its milkshakes thicker so they took longer to finish, and they created express lines for early morning customers.

“Data represents the existence of a phenomena but it is not the phenomena,” he explained “What makes you understand what is occurring is when you understand what’s the job that has to be done.”

Last year, Canadian Tire reported that it was using analytics to fine tune the credit limit it offers customers.

After a testing out several solutions, Canadian Tire decided to sign up FICO (NYSE: FICO) a predictive analytics company, to help build a predictive modeling solution that would help the retailer determine the ideal credit limits to offer its customers.

Canadian Tire has used FICO’s software products for nearly 20 years in other areas of the business such as inventory handling, according to Matthew LaHood, senior director of custom analytics for the Americas at Fico.

Previous use of analytics in the company was at the consumer level.

“Now we are implementing it in the customer level so it is more personalize,” said Merritt. “But we are very conscious of personalization and the privacy of data.”

 



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