Brands are challenged with driving up their ‘share of wallet’ and increasing market share. Marketers are continually faced with finding new ways to help meet these business goals. Businesses cry out “We need a Loyalty Programme!” and with the successes of Nectar, Airmiles, Boots Advantage card, Tesco Clubcard, it seems that such a programme will provide the ‘magic formula’ needed to attract customers to the brand, and keep them coming back.
But let’s step back a minute and see how effective such points based schemes really are. Looking at the stats there should be some caution before diving in to create a ‘me too’ points-based proposition. A 2014 study found that there was over 50% inactivity within loyalty programmes with shoppers having £1.3bn savings unclaimed in loyalty points.
Although 94% of adults belong to at least 1 loyalty scheme, 30% forget to take their card shopping – so brands do not get an accurate picture of purchasing habits anyway. It seems that with many programmes customers are expected to purchase over a long period of time before they benefit from the reward and so inevitably lose interest. So how do brands work to keep their customers engaged?
Most loyalty programmes compete on appeal of rewards, amount accumulated per £ spent and the ease with which rewards can be claimed. But in some settings, loyalty cards can actually erode profitability. If everyone uses a points card in every coffee shop they visit and are not loyal to any particular coffee brand, then the free coffee is just a giveaway without achieving any real customer loyalty. Many of the larger schemes are seeing the impact on their bottom line and reducing the customer value. Sainsbury reduced its scheme’s points to value recently and other brands have been seen to launch with an offer, which they are not able to fund in the long term.
Take a look at John Lewis: free cake at their instore cafes was withdrawn within just a few months’ of launch. Furthermore, data mechanics are encouraging disloyalty as consumers get wise to offers sent to them. For example, Sainsbury sends out money off shop vouchers - £8 off a £40 shop if the customer has not visited for X weeks, as a means of enticing them back. Surely this simply drives customers to shop elsewhere while they wait for one of these offers to pop up?
Take a step back - what does loyalty really mean?
Kotler & Keller define loyalty as; “the extent of consumer faithfulness towards a specific brand. This faithfulness is expressed through repeat purchases and other positive behaviours such as word of mouth advocacy, irrespective of the marketing pressures generated by the other competing brands.”
So, how to achieve this
- Faithful customers - What is it that makes a consumer faithful to a particular brand? The chance to save money? Or to make life easier? Ultimately does this really gain long-term loyalty? What is it that brands expect from their customers? Simple isn’t it? They want them to choose their brand above any other, every, or at least nearly every time.
- If brands want to build this deeper longer-term loyalty, they need offer a wider positive brand experience including excellent customer service, offering the right products at the right price. This becomes increasingly challenging as brands build presence across multiple channels: the brand experience needs to be consistent across all consumer touch points.
- Customer benefits - Once a customer enjoys the benefits of this consistent brand experience, they will want to return for more building an ongoing positive relationship between brand and customer. A great example of this is Timpsons, the high street shoe repairer and key cutting service locksmith, which continues to build its business when many around them have failed – all on the basis of providing excellent customer service and being passionate about recruiting the right people.
- Advocates – With positive experiences customers become brand advocates, recommending to friends, colleagues and family. Look at Trip Adviser and Amazon; two great examples of how recommendation really drives customer decision-making.
- Keeping it going - Finally how can this be maintained and developed? The brand needs to know and understand customer preferences so they can communicate relevant new lines, offers and promotions (data is increasingly critical to this). It needs to recognise and value the customer through relevant and personalised interaction. Pets at Home VIP club, which is a membership programme with news and information about events in store and pet advice amongst other benefits is a great example of mapping preferences.
And this is why people are loyal to a brand and not a programme. Asda has actively chosen not to offer a loyalty programme as such but focuses instead on delivering a strong brand promise based on price, quality, convenience and service to create a good customer experience.
Getting the basics right first
Loyalty lies at the heart of the ‘brand promise’ and needs to sit at the centre of a brands integrated marketing programme. Only then can a lifecycle of activity be built to create long term engagement. Here are my suggestions on steps to driving true loyalty:
- Strategy and services – get the basics right – define what makes your brand different to your competitors; What are your customer needs? Are you meeting those needs? What service and product enhancements are required to deliver to customer requirements?
- Consistent experience - With the product and service offering optimised, ensure consistency of experience across all touchpoints so that the customer always experiences the same levels of service quality.
- Customer data - Capture customer data to enable you to communicate with your customers. Make it easy for customers to participate and share data to maximise data capture opportunity.
- Integrated Communications – Data intelligence in hand, ensure sufficient resourcing to support a communication programme providing regular and relevant targeted information.
Remember your goal – improve experience, increase brand equity, create brand advocates and drive growth; this is what true loyalty is and the value of it to your organisation.