The Nielsen Global Retail Loyalty Sentiment report published at the end of 2016 indicated the UK has one of the highest levels in Europe of the population participating in a loyalty scheme (89%), and with an average person holding 3.6 cards, on the surface us Brits appear to love the incentives offered by the retailers we most value. However, the research goes on to reveal that the impact these programmes have on buying behaviour is incredibly low, in fact we are ranked second lowest of the 63 countries measured globally, with only half of British loyalty card holders stating they would buy from a retailer with a scheme over one without. Of the 23 statements in the study about attitudes, behaviour and benefits, the UK performed below the global average – something is going wrong!
Enough of the statistics and research, they give a great overview of the loyalty sector, but for me they highlight the fact that there are probably a lot of clients and agencies out there scratching their heads as to why their brilliant loyalty programme is failing to generate the ROI they had forecast and having to give more and more away to keep the programme relevant to their customers.
The proliferation of loyalty schemes into all sectors of the economy, whether B2B or B2C has led to saturation and parity for many businesses, with any effect cancelling itself out, as all your competitors often have a similar offering.
The future requires a new approach for loyalty schemes to have any place in the marketing mix. Mike Watkin, Head of Retailer and Business Insight at Nielsen stated that this future is “personal, flexible, and connected – schemes geared to what consumers really want”. At RLA, we recognised this sometime ago, and have committed considerable time and investment into a technology platform that can deliver this future.
I will talk at a later date about what loyalty should look like in the future, but if you’re struggling to get your scheme to perform, or considering launching your first one, here’s five thoughts you might want to consider:
1. Is Your Brand Strong Enough?
There is direct relationship between brand image, customer satisfaction, and brand loyalty.
Simply put, if your customers don’t even fancy you, they’re never going to fall in love. Don’t see a loyalty programme as a substitute or mechanism for creating a strong brand, it’s only when you have created something desirable to consumers should you even contemplate dipping your toes into loyalty schemes.
2. Know Your Customers.
Being a Planner, I’m bound to think this is the most important aspect of getting a loyalty scheme right. Know your customer journey, understand your strengths and weaknesses, challenge the status quo, and incorporate your customer needs. Without knowledge of the psychology behind your business, you will only be able to read the vast amount of data a loyalty programme will generate, not gain the insight required to alter the dynamics within your business sector that you are trying to achieve. Data gives us a clue as to what is happening, but deep customer knowledge will get us to the why, without which you cannot effect change.
3. Do You Treat Loyalty Customers Differently?
The Nielsen research highlighted that the only element of loyalty schemes the British over-index on, and in fact we are nearly twice the global average, is for an individual to be recognised as an important customer. This was easy in the early days of retail when a shop owner knew every customer personally, even your bank manager knew your name, and why we consider our ‘local’ as the pub where the landlord knows us. Technology and data now allow us to communicate to customers personally and create a sense of community. Moving beyond traditional segmentation methods, the serving of dynamic content based upon an individual’s preferences or behaviour allows millions of iterations of a single e-mail or landing page. Personalisation boosts effectiveness, and for loyalty programmes it will move your relationship with a customer to the next level.
4. Your Employees Have To Be Motivated.
Where there is a physical link between your customers and your company, be that a store, call centre, or delivery, customer satisfaction is driven by their experiences with your company. Whilst you won’t be able to get every person to behave properly every time, you can increase the chance of this happening. We run an employee engagement programme for Volvo, that measures and rewards sales people at dealerships, not just on volume sales, but a number of ‘soft dimensions’ that consider speed of response, product knowledge, and customer satisfaction. If you are considering, or have a loyalty programme, extend it throughout your organisation to make a clear link between key employee behaviour and customer loyalty.
5. Don’t Expect Immediate Results
Creating loyalty is effectively motivating your customers to create a new habit, a new way of behaving. Habits are the small decisions your brain has to make every day. Even the most intelligent people have to automate many behaviours, relegating about 40% of decisions to the sub-conscious. In a research article published in 2009, Phillipa Lally established that it took anywhere between 18 and 254 days for people to form a new habit. The length of time for a loyalty scheme to start working will depend upon the frequency of purchase in your sector, and other blocks that need to be overcome. If you’re after an instant effect, don’t do it, you will be disappointed.
If you have got this far, thank you for reading. Hopefully this article will have created more questions than given answers. If you want any of those questions answered, just drop me a line, and we can have a chat. I’m afraid there is no one solution for everyone, we take a tailored approach on what is best for you, we understand how a loyalty programme can work for you and then connect the different aspects of your business to make it deliver the ambitions you have. We have invested in the technologies to deliver programmes end to end, and a team with the skill sets to know what will work for you.