Why You Need To Change Your Loyalty Offering

Customer engagement is a hard thing to capture, especially in this modern market where a customer’s attention is divided between mobiles devices, store shelves and computer screens. But, even then, that doesn’t ensure you’ve retained their loyalty. But in this day and age loyalty might as well mean nothing – that is, if you don’t make strides to shake things up first.

Featured, loyalty, waitrose, tesco, boots, starbucks, mcdonalds, cards, omnichannel

Loyalty schemes as we know them largely revolve around collecting things and storing them on cards. This could be your typical Tesco Clubcard or Nectar card points earned on purchases, perhaps it’s a stamp on a coffee card from Costa or Café Nero. Sometimes loyalty can just manifest itself in coupons directly from a newspaper or catalogue. Overall, the type of loyalty scheme is irrelevant, they’re all fundamentally broken.

I can hear your eyes rolling into the back of your head with disdain already. But hear me out. Out of all the customers you have signed up to your respective loyalty schemes, how many of them actively make use of the points they’ve accumulated? How many of them accumulate those points in your store versus another – such is the way with point-laden credit-cards. How many of them are actively engaged in using the points they’ve accrued?

It’s rather likely that many of those who still remain actively engaged are of an older demographic, with younger customers either deciding to not pick up a card or to never use the points they’ve actually managed to attain. Just glancing into my wallet now I can see that I have 11 loyalty cards. I also know that of those 11 cards, I use two with reasonable regularity: my Tesco Clubcard and my Boots Advantage Card. Of those two, I can safely say I’ve never made use of the points and discounts afforded to me thanks to the largely cumbersome method of claiming ‘rewards’.

And here’s the issue, if they are supposed to be rewarding me, why is it such a chore to attain? I’m not talking about the ludicrous return on investment – of which Tesco’s is criminally low. I’m talking about actually being given my loyalty points in a form that benefits me – not the retailer. After all, it’s about making me engage with the business, so why stick unnecessary barriers in the way?

I’m not a rare case either. Bracketed into the camp of ‘millennials’, who are endlessly referenced as a bunch of self-aggrandising middle-class brats with little time for patience and respect, loyalty to a brand or product is rarely important on the more trivial things in life. One key example of change happening faster than almost anywhere in the world is over in China, where a boom for designer and fashionable goods has left companies reeling in pain from the complete lack of loyalty customers seem to show.

shoppers are “very fickle and hard to pin down to a strong brand loyalty”

China is already hotly tipped to become the next eCommerce hotspot, having overtaken Japan to become the world’s second-biggest consumer economy. It consumes roughly $3.3 trillion in private consumption, which is around 8 per cent of the world total. It’s no surprise that they’ve also contributed more than any other country to the growth of global consumption in 2012-13. Yet it’s supremely fickle. The competition is fierce, largely due to the incredibly tapped-in nature of eCommerce in the region; yet foreign brands can sell well – especially if they introduced the sector into Chinese commerce.

Still, shoppers are “very fickle and hard to pin down to a strong brand loyalty”, according to Mintel, a market research firm. It’s also reckoned that Chinese customers switch between Pepsi and Coke, Crest and Colgate, and KFC and McDonald’s “much more so than in most markets”, according to Yuval Atsmon of McKinsey. Indeed, even Swarovski believes that over three-quarters of Chinese Customers are eager to try new brands – a figure far higher than elsewhere. A recent study in the region showed that the top five brands in ten categories lost between 30 and 60 per cent of their customers between 2011 and 2012.

Indeed, moving closer to home, a Mintel study of the US household saw that many Americans are actually flocking towards different products based upon their packaging and how they position themselves as luxury goods – instead of relying upon their previous trusted products.

It was rather telling that the Christmas shopping period that has just passed wasn’t overly lucrative for the big four. In fact, it wasn’t that lucrative for many retailers who found themselves on the high-street. While sales over the Christmas period were up compared to those of the previous year, the majority of those took place in small stores catering to specific needs and the desire for hand-made goods. This is due, in part, to online shopping being so prolific and smaller businesses being able to have a much larger impact online than they would on the high-street, but it’s also down to a lack of interest and loyalty fatigue.

God Rays

But all hope is not lost

There are some genuinely engaging loyalty schemes out there, not all are traditional in flavour – what with Starbucks customers having put a whopping $4billion on giftcards over the last year, most of which probably hasn’t been spent. It’s even worth taking a look at how GAME uses its actual products as its loyalty schemes USP, essentially turning it into a game for customers to play and allowing them to get instant store credit in the process.

Both Marks and Spencer and Waitrose do well by rewarding their customers with experiences, such as a free coffee for shopping on a certain day, or after having spent a certain amount they get a free lunch in the store café. They’re simple things, low cost things, but things that their customers really want. Waitrose managing director Mark Price knows this too, saying in a statement to the Telegraph:

“Giving free coffee or free newspapers is disruptive to the market, but I think that is what customers want, I don’t think they want a point. I mean, what is a point? I think it’s meaningless. It doesn’t have the richness, it doesn’t have the affinity you can gauge if you engage with your customers in a different way.

“It is about what do consumers value today, not what did they value historically. So green shield stamps, or points, were a response to what happened post-war . . . I just don’t think that is where the world is now.”

And he’s got a serious point there. The market is no longer about points, it’s about catering to the customer’s wants and needs. Giving them a service that benefits them and gives them the things that they enjoy most.

Of course, you can continue down your point accoutrement strategy, dishing out coupons and vague rewards of vouchers for buy one get one free on theme park entry and meals out. But in those situations customers don’t want money off after having spent so much money already, they want something free and truly rewarding.

“Giving free coffee or free newspapers is disruptive to the market, but I think that is what customers want, I don’t think they want a point.”Mark Price – Waitrose

Of course, you can continue down your point accoutrement strategy, dishing out coupons and vague rewards of vouchers for buy one get one free on theme park entry and meals out. But in those situations customers don’t want money off after having spent so much money already, they want something free and truly rewarding.

The big four are looking for new ways to boost loyalty and use data from loyalty schemes to improve the efficiency of marketing campaigns. But to do so is to ignore one fatal flaw. How can you make your customers more engaged through advertising and marketing when the fundamental problem with your offering lies with how you actually reward them for engaging with you?

One interesting case is how millennials in the US now value Starbucks way over McDonald’s and many other food brands. This is largely down to it appearing as if it offers them a better experience – no doubt thanks in part to the Starbucks mobile app that rewards customers with free coffee, newspapers, and food for their patronage. And that’s an app with 10 million engaged users.

The future, as predicted in the 14 trends for 2014 infographic is to create a loyalty system that is truly geared towards the customer, not towards your thirst for customer data. Obviously you still capture such information, but the trade-off has to be bigger. Customers aren’t dumb, they know what you’re getting out of this partnership with them, but they want something more, otherwise you won’t ever get their loyalty or respect. So, create a loyalty app that partners with a card, that sends rewards – be they point based or otherwise – direct to the users phone or stores it on the card account. It minimises fuss, means they get used, and because it’s so simple to redeem, customers will flock to you.

That, however, is just a small drip in the ocean of issues that need to be addressed when it comes to modern loyalty. Just make sure you don’t lose the lucrative millennial market share before it’s too late.

[Image:  AnotherTessCreation - Flickr]

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About the Author

About the Author: A man of many words who's interested in the busy world of payment technologies and customer loyalty. You'll find me writing on Total Payments and Total Customer. .

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  • http://brandkeys.com Lauren Proctor

    Great article, Vaughn. We’ve seen what you’re talking about time and time again here at Brand Keys. The key to profits isn’t loyalty cards. It’s the ability to listen to actual customer values and create true engagement.

  • Guntis Čoders

    That’s exactly what I have been thinking of for the last 3 years.
    I mean – it’s so predictible, monotone and non-personalized that it gets boring.
    I realy believe that it will get better as there are lot of new loyalty platform providers who provides great ways of doing loyalty programmes and what’s not less important that even small merchant have much more easier way to do this.
    Gamification will be part of freshing up this industry as well.

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