Guest comment: Can vouchers ever buy you loyalty?

By Guy Keeling

The problem with vouchers is that there are just too many limitations on them to really encourage shoppers to invest in one particular brand on a repeat basis. If it’s not expiry dates, it’s a price limit that leaves consumers having to make up the difference themselves. Vouchers by their nature, whether electronic, plastic or paper, have a disposable quality to them. Most people mean to spend them, put them somewhere ‘safe’ and forget about them. By the time, they are found again the offer has expired. Rather than encouraging a shopper to keep coming back, they are very much a ‘use once for this one special offer’ incentive. Retailers using vouchers will always find them successful in the short term, but when it comes to generating genuine brand engagement they will always fall short of the mark.

Loyalty programmes, on the other hand, whether through a card or an online account, are based on savings through repeat interactions and for many consumers, prove much more useful in the longer term. Saving up points to get something really special back leaves people feeling more satisfied about their shopping, especially when they are collecting points on everyday purchases that they would make anyway. For brands, this sentiment of permanence goes hand-in-hand with greater ROI as a loyalty scheme ensures that a shopper repeatedly returns to one retailer in order to make the most of a relationship.

You can’t buy loyalty

Whatever your circumstances, if you’re considering implementing a loyalty marketing initiative, the one rule to remember is: you can’t buy loyalty. Dangling carrots in front of your customers simply will not work when it comes to building an emotional connection with your brand. To create a genuinely useful connection with your customers, you need to earn it – the whole customer experience needs to add value, from the website homepage to the call centre. The more commoditised or low value your products, the truer this is.

It sounds obvious but the true value of customer loyalty for a retailer is not just the fact that customers come back to your store but that, in doing so, you learn more about them and are able to extract more value out of them. Loyalty schemes are the ultimate tool for determining customer lifetime value. Think about it, a voucher or voucher code will simply show you that your offer was redeemed – a successful loyalty scheme will reveal your most and least profitable customers, providing you with the intelligence to create not just short-term sales spikes but long-term improvements to your margins.

What is the real value of loyalty?

A loyalty scheme can affect and enable you to optimise almost every aspect of your business. The continual stream of data you gather on your customers will allow you to determine a profile of your most profitable customer base. This will then allow you to segment your marketing activity, concentrating specifically on those consumers that fit that demographic profile. Rather than focussing on expensive above-the-line tactics which may be inappropriate for your most valuable prospects and customers, the insights you’ve gained from a well-run scheme will allow you to either reduce your marketing spend or make it travel further. As well as being able to identify your most valuable customers, the data gathered from a loyalty scheme will also enable you to optimise your campaigns for reactivating customers that have become estranged. You will already have the information you need in your database to provide them with a highly personalised offer and motivate them to reengage with your brand.

Not all loyal customers are equal

As anyone who has ever witnessed the land grab that follows a cheap promotion via Twitter knows, the internet is populated by segments of consumers whose only priority is get as many ‘freebies’ as possible. This group naturally will be focussed on getting the most discounted lines or deals that they possibly can with little concern as to which retailer they’re getting them from. While entering free competitions may be a completely reasonable thing to do, this group of consumers are just not profitable for a retailer. In fact, they actually lose you money. It therefore makes sense to disincentivise this group and focus on fostering your most profitable customers. With voucher codes though, you have very few options open to you. You effectively have no control as to who will get their hands on a voucher once you release it to the market. A loyalty scheme, however, will allow you to create a hierarchy of rewards ensuring that the best rewards are available only to your most valuable customers, effectively creating customer value segments.

The basic rule is, there are no short cuts to gaining customer loyalty and, trying to take the easy route can actually do more harm than good. The more cheap voucher promotions you do, the more you will devalue your brand and the more of the wrong type of customer you will attract. If you want customer loyalty, you have to earn it. Bear in mind that, run well, a loyalty scheme does much more than get customers to come back to you. It becomes a business intelligence hub for your entire operation.

Guy Keeling is managing director of loyalty specialist Maximiles UK.