Jason De Winne, UK General Manager, ICLP, explains what customer loyalty means in 2018 and how retailers can drive devotion to their brand.
The retail loyalty landscape in 2018 might not necessarily be reaching a crossroads, but there are undoubtedly changes afoot. Retail brands are facing an evolving world where advancing technologies and a new generation of customer demands are forcing them to re-evaluate the loyalty strategies they have in place if they are going to drive devotion. According to Capgemini, 90% of consumers have negative perceptions of loyalty programmes, 54% of loyalty memberships have fallen inactive and 28% of consumers abandon loyalty without having redeemed a point. Yet, in contrast to this, 3cinteractive reports 64% of brands have seen an increase in loyalty membership. Evidentially, the demand for recognition and reward by brands remains, but there needs to be a shift in the way many loyalty programmes are being executed.
The world has changed so dramatically since the loyalty programmes that we all recognise today were implemented 20 or so years ago. ICLP’s ‘Deeply Devoted’ research study revealed that 92% of UK consumers are willing to cheat on their favourite retail brands, highlighting the challenge facing many brands; understanding how to recognise and reward their customer’s loyalty today and keep them from shopping with competitors. In a landscape dominated by digital, social, mobile and data, where the millennial generation is coming of age and bringing with them a whole new set of expectations and demands, how can retail brands deliver a personalised experience that a customer will value?
A programme, under whatever guise it takes, is a tactic; a method of achieving your strategic objectives. For loyalty programmes the aim is to drive retention, increase knowledge and insight of the individual customer through data collection, to increase spend and share of wallet and ultimately, to drive devotion to a brand. Whatever the objective, the overriding ambition will be changing a customer’s behaviour. Moving away from a one-size-fits-all approach and recognising that, in loyalty, not all customers are created equal is critical to providing a targeted experience for the individual.
Retail brands need to use insight to identify, reward and recognise their most valuable customers, and encourage their next-best customers to engage and purchase more. Through delivering exclusive and rewarding customer experiences, organisations will be able to encourage repeat purchase and advocacy, driving growth for the business. Leveraging data to deliver a personalised interaction and catering to what customers’ value most lies at the heart of a successful loyalty programme in 2018.
WHAT MAKES A CUSTOMER HAPPY?
While most customers associate loyalty programmes with a traditional card, the opportunity for brands to go beyond this today is huge. Kate Leggett, VP, Principal Analysts at Forrester has previously stated that a happy customer is a loyal customer. So, knowing what makes a customer happy and establishing what a loyal customer means to the business will help establish a successful programme. Retailers must link this into a wider strategy that engages customers and shapes their behaviour, and look to expand beyond the traditional remit of loyalty to include all areas of customer engagement, wherever and whenever that takes place.
Diversity in loyalty programmes has increased in recent years, as brands negotiate the changing landscape and seek to meet their customers’ expectations. From VIP events and money-can’t buy-experiences to priority access to new product launches or sales – multiple tactics can help build a higher emotional connection between the customer and brand. Membership and subscription-based loyalty strategies are in resurgence, with many predictably quoting Amazon’s Prime as being the best, a view I would challenge. It may not be a loyalty programme in the traditional sense, but when you consider how it is putting the customer first and using insight to deliver exclusive or improved services and experience elements to members against the traditional customer experience, it’s clear why its popularity continues to grow.
In an ultra-competitive world, the customer should always be the starting point for a successful programme, rather than looking at the channels available and trying to fit the customer around those. For Amazon, the objective was to get customers to spend more with the brand and a loyalty strategy was built around creating a frictionless shopping experience. Amazon Prime was one of the tactics implemented to achieve this. Charging a subscription fee in return for the experience was a gamble by the brand, but by charging a fee Amazon created a behaviour that meant Amazon becomes a customer’s first port of call. While the delivery benefits are certainly one of the headlines followed by a whole number of other rewards, it is the experience and ease of shopping that makes Prime so successful and continues to build deeply devoted relationships with customers.
Today’s customer is more demanding, they want a great experience through whatever channel they use. As Amazon has proved, the options and tactics retailers can use to deliver these experiences are now endless. The most successful programmes within the next year will come from retailers who really understand their customers, and recognise that loyalty needs to be more than just a functional exercise. At the heart of this lies data.
Customers are beginning to understand the value of their data, and this will be brought into sharp focus with new GDPR legislation coming into play in May. Retailers must be using and acting on data insights that drive the personalisation of programmes in order to deliver an experience where loyalty is tailored individually to each customer. Developments in machine learning and artificial intelligence have the potential to revolutionise loyalty even further. In analysing customer data alongside predictive modelling retail brands will be in a stronger position to understand customer behaviour and offer the rewards they want most.
Taking stock of all the customer channels available to deliver an experience is another key element of successfully building a deeper relationship. Customers expect the experience to be the same no matter what channel they are using. Amazon’s frictionless shopping experience is an example of how this can be approached. The Echo and the voice-driven AI allows a customer to easily order via voice. While not entirely seamless just yet, it is evident how Amazon is trying to provide another channel with the same purchase experience for customers, driving further engagement. Voice-driven AI will become more common as retailers begin to understand the importance of the channel in encouraging a behaviour shift and creating experiences that build deeper relationships with customers.
During the next 12 months the tools and channels being deployed to drive retail loyalty are only going to evolve and become more innovative, but essentially frictionless. For both brand and customer, this should be viewed with excitement as loyalty continues to develop and bring with it new experiences. In a hyper-connected and competitive environment, me-too programmes will not be enough, so implementing a clear strategy which outline the outcomes of the programme is vital. Using a tool or channel just because they are available is not going far enough. Understanding who the customer is, how they are behaving, and how that behaviour can be influenced should be the starting point. Ensuring that data sits at the heart of these decisions is critical to delivering deeper engagement at every stage of the journey, ultimately driving a more devoted customer base.
CHANGING LOYALTY IN THE GROCERY SECTOR
Recent changes across Tesco, Waitrose and Sainsbury’s reward programmes – some of the most well-recognised in the retail space – have sparked a wave of reaction from consumers. Ultimately, while retailers must evolve their reward offerings to ensure that they remain commercially viable while meeting changing customer expectations, these changes must be handled carefully.
Targeting customers with greater personalisation, differentiation of rewards and recognition is critical to continuing to drive deeper, more devoted relationships with the customer. A one-size-fits-all approach won’t resonate with consumers that have more shopping choice than ever before. With major competitors all using insight to drive sales, but not to enhance their customer relationships and loyalty experiences, Tesco and Waitrose need to make modifications to their own programmes in order to win loyalty in a highly competitive space.
What the recent changes to Tesco’s Clubcard scheme highlighted however, was the importance of communication. Whilst the changes only impacted a small percentage of customers, poor communication led to much wider negativity. The brand must now work to repair customer trust by delivering the personalised experiences that prove there is value to the Clubcard scheme.
Sainsbury’s acquisition of Nectar is further evidence of retailers seizing control of their consumer data to enable the customer-centric, highly personalised rewards and loyalty experiences that are defining the modern era of retail loyalty. It does however pose wider questions about the relevance of partner schemes. In principle, offering customers further opportunities to earn and redeem rewards is beneficial, but if an ulterior motive from retailers is to envelop more partners to hit their sales targets – as Sainsbury’s will with its absorption of Nectar’s existing roster – then those retailers must be careful not to dilute their focus on delivering the best possible customer experiences.
The following guest article has been written for InternetRetailing by Jason De Winne, UK General Manager ICLP. ICLP is a leading end-to-end loyalty agency that drives customer devotion for clients across multiple sectors including retail, travel and technology. ICLP transforms customer relationships into personalised, profitable and emotional connections. Blending data analytics, strategy, technology and creative expertise, ICLP delivers customer-centric engagement strategies that help brands to drive acquisition, repeat purchase and advocacy.