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Time to rethink your approach to customer loyalty, says new report

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UK business needs to urgently rethink its approach to keeping customers loyal as the impact of the recession deepens across the country, new research by The Logic Group and Ipsos MORI has found.

With barely half of UK consumers (52%) saying that they are members of a loyalty scheme, significant opportunities exist to develop loyalty; positive news for the 57% of business leaders that recently stated they intend to focus on nurturing and keeping existing customers over attracting new ones (23%) during 2009, say the researchers.

The ‘Imperatives for Customer Loyalty’ report also brings into sharp focus the need for businesses to concentrate on improving the customer experience and to pay more attention to their best, and most profitable, customers.

“The traditional models of engendering loyalty are changing with the economic climate; even in sectors where the barriers to switching brands are significant,” says Antony Jones, CEO of The Logic Group. “As consumers we are very clear on the need for organisations to deliver on promises, customer service and recognising us as individuals. As the recession bites, it is evident that businesses have a very clear brief: Focus on improving the customer experience and building loyalty through schemes that deliver rewards that are actually valued by customers.”

According to the research, supermarkets, banks and building societies act as a reference point for attitudes to loyalty with 72% of us feeling loyal to at least one company or organisation operating in these sectors. However, say the researchers, this may suggest that for many people, loyalty today is still more about habit than a deeper attachment. Surprisingly, although banks have seen their public reputation collapse in recent months, 72% of people still described themselves as loyal to their bank or building society.

Significant opportunities remain, however, for improving feelings of loyalty amongst customers, they say, with almost half of the UK population (46%) taking no part in a loyalty programme of any sort. Moreover the majority of people that have signed up to programmes describe themselves in the retail sector as feeling only ‘fairly satisfied’ (51%) with the benefits that businesses offer through schemes, whilst a meagre 24% in retail, and 13% in financial services, are prepared to describe themselves as feeling ‘very satisfied’.

The research also provides an insight into the different demographic and age profiles of consumers’ attitudes to loyalty, reflecting the need for businesses to recognise these if they are to succeed in retaining customers during the difficult year ahead. For example, 15-24 year olds seem to see little value in current loyalty programmes, with only 28% being a member of any scheme.

“In a business environment where the focus has shifted sharply onto the retention of customers, it is striking that so many of us don’t feel part of loyalty schemes,” says Simon Atkinson, managing director of loyalty at Ipsos MORI. “And those of us that are members of loyalty schemes don’t necessarily value them. Current programmes urgently need to be reviewed and refocused if businesses are to successfully create true loyalty amongst today’s consumers.”

Loyalty is not necessarily just about specific tangibles such as points or money off, according to the research findings. Good customer service (34%) remains the leading driver in encouraging people to spend more in the shopping and retail sector, even within loyalty programmes, followed by rewards that were relevant to the individual (30%), and both are prioritised ahead of rewards that provide money off (25%) or periodic vouchers (16%). At the other end of the scale, poor customer service (44%) is the feature most likely to put people off increasing their spend as members of loyalty programmes, as are unachievable rewards (28%), unrealistic points expiry deadlines (20%) or too much communication (18%).

“As the focus turns to retention rather than acquisition, the survey revealed that despite current beliefs that consumers will switch their business to value brands or price offers, opportunities for organisations to build successful loyalty with consumers still remain,” says Jones. “A clear imperative has been identified in linking customer experience and service with loyalty programmes that are relevant to an organisation’s consumers. The time has come for businesses to be loyal to their customers, rather than expect the other way around.”

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