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Customer Recognition: Is A Loyalty Program Right For My Retail Brand?

Jed MoleOctober 27, 2015

It’s a jungle out there. Competition is fierce so you do what you can to keep your customers loyal. But is a loyalty program necessarily the right fit for your retail brand?

When is a retail loyalty scheme appropriate?

If you’re a high-end furniture retailer, probably not. If your customers have just bought a top-of-the-range sofa then they aren’t likely to want another one any time soon, nor are they likely to buy all their furniture from the same place.

Retailers need to know whether loyalty is important to them commercially. For example Morrisons supermarket only introduced its loyalty Match and More card last year, otherwise choosing to invest in their shelf propositions.

Modern shopping habits have changed. The “big shop” is dying if not dead; instead of doing a large weekly buy, shoppers might now pop to the local greengrocer or butcher for fresh food, or go to Costco for bulk items. They may buy nightly; shopping on their way home from work, or increasingly they might order online. This presents challenges to supermarkets in how they position themselves. But do retail loyalty programs always help in this competitive situation?

Aldi and Lidl, for example, noted for having considerably improved the layout of their stores, choose not to have loyalty schemes, but instead have newsletters to keep consumers informed of offers. So if that two-ton car jack you’ve been looking for is going to be in store, you’re going to know about it. Of course, from the customer’s point of view, newsletters are an ideal way to learn about store offers. But the disadvantage to the retailer is that there’s no way of matching those offers back to the individual.

Linking customer recognition with effective retail loyalty scheme examples

When considering a loyalty scheme, the question retailers must ask is ‘what data do I need, how easy is it to get that data, and what is the value exchange in getting in it?’ To know this it’s important to clearly understand the nature of a brand and its customers, plus the loyalty proposition.

From the consumer perspective, loyalty programs may just be about how many pieces of plastic you can fit in your wallet, but to a retailer they offer a chance to complete the data image of an individual for more relevant, timely targeting and an improved retail customer experience. Loyalty schemes are not always easy to get right, but as a good example, the MyWaitrose retail loyalty scheme has people wanting to be seen to be a member, aside from the incentives it offers. Why?

Because it’s an affluent choice, it fits the brand image and it contains a personal element being able to choose the offers they receive which makes the customer feel valued. Plus customers get a free cup of tea or coffee in store; and who doesn’t like that?

Recognition, loyalty, and continually better retail customer experience

It’s a myth that luxury retailers shouldn’t offer or don’t need loyalty schemes. Ralph Lauren stores choose to offer an incremental benefit with an increased discount with every interaction with the brand. This means the experience gets better every time rather than plateauing.

But for long term success, retailers must make the most of their data assets to not only recognise consumers, but recognise what’s working or not. For example Tesco are transforming their loyalty program to make it more personalised and relevant.

Other key loyalty issues arise when retailers don’t maintain consistency across every single touchpoint; it’s crucial to use the data to recognise consumers at all points, whether they’re calling in store, or online, and maintain that seamless customer experience.

There can be few better examples of how important data is than the 2015 DMA/Acxiom/Future Foundation research ‘Data Privacy: What the consumer really thinks’. In it, we learned that consumers increasingly want hard rather than soft benefits, cash rewards and discounts over more personalized experiences. However, while brands like Ralph Lauren are only too willing to reward their best customers, the challenge remains how you recognise who they are and their eligibility. To do this at scale means accurate data and doing this well means a win-win for the consumer and the brand.