Acxiom’s latest CX trends report reveals an intriguing misalignment in the loyalty space. While 72% of consumers say they are willing to stay loyal if offered discounts and rewards, half of brands say they don’t currently provide any sort of customer loyalty rewards. With that in mind, we asked loyalty specialist Nicki Helfet CLMP – who has worked with brands such as Ralph Lauren, M&S, and Expedia Group – for her expert perspective on how brands should approach their loyalty strategies.
In a tough economic climate, rewarding customer loyalty is more important than ever. All spend has to be hard won, even for necessities like groceries and fuel, and discretionary spend on perceived luxuries like fashion and travel is even harder to secure.
Loyalty programmes offer a huge opportunity for your brand to differentiate when consumer spending is squeezed. According to the latest Global Customer Loyalty Report from Antavo, a convincing 81% of loyalty programme owners feel their program helped them overcome the economic downturn by nurturing existing customers that provide their core revenue.
Bigger winds of change are also elevating the importance of loyalty. With an evolving privacy landscape and the disappearance of third-party cookies, owning the relationship with the customer – and specifically the zero- and first-party data that comes with that relationship – is vital. Loyalty is one of the most effective ways you can incentivise people to part with their data, and programmes are increasingly being set up or pivoting to reward data sharing as much as spend.
A surprising lack of ubiquity
Considering the importance of loyalty, there’s a surprising lack of ubiquity in brand loyalty programmes in certain industries. Of course, there are some verticals where loyalty mechanisms are well established and entrenched within business models and customer journeys. If you think about buying groceries or booking a flight, your Tesco Clubcard/Nectar card or Avios/British Airways Executive Club just form part of the checkout process. And within the business too, they are recognised as important functions. But in other industries, there’s a noticeable lack of importance and investment allocated to loyalty strategies within the marketing mix.
Often, it’s not that brands don’t understand the general principles of loyalty, but more that they don’t appreciate what’s required to make it work effectively. Loyalty is a specialist discipline. It’s not something that can simply be lumped in with a CRM role or tagged onto the remit of the wider marketing team and maintained as a side project. And, as loyalty programmes are increasingly data-driven, there’s the added complexity of integrating multiple disparate systems to get the data visibility that will positively inform loyalty.
Introducing the 3 Cs of brand loyalty
Having worked on loyalty strategies across multiple brands and verticals, I’ve found it requires a blend of art and science that is quite unique in marketing disciplines. The three Cs sum up the areas of expertise you need to craft a successful loyalty strategy:
- Commercials
There are lots of commercial decision-making pieces that fit into a loyalty strategy, and it’s vital to understand the numbers across business cases, ROI, and areas of opportunity. Other acquisition and retention strategies are often perceived to be more measurable than loyalty, but loyalty programmes can drive robust and attributable results if they are well structured, and aligned with business goals. According to the Antavo report, 90% of loyalty programmes generate a positive ROI, averaging 4.8 times their cost.
If you’re looking to create (or refresh) a loyalty programme, it’s not just a case of ‘build it and they will come’. You’ll need to use transactional data or other sources of insight to define the problem statement so your strategy can address it. You might, for instance, discover a high proportion of customers only buy once from you, and design your programme to reward second purchases.
Alternatively, you might identify common behaviours in your most valuable customers – such as purchase frequency, basket size, or product variety – and then structure a loyalty mechanism to reward those behaviours in other members. You’ll then need a strong grasp of the likely increase you can drive in this behaviour, the margin it will generate, and the costs you’ll incur to deliver relevant rewards.
As mentioned earlier, loyalty has become as much about incentivising data sharing as about encouraging spend, so the loyalty team really has to understand what that data value exchange looks like from both the business and customer perspective. Consumers may assume (rightly or wrongly) that brands are making money from selling their data, and a loyalty programme can be a strong mechanism to recognise and reward their willingness to share data with a brand they trust.
- Creativity
It’s easy for creativity to fall by the wayside when teams are focused on the commercials. And for the result to be a paint-by-numbers programme that simply fits the business case. But that’s unlikely to achieve cut-through in a market that’s already awash with points and cash-back programmes, and increasingly other mechanics too. An innovative approach – to both the concept of the loyalty programme and to its creative execution – is needed to really change customer behaviour.
There’s often a trade-off between adding the complexity needed to achieve your commercial objectives, and keeping the proposition simple enough for customers to understand and engage with, while of course keeping the programme financially viable. It often takes some out-the-box thinking and creative problem-solving to refine a proposition into something that drives the results you want whilst remaining clear and compelling.
Some examples of loyalty programmes that tick the creativity box for me include:
- Club Pret: Pret a Manger’s subscription-based offering (which slightly blurs the lines between a loyalty scheme and a product), broke the mould for coffee chain loyalty by giving members almost unlimited drinks for a monthly fee. The beauty of the programme is it locks in share of wallet for a highly commoditised product. In a market where customers generally buy from the most convenient coffee shop, the programme gives them the incentive to walk twenty yards down the road to drink at Pret, and is a great example of creative thinking to solve a specific problem.
- Treasure: TK Maxx’s rewards programme allows members to collect keys when they shop or interact with the brand, and ultimately exchange those keys for a choice of treats. The branding of the programme is beautifully aligned with the mindset of TK Maxx’s treasure-seeking customers, whose ideal experience when visiting the store is likely to be unearthing that little gem – in the right size, from a favourite label, and for a bargain price. By tapping into the psychology of shoppers seeking something special, the Treasure loyalty programme is really well positioned.
- Octoplus: With Octopus energy known for providing electricity from 100% renewable sources, it makes sense that its loyalty programme is structured around sustainability. Rather than aiming to increase spend, the programme incentivises desired behaviour. It encourages customers to use electricity when the grid is benefiting from lots of renewable energy, and to use less when the grid is under pressure. And with concepts like Octopoints and Shoptopus discounts, the branding is lovely too.
- Customer psychology
Creating a successful loyalty strategy means understanding customer decision-making. What motivates them to do one thing versus another? Why do they choose to buy from you (or not)? This understanding is crucial to create a value proposition that will shift the numbers and also to inform a high-performing creative execution.
For some brands, this might mean shifting from transactional approaches, such as offering discounts, towards more emotional rewards such as experiences, superior service, or exclusive access. The Antavo report predicts 52% of future loyalty programmes will be more emotional than rational.
There’s no one-size-fits-all solution to loyalty. It’s different for every brand and getting the right balance between functional and emotional requires experience and understanding of customer motivation, and what your customers will perceive as valuable.
Discounts, for example, might work well for a supermarket chain. But they wouldn’t necessarily motivate the customer of a luxury retailer, where price is unlikely to be the deciding factor as to what and where to purchase, and would also risk denigrating the brand. Luxury brands usually need to work harder to establish a value-add loyalty strategy that shifts the dial commercially but is still brand-aligned. Either way, it really boils down to having a solid understanding of the purchase decision-making of your customers, and what drives it.
Realising loyalty’s full potential
Competition for consumer spend and attention is only getting more fierce, and a loyalty programme that is aligned with business commercials and brand values, is creative both in concept and execution and really considers customer motivation to set up a strong value exchange, will help brands build enduring customer relationships. For loyalty to fulfil its potential, most brands need a greater understanding of what programmes can bring to the table, as well as more appreciation of the unique blend of art and science that will drive success.
To learn more about Acxiom and Antavo and how they can help consumer brands with their loyalty strategy, loyalty technology, and platform services please click here.
