Customer loyalty: Why retailers need to improve efforts

Customer habits have changed; they are becoming more sophisticated and demand more from brands. And many of the high street’s loyalty programmes aren’t doing as well as they did in the past.

In a recent survey of marketing professionals across Europe by Adobe on customer loyalty, 75% admitted they are struggling to keep up with rapidly changing consumer habits. A corresponding survey of 1,000 European consumers found that almost two thirds (61%) of consumers report loyalty to brands that tailor their experiences to their preferences and needs. 

So, what should retailers be doing with the data they have on customers and what can be done to make a customer loyal to a brand and keep them spending?

Wayne Chadwick, managing director of the York Roast Company, says it is crucial to his firm that they are able to engage with their customers and build a database so that they can continually promote to them.

“We recently launched a new delivery service with Deliveroo and used our loyalty database to email out promotional offers telling our customers about the service and offers of the month. But loyalty cards are also great for social media engagement; we’ve found that our customers use us again and again and really engage with the card – even posting up pictures of themselves in store on Facebook, Twitter and Instagram,” says Chadwirk.

“Our branches are in a lot of tourist areas such as York and Chester and giving people a loyalty card is our way of making them feel loved on a local level. It’s also a way of measuring how well we are doing – and customers can be rewarded on a regular basis for their commitment to our brand.”

Differentiate to maintain loyalty

Kristine Kirby, managing director for digital at Pragma, says that customer loyalty programmes now need to offer differentiation. “The concept is based in the Green Shields stamps we had ages ago. M&S Sparks is the largest launch by any retailer in a few years, but it doesn’t offer enough uniqueness,” she says.

She says retailers can learn a lot of easy lessons from airlines, with tiers. Overall, they are still fit for purpose – but need to be switched up to be more purpose-built. “To still have a purpose and drive the usual actions a brand wants by having one, they need to revisit them and ensure they are using all customer touchpoints and personalise the customer offer to a greater level,” she adds.

Rob Meakin, managing director of Loyalty Pro, says that customer loyalty programs are moving towards data-guided decision-making and a single customer view.

“Now businesses need to have a single view of online and offline systems across multiple channels,” he says. “In 2017, marketers and businesses need to be giving customers what they want – and that’s personalised experiences at every touch point. This is the year for customers to be treated as individuals and receive consistent brand experience regardless of channel.”

Anthony Mixides, CEO of e-cigarette retailer, The London Vape Company, says in a competitive market such as Vaping, Vend’s loyalty scheme is what differentiates his company, as it offers an alternative means of attraction. 

“It has also been one of our key sales drivers, with 1/7 sales being made via the loyalty system and 25% of in-store purchases going through the loyalty scheme and turning into cash. Offering the most generous loyalty rates in London, we are rapidly increasing our customer base, with up to 10,000 customers currently registered to the programme and growing,” he says.

Maintaining loyalties

Today’s consumer’s loyalty is shifting. Ultimately loyalty programmes should be focused on maintaining a relationship with a customer and increase the lifetime value (LTV) of that customer. Brett Lawrence, a retail analyst and consultant at Inviqa, says that incentives shouldn’t be issued if they don’t actually change behaviours. “For example, if someone was going to buy the product anyway, with or without your reward. Thankfully technology can help identify which customers to target and how to do so,” he says.

He says that using customer insight to help control churn is nothing new. “As a former head of online at a retailer with a large subscription business, I was constantly looking to analyse the behaviour of customers in order to target those at risk of churn and provide (those of them with future value) with compelling reasons to re-engage as customers,” says Lawrence.

Personalisation for everyone

Tim Mason, CEO of Eagle Eye, who was deputy CEO and CMO at Tesco for 20 years, where he launched Clubcard, says millennials represent the next generation of spending power and failing to understand them is a huge risk for businesses. “Eagle Eye’s research found that 38% of 18-24 year olds said they have left loyalty schemes due to a lack of personalised rewards and excessive, blanket communication from companies,” he says.

“Customers are often barraged with generic communications.  It’s difficult for a customer to form a connection with a retailer which sends them irrelevant offers and discounts – e.g., £5 off dog food at your next shop, given to non-dog owners. With a wealth of information at their fingertips about consumer preferences, habits and purchase history, there’s no longer any excuse for sending generic, blanket offers.

Future loyalties

In the future, loyalty programmes will require much more attention to detail, according to Channie Mize, senior vice president and global sector general manager for consultanty firm Periscope By McKinsey.

“We keep saying "get back to basics" and we mean that – marketers need to execute the basics well at very granular levels. The best retailers will get their data and processes in good order, as they start approaching loyalty differently. Going forward, machine learning and prescriptive analytics will be key to delivering loyalty programmes by identifying the patterns and preferences of their best customers and segments,” she says.