Driving loyalty in an omnichannel age

The Sainsbury’s-Asda mega merger proves the retail landscape has changed, with consumers becoming more fluid, wanting both quality and low cost, according to Daniel Saunders, CEO of early-stage investment company L Marks

But, if that’s the case, what does it mean for loyalty initiatives in retail? Are today’s offerings truly defining what it means to be “loyal” to a brand in an omnichannel world?

“The retail landscape is more competitive, and consumers have more ways of purchasing products than ever before, which is reflected in their higher than ever service delivery expectations. This means that loyalty programmes are critical,” said Saunders. 

Retailers should, therefore, be prepared to adapt and innovate on a regular basis, with a particular focus on the channels through which they attract customer loyalty.

“The truly successful programmes will be those that offer more than mere savings, they will also offer the best possible customer experience,” he continued. “This could be achieved in a variety of different ways, such as streamlining the purchasing process, improving precision marketing and providing bespoke offers.”

Who is doing loyalty well?

Saunders believes that high street retailers should be looking at the financial services and telecoms sectors. For example, Amex and O2 are having success though their offers of experiences and exclusive promotional access.

“These brands have utilised technology effectively in a way that links loyalty programmes with mobile technology, Apple Pay and other mobile payments to streamline and integrate the process to enhance customer experience,” he said.

Also of note are StarbucksAmazon Prime and clothing retailers like Next, who have developed offerings that seamlessly fit into the lifestyle of their customers. “The strength of these loyalty programmes is in recognising their customers, remembering their preferences and the ability to tailor their service around it,” said Gorazd Kert, director, AlixPartners

Getting emotional

Monetary rewards and convenience only create logical responses to shopping experiences. Customers are increasingly looking for an emotional response from retailers. “If we are thinking that customers are becoming more fluid and are looking for quality and price alone, we are largely neglecting what makes up the customer experience that ultimately builds customer loyalty,” he commented.

The power of emotional responses to brands can be illustrated by two UK programmes that have stood the test of time: Boots and Tesco. The former’s customers tend to use their rewards for discretionary, more luxury items and that enhances the experience of the loyalty and the retailer brand. And for Tesco it was the Clubcard that captured the heart of the nation and became the symbol of the grocery giant’s market dominance.   

Germany’s MediaMarktSaturn Retail Group is also having success in this area. The consumer electronics retailer’s MediaMarkt Club initiative has been running for two years and its Saturn Card for just under a year. “We’re extremely satisfied with the growth we’re seeing,” said Christan Hess, managing director CRM & loyalty.Since the MediaMarkt Club was launched in Germany, we’ve reached 4.3 million active members with sales penetration of 30%. Growth is relatively stable at two million new members per year.”

He added: “And with the Saturn Card, we’ve already signed up 1.3 million members and achieved sales penetration of 23%, even though the programme has been up and running for less than a year. Similar growth rates have been observed in all other countries. This is very satisfying, especially considering that we don’t lure customers with traditional discount mechanisms, but have instead designed our programme mechanisms to build long-term, valuable customer relationships.”

Previously, sales were anonymous, but now customers are telling MediaMarktSaturn Retail Group how old they are, where they live, how their households are structured, what they’ve bought over the past two years, how they respond to campaigns, what services they use, and what they’re looking for on its website. “These are enormous assets whose potential we’re only just starting to analyse,” said Hess. 

In a few years, 50 to 60% of all the group’s sales will take place via loyalty cards. “We’ll see more and more financial resources being diverted from traditional marketing channels such as TV, radio and flyers to CRM channels, because we can use them to target customers very specifically and individually, with better conversion rates and less wastage. In addition, the CRM programmes will become increasingly important for stores, enabling them to address customers locally with relevant, coordinated content,” Hess concluded.