Loyalty schemes can be an invaluable tool when it comes to customer satisfaction and the overall consumer experience. Our most recent research shows that 94 percent of UK consumers are members of at least one loyalty program, and many belong to multiple schemes. However, to really get consumers flocking to a brand and forming a strong bond with it, a company needs to do more than simply have a loyalty scheme in place.
Loyalty schemes have emerged as a critical customer relationship platform for businesses of all types. Firms that have jumped on the loyalty scheme bandwagon in just the last couple of years include John Lewis, Morrisons, Papa John’s, Pets at Home and ASOS. The proliferation of schemes has made the competition tight for place of pride in the wallets of consumers. It is therefore paramount that companies offer meaningful benefits that appeal to a range of consumers and establish their business in the minds of customers as the go-to brand within a specific sector.
To be embraced by consumers, a loyalty scheme has to offer benefits that provide value and relevance to the particular customer being targeted. If members are being offered benefits they do not see as meaningful, they will quickly abandon the scheme and possibly take their business to another brand. Research by Nielsen shows that 50 percent of UK consumers will quit a loyalty scheme or not join at all if they feel the benefits are not worthwhile.
Once a loyalty scheme has been implemented, then the hard work begins. Running the scheme successfully is really about using the data to better understand your customers and to extend your relationship with them. The data on members, both the information they have given you and that which you have gleaned from their transactions, provides you with insight into their preferences, interests, personal circumstances, needs and buying habits. This has to guide the targeting of certain rewards and benefits such as vouchers and exclusive offers.
This database of knowledge that you will build regarding your customers is essential to growing long-term relationships with them. The insight yielded by loyalty scheme data is critical to furthering customer relationships and maintaining their engagement with the brand. Your scheme should be treated as a platform for understanding buyer behavior and interacting more effectively with your consumer base — fostering customer intimacy. Achieving a high level of customer intimacy is no simple task, however, and consumers today have high expectations when it comes to loyalty schemes and what they deliver. People will not continue using a loyalty program if they feel they are not receiving significant value from the brand.
Research shows that many schemes are in fact failing to engage a significant proportion of members: only 50 percent of people who are actually registered in a loyalty program are actively participating in them on an on-going basis. This shows that there is plenty of opportunity for companies to get more from their schemes. So what is it customers are expecting?
According to research, collecting reward points does rank the highest in the list of factors that push people to take part in a loyalty scheme, however, there is a wide range of other factors that attract them. While 74 percent of the 1,000-plus UK consumers surveyed said redeemable points are a big incentive, 60 percent said vouchers and coupons offering cash off or a percentage discount are a critical selling point, and 53 percent cite special offers as a major motivator for scheme membership and use.
The survey revealed that women are particularly drawn to cost savings that are offered by loyalty schemes. Female consumers are more likely to be motivated by redeemable points with 78 percent (compared to 70 percent of male respondents) of the women surveyed citing these as a big motivating factor to sign up. But more women are also persuaded by vouchers and coupons (65 percent versus 56 percent of male respondents) and special offers (55 percent versus 50 percent of men).
Interestingly, research showed a larger proportion of older consumers point to redeemable points as a motivator with 80 percent of respondents 65 years and older choosing this option. However, for younger consumers it was less of a driver with only 64 percent of those 18-24 years old choosing redeemable points as a key reason for joining and remaining active in a scheme.
For a significant minority of consumers, convenience was a key motivating factor, with a quarter of respondents choosing schemes that are easy to sign up to and to continue using. Our research showed that factors that related to regular habits, fit with lifestyle and were easy to use were far more important to older consumers than their younger counterparts.
A noteworthy proportion of consumers also view free extras such as coffee or cake, special offers for birthdays or other occasions, and early access to new launches and discounts as important reasons for joining and staying active within a scheme: 17 percent of respondents identify complimentary treats as an incentive, 12 percent list event-linked deals, and 12 percent point to exclusive/first opportunity to buy new products and take advantage of deals.
Many marketers or business owners might think that mobile technology would be one of the biggest motivators enticing people to sign-up to a scheme; however, this proved not to be the case. Despite continuing growth in the use of smartphones and tablets, having a loyalty scheme that was accessible through the use of an app did not register as a major enticement for the vast majority of consumers. Only six percent of those surveyed said this was something that would excite them about joining and participating in a scheme.
Nonetheless, mobile loyalty apps are more of a factor for younger consumers. The percentages remain relatively small, but some brands — particularly those that have a young target audience — might find it beneficial to develop and promote a loyalty app in order to differentiate themselves in an already crowded market. The research showed that 10 percent of 18-24 year olds and 14 percent of 25-34 year olds say they have been positively influenced by the offer of a mobile app. But just two percent of consumers in the 55-64 age group and one percent of those older than 65 saw the availability of an app as an important consideration.
Of critical importance to developing your loyalty scheme and leveraging it to foster stronger customer relationships is analyzing data gathered through the scheme and using the resultant insight to improve communications and better target offers. In the age of Big Data, customers expect precisely tailored messages, services and offers. The research clearly indicates that not enough companies are using scheme data to more effectively communicate with and target their customers. According to the research, a mere 27 percent of the respondents felt like companies providing loyalty schemes were successfully analyzing their needs and sending relevant offers.
When a loyalty scheme is set up and managed effectively, it can provide a great tool for customer insight and a mechanism for acting on it. A company can use the data generated to track patterns of customer behavior and segment the database. The result is that you not only cultivate customer loyalty, but you also encourage more and more frequent spending — which, in turn, leads to more profitable and lasting relationships.
— Andy Wood is the Managing Director for GI Insight (www.gi-solutionsgroup.com/gi-insight), a company that is focused on helping you understand your customer’s behavior and using this knowledge to tailor your marketing communications to boost response rates and return on investment.