Put the word ‘loyalty’ into your loyalty scheme
What engenders loyalty and gives greater value to the individual customer?
An introduction from Angela Hall, our Customer Centricity Director.
“I’m constantly being asked if I’d like to join various loyalty schemes – right at the point of first purchase. Most are app-based, making it even easier to sign up. Generally they all operate a points-based scheme where points equal discounts; the more the consumer spends the greater the reward.
How can I qualify for a scheme set up to reward loyalty when I’ve only just started a relationship with the brand, and the chances are that I may never make a second purchase?
My most recent experience was at a garden centre – in Australia. And perhaps more worrying was my experience with a luxury confectioner who not only joined me up there and then but gave me the so-called loyalty discount off of my first purchase.
As a marketer I would agree that this is a very laudable solution to being able to identify and communicate directly with your customers where a 121 relationship doesn’t always exist. This is of course the model that Dunnhumby introduced for Tesco way back when. But these masters of customer data used that priceless data to dive into customer behaviours and with that knowledge built a strategy to create positive changes leading to increased loyalty, i.e spend and share of wallet.
I would, therefore, proffer that the start point for loyalty is not offering up the scheme at the first opportunity, but instead, finding what engenders loyalty and therefore greater value for the individual customer. Something that we seem to have skipped and gone straight for the discount.
The question to review is what drives a more valuable relationship with your customers? Is it short-term discounts or longer-term relationship that rewards according to how much a customer participates with a brand?”
How should we define loyalty?
The most loyal customers are not necessarily the most valuable. Similarly, the most valuable need not be very loyal. Therefore, loyalty needs to be carefully defined and understood within the business and not necessarily linked purely to value.
Loyalty is about exclusivity and share of wallet but it should also be about your conscious choices. How actively do you choose a brand over just convenience? How much of a champion are you, etc?
We should then use value to add some context – can you be really loyal if you only purchase once a week / month / year, even if you don’t go anywhere else?
The key question is does the scheme drive incremental value?
Our evidence shows that customers engage with loyalty schemes in different ways. Some use the scheme as if it was a currency/discount and redemption is integrated into their ongoing regular behaviour, and others treat points as a reason to do something extra, make incremental purchases, something different to their normal behaviour.
What about your non-redeemers? Do they even know they are being rewarded? Do they care?
How do you recognise and reward loyalty?
Does the scheme recognise and reward the loyalty of the best customers? Does it encourage and engender increased loyalty from those who are currently sharing their wallet with competitive brands? Beyond some occasional tiering of benefits, all that rich transactional and behavioural data is going to waste.
No differentiation of message, offer or reward.
What should you do to make your customers feel valued? To show them that you value their loyalty. To show that you know who they are and how they interact with your brand?
The answer is right under your nose in the data
The alternative approach is to use this rich vein of customer data for a mutual advantage. The transactional and engagement data recorded through the scheme is priceless.
A loyalty scheme gives you a vehicle not only to collect more and more behavioural and attitudinal data but also as a communication platform. You are now able to converse with your most precious asset, to open up a dialogue, to drive a true relationship. It’s so much more than a money-off promotor.
Starting bottom up, you will be able to determine what behaviours deserve a proper thank you, to be justly acknowledged and even rewarded. Having someone consistently rate your service as high may warrant a higher ‘reward’ than simply being a regular purchaser. Their values may be identical or miles apart but which merits the better thank you? And what if this changes? What tools do you have in your loyalty armoury to fix any negative shifts in these relationships before attrition sets in – much harder to come back from.
Long-term loyalty brings mutual rewards
Done properly, a loyalty scheme will help drive long-lasting and valuable relationships with your customers. They will perceive the rewards they receive as a gesture of recognition from the brand, as a thanks for giving them more – more share of wallet, more revenue, more advocacy. And the information captured via the ‘scheme’ is seen as a fair exchange, a legitimate price to pay for that recognition.
Reward does not necessarily need to be monetary
At TIH we advocate just saying thanks sometimes. Verbal recognition, small gestures of gratitude and appreciation can be just as impactful if not more so than getting ‘the next one on us’.
At The Insight House we’ve worked with many clients to help them find that connection with their customers, making it relevant and appropriate and ultimately driving longer-term value. From coffee drinkers to holiday seekers, with our expertise you really can turn points into prizes!
- Make it relevant, personalised and timely
- Be consistent – create a continuous conversation, not a series of transactions
- Reward advocates – not always those who generate the highest revenue
- Choose the behaviours that you want to encourage and strengthen, decide on the appropriate reward for each