May 02 2008
Comment - The loyalty trick you’re missing
Louise Isaacs, Head of the Loyalty Practice, a division of Relationship marketing agency Hicklin Slade and Partners explains some of the loyalty tricks retailers are missing
Louise Isaacs, Head of the Loyalty Practice, a division of Relationship marketing agency Hicklin Slade and Partners explains some of the loyalty tricks the UK’s biggest retailers are missing
In a highly competitive and saturated industry, strategies that generate and drive customer loyalty have long been the ‘Holy Grail’ for retailers, but why are some of our biggest brands still facing difficulties?
The problem is that we have seen the issues that are troubling retailers now, surface before. Remember the birth of websites? In 1996 everyone knew they needed a website. Sure, we weren’t absolutely crystal clear on why or what for, but we knew a commercial presence was no longer an option – it was a must. So, the masses rushed out and stuck themselves on the web. A year later, we realised our websites were out of date, too rigid or just plain simply broken – and we had to kick off the whole process again.
Fast forward to 2008 and some of our biggest retail brands are facing a familiar quandary with their loyalty programmes. The fact is that only a few retailers got it right from the beginning. The difference between them and the brands that have loyalty programmes that people don’t understand, use or care about, is that those loyalty pioneers understood the point. The point is customer data. It’s as simple as that. And of course the point of data is insight. And it is insight that draws a line between the retailers that fly or flounder.
The primary benefit of loyalty schemes is not short-term sales uplifts, or whimsical fair-weather customers tempted by the multipack offer or free keyring. A loyalty scheme should be created to build the best customer picture. Brands must know how to turn the data they generate into insight, and use that insight to inform decisions across the whole business. That is what is going to have a real impact on customer loyalty. Actionable customer knowledge should be the goal.
What’s more, when looking to implement such a scheme, retailers should not be afraid to think outside the traditional methods. For instance, a loyalty card and a ‘points-based’ scheme should not be seen as the be all and end all of loyalty. The card is just a way of obtaining what retailers really should be striving for – customer data. Those retailers that shun loyalty schemes because they assume that they must always constitute a plastic card risk lagging behind their competitors. In fact, there are many other suitable mechanisms that can be implemented, but each one needs to be able to identify customers and link them with their transactional data, across multiple channels.
Brands acknowledge that multi-channel retailing is where the industry’s future lies. But many are still struggling to build a true customer picture that identifies how customers shop in-store, on the web and through other channels. Understanding and using this information collectively is essential to building customer loyalty.
However, employing a disjointed view is not only true of the way retailers currently view their customer data, it is also reflects the way they operate their different outlets. Take the web for instance. Many retailers appear to treat the web as a store in its own right and as a result are failing to utilize their online presence to generate customer loyalty. A quick look at some websites and the language used, uninspiring imagery included, uninviting layout and difficult navigation appears to suggest that where consumers have the opportunity to buy, some retailers are unwilling to sell. If websites can’t personalise or speak to the customer directly then they will be incapable of driving loyalty. Most importantly not utilizing a website means the brand is neglecting a financially valuable touchpoint opportunity to connect with the consumer. Whilst the High Street continues to feel the pinch of the credit crunch, recent research from Verdict Consulting has shown that online retail sites are bucking the trend and this year, it is estimated that spending in the sector will grow by 32%.
Once a true customer picture has been gained, the next step is to put the loyalty initiatives in place. To appeal to customers these must be channel neutral and most importantly reflect how your customers are currently interacting with your brand via the different touchpoints available. It should not simply be the case of the online team developing online strategies and the marketing team developing strategies for store customers. Implementing a loyalty programme is about joining up the customer data and gleaning insight so you can make, retain and grow customer relationships across all touchpoints of the brand.
In addition, it is paramount that when a loyalty programme is adopted, the whole business operation is set up to support it, from Senior Management through to the processes and systems in place. Only then will the customer data, the loyalty mechanic has generated, be able to be used to inform decisions across the whole organization.
At the risk of trotting out this year’s favourite wise warning, it is going to be a tough year for the retail industry. The best retailers will escape unscathed because they have put a premium on their data and built their business plan around it. A few extra loyalty points won’t ensure your customers stick with you through good and bad. Using a loyalty programme across multiple channels to generate the kind of insight and understanding that inspires a strong relationship just might.
