By Dimitri Kyprianou, Managing Director of Go Inspire CX
There’s never been a better time for brands to introduce loyalty programs as digitalisation engulfs almost every facet of our lives.
In past times, consumers have used these schemes to lower the cost of weekly shops or pay for luxury items and occasional treats, while saving money for a holiday, house deposit or to upgrade their car.
Now as the cost-of-living takes hold, customers are becoming even more reliant on loyalty schemes to help them get through difficult times. However, retailers shouldn’t get complacent. They must continue to provide offers and rewards that are relevant and meaningful – even with a possible focus on non-monetary benefits to drive genuine loyalty, rather than an affinity to the lowest bidder.
Here’s where digital helps – customer data and insight-led offers can be used to deliver enhanced personalisation at every customer touchpoint, from direct mail to online and in-store experiences. Using this hyper-personalised approach gives consumers confidence in a brand’s loyalty to them, which may beget loyalty from the customer in return.
Those that fail to offer personalised experiences are likely to lose custom during these trying times, as consumers become increasingly aware of their money and where they are spending it.
Loyalty programs are getting more popular
Research shows that 42% of Brits are using loyalty schemes to combat the cost of living, as written about here in the Retail Gazette. We also know that customers are focused on making ends meet and looking for ways to stretch the family finances anyway, and especially now budgets are squeezed. The Opinions and Lifestyle Survey by the Office of National Statistics written here on Raconteur in August 2022 found that 60% were spending less on non-essentials, 44% were spending less on food shopping and essentials, and 40% were shopping around more.
Joining a loyalty scheme is a sensible way to help consumers tighten their belts – previous sentiment has been: ‘I’m shopping there anyway so I might as well get a little bit extra back’, but nowadays the rise of ‘member pricing’ from the likes of Tesco Clubcard and Nectar allow customers immediate access to cheaper prices in supermarkets, increasing their popularity.
Customers are shifting their preferences from loyalty schemes that offer them rewards or benefits, to those that are focused on discounts or other ways to reduce the cost of groceries. This is particularly clear when you see how popular Clubcard Prices and Nectar Prices have been. Customers love these discounts and use them to navigate the supermarket.
This slight but significant pivot has helped loyalty schemes grow in importance – they’ve gone from being ‘the cherry on top of the cake’ to providing a way to afford the cake!
The benefits and challenges of loyalty programs
From a data standpoint, accuracy is key to delivering personalisation. Loyalty programs allow retailers to get very detailed personal data of the customer including name, address, email and purchasing behaviour, which helps you to really understand them and their shopping tendencies.
This type of data allows retailers to speak to their customers more personally and with relevance. Retailers can use the data to grow customer loyalty and sales revenues by identifying loyal customers and rewarding them suitably. It also allows retailers to see which customers have the “headroom” to spend more and tailor offers and rewards to encourage them to extend their purchasing with them, rather than with competitors.
On the flipside, loyalty programs can be costly to set up and manage in terms of IT, human resources and the costs of the customer rewards and benefits. Another one of the most important considerations is the ability to collect and store the data safely and legally.
There is also a requirement for expertise, either in-house or via a third-party partner, to maximise the value of the data, in order to ensure the investment in the loyalty program is not wasted. Retailers must have the ability to understand the customer behavioural patterns within their data and create segmentations and modelling tools to identify, group and grow the loyalty of their customers. They will also need expertise to deliver personalisation at scale to fully maximise the value of the data.
Loyalty programs are used by customers during good and bad times. Retailers must be prepared to adapt their offering to deliver both short- and long-term solutions to their customers to ensure they remain loyal and chose to spend their money with them.