The New(Ish) World of Retail Loyalty

woman-using-cell-phone-with-5-gold-star-customer-satisfaction-graphic-picture

Retailers are experiencing a realisation post-pandemic. While stores were closed, those with loyalty programmes were able to keep in touch with customers. Once lockdown lifted, those who had maintained this relationship were able to manage behavioural changes and start to plan for the future, says Andy Wood, Chairman of Go Inspire.

The Nuances of the Online ‘Shift’

There’s an assumption that purchasing is now permanently online, having migrated during the pandemic. Data from the ONS supports this – while online purchasing accounted for 19% of sales in 2019, it shot up to levels of 30-40% during lockdowns, then fell back to 25% by 2022[i].

But these statistics are not the whole story. Our work with Lakeland revealed a cohort of customers who were ‘store lovers’ and wouldn’t shop online – even those that had opted into marketing emails. The CRM strategy proved critical to enticing these customers back in-store after lockdown; they received compelling and timely direct mail which enticed them back at the earliest opportunity.

Discounting – the Devil’s in the Detail

Another retailer decided to remove discounts for existing customers and only use them to tempt new customers. Some lower value incentives were retained for current customers, but product discounts were almost all turned off. The quarterly results showed an upturn in revenues.

However, the analytics revealed that this uptick was coming from net new customers, plus a post-lockdown surge in-store. Meanwhile, margin contribution from existing customers had almost halved. Average transaction values from existing customers were up but repeat purchases and purchase frequency were down. The strategy was flawed.

Considering this, management reversed the policy. Customer discounts were reinstated, and behaviours started to swing back – although any long-term damage is yet to be seen.

Measuring Online and Offline Spend

Analytics should be tracked across the channel mix. While direct mail has an advanced measurement process, other techniques are not subject to the same rigour: we don’t often measure incremental growth on PPC or social. A marketing budget must add value, so it’s essential to measure performance through incremental spend. Generally, online campaigns only measure gross results, which is ironic when online advertising claims to be fully measurable.

Control groups to understand how much spending is genuinely attributable to marketing could mitigate this. Those who opt for this approach will understand each customer holistically – whichever channel they’re using.

In turn, they can divert the presentation of PPC, for instance, away from customers who already spend with the advertiser – thus not ‘wasting’ budget on clicks from established customers. Rather than reducing PPC spend, retailers are reassured it’s being properly spent.

The Changing Face of Rewards

Incentives and discounts remain essential tools of the trade; rewarding spending, whilst simultaneously encouraging more, is an art. However, there’s a desirable new layer to loyalty rewards, accelerated by the pandemic: exclusivity. We’ve worked closely with Lakeland on their exclusivity schemes, which demonstrate ‘extra mile’ behaviour, allowing loyal customers to feel like they are part of the club.

Lakeland also facilitates fund-raising events for charities, even maintaining local appeal by varying the beneficiary by region. Consciences are heightened post-Covid, so ‘softer’ elements are likely to be imbued in more loyalty programmes as retailers clock up ‘emotional credit’. Ultimately, an exclusive offer will make a consumer feel more connected to and understood by a brand and may consequently drive loyalty.

Conclusions

Change is afoot, but no-one really knows how it will turn out. There may be a permanent rebalancing between online and offline – but physical retail is still important to customers. Why else would online companies still be opening physical stores?

Agility is the name of the game, plus avoiding assumptions about customer behaviour. That’s why data is so important:­ businesses that use their data can differentiate themselves from competitors and optimise their results.



Lakeland’s Pandemic Journey
Scott Jefferson, CCO

During lockdown, we maintained communications with customers – including those who weren’t buying online. We moved away from traditional sales messaging to ‘content’ that would entertain customers during a stressful time, like ‘how to’ articles on cooking and baking.

We aimed to help our customers manage their lives and keep the brand in mind, rather than directly sell product. In fact, it did both. Click-through rates increased from 6% to 25%, and we have since hard-wired these communications into our strategy.

We were concerned that discounting might be affecting margins, so we endeavoured to find out. Targeted discounts were introduced for higher value groups. It transpired that those customers who used discounts from their offer packs were three times more valuable (revenue and margin) than those who had not.

Finally, we are seeking to delight customers with unique experiences, along with charitable support. We block booked tickets to a well-known hospitality exhibition, then arranged for celebrities to attend Lakeland-only sessions. Loyalty scheme members were offered tickets at a minimal cost, offering a truly unique experience. We have also donated £200,000 to charitable causes.

Ultimately, getting to know our customers and maintaining that relationship has paid dividends with regards to what we’re able to offer them post-pandemic. We’re not just able to offer generic rewards for loyalty, but to demonstrate that we understand our core customer set and what they actually want.

[i] https://www.ons.gov.uk/businessindustryandtrade/retailindustry/timeseries/j4mc/drsi

SIGN UP TO SKILL UP
The All Access membership allows you to discover 500+ hours of best in class thought leadership