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Conference preview: Retailers need to recognise they are in the business of loyalty

Loyalty programmes should be regarded as long-term strategic initiatives rather than tools to simply drive increased sales in the short-term by distributing rewards to customers. By Glynn Davis

GENERAL MERCHANDISE

Conference preview: Retailers need to recognise they are in the business of loyalty

Ahead of taking part in a panel discussion at the 4th Retail Bulletin Customer Loyalty Conference 2013 on June 12 Stuart Evans, general manager at ICLP UK, suggests: “Loyalty is about strategy, and creating a roadmap with a commitment from a board sponsor. It’s a strategic investment that is part of a retailer’s advertising, marketing and product strategy. But for many it is just a bolt-on.”

Increasing sales might help a retailer deliver a quick return on investment (ROI) from their loyalty programme but Evans says long-term thinking should instead be adopted whereby value is gained from using the data generated from the programme.  

“It’s hard for retailers to think about the business of loyalty – including the selling of data to brand owners - but the maximum opportunity for loyalty is about recognising what the value of the data is and the routes to [get it to] market, which might involve bringing third-parties in,” he explains.

Evans points to the high revenues Tesco drives from selling its data to big brand owners and suggests retailers should also take this route to “commercialise their data”. He says it highlights the differentiation that retailers must make between running a loyalty programme for their business and being involved in the business of loyalty.

Although much talk is being made of Big Data Evans says recent research undertaken by Forrester Research for ICLP found that consumers stated: “Listening and responding to me is more important than over-predicting me. Don’t just use last year’s shopping data.” 

Mobile devices certainly help here. By utilising their GPS capabilities and adding in some data points from the customers’ shopping history it is effectively taking “small data” and combining it with a contextual element to potentially create an effective time-sensitive targeted engagement with individual customers.

The latest moves – spearheaded to some extent by Tesco and its Clubcard Play initiative – involve customers designing their own loyalty programmes. By giving consumers access to their own data it enables them to set their own goals in terms of purchasing and to then look to gain relevant rewards from the retailer.

By looking at say the last five years of their shopping transactions the customer might look to reduce the levels of alcohol or high fat foods that they have historically been consuming. “They could then set themselves goals and look to the retailer to reward them,” says Evans.

Tesco hinted that ‘gamification’ might play a role in the way such an initiative plays out. But  whatever the outcome Evans says things are moving on apace from loyalty programmes being centred on the giving away of money-off vouchers. “It’s about giving customers choice and control over their rewards and also retailers responding to their current interactions. It’s not just about giving rewards but giving relevancy,” he says.

This represents another example of the shifting of power from the retailer towards the customer and goes some way, according to Evans, of effectively replacing CRM (customer relationship management) with VRM (vendor relationship management).  

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