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Loyalty scheme the right weapon in the fight to retain customers in the face of recession

In the battle to retain customers in an economic slump, loyalty schemes are one of the most effective weapons brands can employ, according to new research from GI Insight. By Andy Wood.


Loyalty scheme the right weapon in the fight to retain customers in the face of recession

As the UK continues to be mired in a ‘double-dip’ recession, many firms have found more ‘promiscuous’ shopping behaviour among customers, as an increasing proportion have looked for bargains. With customers shopping around for deals and budgets tight for businesses, companies have had to decide: should precious marketing spend go to protecting existing customers, or poaching those of competitors? With studies showing that it costs up to ten times more to generate a new customer than to maintain an existing relationship, retailers should be doing all they can to hold on to the customers they already have.

GI Insight’s latest research indicates that a well-implemented loyalty programme is one of the best ways to hang onto good customers, enabling a firm to successfully attack the retention problem from different angles. More than 1,000 UK consumers were surveyed, with 68% saying that at least one of the companies they buy from has a loyalty scheme that has been a factor in keeping them purchasing over last few years. The survey also revealed that 74% of respondents have seen companies ‘wake up to the need to give their customers better, more individual service, attention and offers’ during that time, when the downturn has dragged on.

Indeed, the research indicates that loyalty programmes played a major role in firms retaining customers and maintaining consumer satisfaction during the course of the recession and continuing economic turmoil. More than half of those surveyed (58%) say they have stayed loyal to certain brands, retailers and suppliers over that time, feeling that they have ‘somehow given me value in return for my loyalty’ despite the fact only 40% noticed the schemes they belong to increasing points, improving rewards or providing more bonus point opportunities.

Through loyalty schemes, companies can not only offer rewards but can capture and utilize valuable data that enables them to analyse their customers’ needs and preferences. By utilizing this insight, brands can tailor and personalise the communications they have with each individual – allowing them, for instance, to alert customers to discounts on relevant products and follow-up offers related to recent purchases. It is service such as this that helps a customer feel valued and, in turn, value the relationship they have with a brand. Indeed, customers are well aware of the returns loyalty schemes can offer, with 77% saying they don’t like giving details about themselves to a company unless it is through a ‘proper loyalty scheme’.

There are more testing times ahead for all businesses and customer churn is a major issue. Therefore, marketers need to know their customers so they can communicate with them more effectively and provide better service than competitors. To do this, companies must take full advantage of the opportunities they have to gather data on each consumer and use all available channels to reach those individuals with the right communications at the right time. Loyalty programmes provide a level of customer insight that not only enables firms to make a pre-emptive strike aimed at retaining customers who might stray – but it can be used to get them spending a more and more often, making them more profitable too.

Andy Wood is managing director of GI Insight

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