Retail Bulletin Customer Loyalty Conference 2012
In the current tough environment retailers have continued to focus heavily on customer acquisition supported by the indiscriminate offering of money-off coupons, which have taken the focus away from rewarding loyal customers. By Glynn Davis
Such has been the profusion of coupons that Gary Topiol, managing director for EMEA at Empathica, told delegates at The 3rd Retail Bulletin Customer Loyalty Conference 2012, sponsored by the Logic Group,in London that 61% of consumers now regularly use them and he suggested it has reached the point whereby in some restaurants and stores “you can feel as if you are being ripped off if you pay the full price”.
What exactly is loyalty?
He believes it is only “great experiences” that build long-term loyalty and that retailers should look to understand what it is that makes customers loyal – and then take the next step of enticing the into being brand advocates.
Considering whether there is even such a thing as a loyal shopper is something that Leonie Foster, marketing insight director at Tesco, has been pondering. And she concludes that it is highly doubtful, highlighted by the fact that 60% of customers state location as the key driver of loyalty to a certain store. After that, price is the second major driver.
But this has not diminished the commitment of Tesco to its loyalty programme Clubcard. “It is not enough on its own to create loyalty but it is very valuable because we can use it to tailor rewards and measure behaviour. The business has to recognise it is just one part of loyalty, which can be a challenge,” she explains.
Foster says the most successful rewards are: tailored, simple, fair, relevant and genuinely rewarding. Using these elements Tesco has recently been developing its rewards further through its Clubcard Exchange and Points Booster initiatives.
Data and customer communication is vital
In addition, it has created Tesco Families and Tesco Communities that run alongside its Shopper Thoughts panel, which seek to add extra insights into shopper behaviour over and above the sales data that is collected from Clubcard.
This focus on data reflects the fact that its programme is fundamentally around information collection and using it to gain insight. The power of such data was quickly realised by Kevin Hydes, marketing director of Costa Retail, who launched the coffee chain’s loyalty programme in 2010.
“The most valuable part is the customer feedback we receive from it. We received 250,000 pieces of feedback in only three months, which was the equivalent of 21 years of mystery shopping visits information,” he reveals.
The data is also being used as customer demographic information that is helping determine new store locations. It has highlighted villages with only a few thousand residents but who would be sufficiently regular coffee drinkers to warrant a local Costa outlet.
What to do with infrequent shoppers
Such a programme is perfect for retailers that have frequent visitors but for others a coalition like Nectar might be better. Or the likes of the new service from Visa Europe that Crispin Rogers, senior vice president of loyalty and merchant analytics at Visa Europe, says provides data showing customers’ spend on its debit cards across all merchants.
When this is linked to Visa’s ‘Spendographics’ capability, which adds attributes to customers raw sales data – such as brand affinities and inferred hobbies – then he says “it is very powerful and shows what the drivers of spend are for certain segments”.
Magnus Holst, communications manager for Ikea Family at Ikea, is in the camp of having infrequent shoppers but says the home furnishings company still values its loyalty programme Ikea Family.
To its 54 million members around the world it assigns space in-store to specific exclusive products, offers special prices on certain goods, and gives access to third-party services – from suppliers that share Ikea’s philosophies on the likes of sustainability.
Charity and ethics drives loyalty
Linking loyalty programmes to ethical and philosophical stances is proving beneficial to a number of organisations including Costa, which links its programme to a charitable Foundation - that funds schools in coffee production countries. Hydes says it is more about creating internal goodwill – which can be translated into a type of loyalty – than an external message: “For some groups this can be incredibly motivating, whereas for others it is not.”
Aligning with a charity has certainly worked for The White Company as it has both engendered greater engagement with employees and helped customer retention. The company linked with Great Ormond Street Children’s Hospital to run a bespoke campaign involving a range of heart shaped products – ‘Hearts helping save little hearts’ – that began in September.
Every such product sold prompts a 10% donation and such has been the demand for heart-shaped plates and covers with hand-stitched hearts that Fiona Strang, marketing director at The White Company, says a 20% sales uplift was quickly achieved and the range has now been extended.
On top of the enthusiasm generated from customers, she says employees have also been keen to get involved with the campaign, as have suppliers who have even offered discounts on products. This has highlighted the campaigns ultimate success in driving retention levels at The White Company and most vitally boosting donations at Great Ormond Street.
Personalisation becomes important tool
Such activities clearly need to be created with the company’s customer base in mind and the next step on from this is the way they are presented to individual shoppers, with personalisation and tailoring becoming increasingly important.
This is a focus for Bernard Page, head of CRM at Shop Direct Group, who says: “We are now identifying customer behaviour on our company’s websites and serving up tailored relevant experiences to get greater conversion and advocacy.”
Crucial to this exercise is “matching your efforts to the customers’ worth” as he says Shop Direct was spending a disproportionate amount on lower value customers and missing out on investing in the top quartile.
The ROI conundrum
What is invested in CRM and loyalty programmes and the measurable benefits they deliver continues to be a big issue of debate. Jon Worley, principal consultant within customer loyalty management at The Logic Group, told delegates: “Retailers need to develop programmes that monitor the components of incremental revenues earned and also build a framework that provides the necessary feedback.”
Social media has its own specific issues for retailers over returns on investment (ROI) with many merchants questioning the value it brings to their businesses. Ifty Ahmed, group head of customer engagement at ICLP, is a strong believer in its power to drive revenues and loyalty and points to Bain & Co. research that shows customers who engaged with brands in social media spent 20-40% more than those who didn’t.
Ed Weld, head of digital at Lush, is a social media advocate but is relaxed about ROIs. Although he suggests Facebook is the company’s biggest referrer of traffic, he adds: “It’s not necessarily about measuring returns [on investment]. They’ll come through in the long-term through engaging. People get too detailed – social media is a branding tool not a sales tool.”
Emma Hamblin, content and social media coordinator at Joules, agrees: “We might end up selling through other stockists (trade customers) down other channels so there is no point measuring what sales come directly to us as a result of our social media activity.”
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