Retailers should embrace loyalty programmes despite the challenges
By Glynn Davis
Ahead of presenting at the 5th Retail Bulletin Customer Loyalty Conference 2014 on 10 June, Barry Smith, senior consultant at Ikano Insight, suggests: “Although CRM managers get it, the challenge is to convince the boards to invest in loyalty programmes. They see a lot of [free] data out there in social media but the problem is that you are not able to link this to the customers when they are shopping in bricks and mortar stores.”
He calculates that for every £1 invested in a loyalty programmes, the valuable data they generate results in retailers’ typically earning £7/8 back as a result in the insight they can gain. He says Tesco long ago recognised the gains to be enjoyed but still today many other retailers continue to miss out and operate in single-channel silos.
To fully maximise loyalty programmes Smith says retailers have to move on from just looking at the recency, frequency and monetary value of their customers. “This tends to say a customer is worth a certain amount but it does not say how loyal or engaged they are with the brand,” he says, adding that consistency should also be taken into account as this highlights the regularity of their spending. “It’s not just about how much they spend. It’s about how regular they spend,” says Smith.
Another mistake is to focus too squarely on hard – financial – rewards. Instead he says the ideal is to have a series of benefits attached to a programme. Emotional engagement is one element and this is particularly well suited to fashion brands where some shoppers will have a strong affinity.
Softer benefits are another and could involve the retailer inviting loyalty members along to pre-season launches and open evenings. These are low cost but have a high perceived value. Hard benefits are still relevant but this could relate more to actual monetary amounts rather than points as people respond better to money-off than percentage discounts and points.
The most impactful way of mixing up these different incentives will be driven by the spending patterns that the loyalty data highlights. These patterns are being made ever richer by now being able to look at a customer’s wider footprint – from taking into account their social media activities. “We’re starting to listen to social media [activity] and look at the tools for creating a single customer view. This is a big data challenge,” says Smith.
Another challenge for retailers is overcoming their ageing Point-of-Sale (PoS) systems. Many retailers regard having plastic cards for loyalty programmes as “old hat”. Although Smith believes they still have a place for certain demographics there are now plenty of people who prefer an app on their phones whereby a barcode is scanned at the till to recognize them.
Unfortunately, Smith says, many retailers are unable to undertake this scanning as their tills do not have this capability. Although Starbucks is able to do this there are many other operators on the high street that would need to first upgrade their PoS solutions. However, some retailers like Monsoon simply type in the customers’ unique loyalty number.
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