Supermarkets lead the way when it comes to rewarding customer loyalty with over half (52 per cent) of those surveyed being part of a scheme and reaping the benefits. Supermarkets were seen by respondents as the provider that makes the most effort to retain them as a customer. Across insurance providers, home insurance companies were considered to make the least effort to keep existing customers happy.

Recent research carried out by The Grass Roots Group revealed 48 per cent of consumers admitting to having changed providers because of poor customer service, and 55 per cent admitting they would have stayed with a brand if they had been offered preferential treatment and rewards. Companies really need to wise up to the importance of a solid customer retention strategy and the impact rewarding loyalty can have.

Loyalty schemes are no longer the domain of supermarkets and mobile phone providers. Marketers in other industries could learn a lot from the success of these schemes to customers.

Who is doing it well?

By putting the focus on rewarding its existing customer base, Tesco Bank has proven how much it values them and is not interested in simply attracting new customers. The supermarket’s ClubCard is popular with customers, and by speaking to 20,000 of its loyal following the company understands exactly what they want, which is one of the most important things when considering new ways of retaining customers. By linking up with the ClubCard customer loyalty scheme to collect points as you spend, among other benefits, Tesco Bank is giving customers a good reason not to develop a wandering eye.

Five steps to success

Understanding the issues your current customers are facing and going the extra mile to maintain their trust in you is paramount. Here are my five key principles in executing an effective customer loyalty strategy for your organisation and how to repeat business.

1. Ease of redemption

Rewards must be quick and easy to redeem, without any high level of effort on behalf of the customer. Sainsbury’s Nectar Points is a prime example. By offering customers lifestyle rewards and point based loyalty schemes, it is making the incentive easy to redeem, with the financial benefits instantly available for customers to see.

2. Reward choice

There is no optimal number of rewards that should be offered, as this varies on a programme by programme basis and is driven by factors including the spread of customer demographics, budget and programme objectives. Vouchers are great way for customers to enjoy spending their rewards on themselves and appeals to many interests. New rewards can be trialled on a tactical basis to assess impact on customer behaviour and the most important thing is to remember they must be relevant to the audience and something they really do want.

3. Maintain excitement

Customers tend to get used to loyalty programmes quickly, so it is important that a reward scheme does not become too familiar. Customers can also, over time, begin to view loyalty rewards as an entitlement rather than a gift. This can be avoided by regularly refreshing or enhancing a programme so that there is always something new to please and engage the customer.

4. Surprise and delight

Providing a reward that a customer isn’t expecting can be a very powerful tool. By giving customers an incentive to win as they spend, the perceived value and memorability of the brand is amplified. With Lloyds Everyday Offers, current account customers have the chance to earn up to 15 per cent cashback from places they already regularly shop at.

5. Communication and engagement

Our research has shown the power of loyalty schemes in retaining customers, but it is clear that not all industries are using them to their advantage. Effective communication is the key to the success of any loyalty programme. It is important to ensure customers understand the initiative and value of what they are being offered. Points statements, reward reminder emails and programme enhancement updates are simple and effective ways to drive customer engagement and cement the ongoing bond with the brand.

The old adage “the customer is king” still holds true today and with so many options and offers available for today’s consumer, it is often the small things that can make the difference between holding onto your customer base and them switching allegiance. Putting simple steps in place to reward loyalty for frequent shoppers and subscribers, as well as giving them the same or comparable opportunities as new users will ensure they have no reason to go elsewhere.

 

By Ian Horsham, Divisional Director, Promotions and Incentives at The Grass Roots Group. 

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