Do store cards and discounts really result in loyal customers? Brands need to be doing much more.
A key factor in determining how loyal a customer is to a particular service or brand is the amount of choice that person has. In the past people relied on local shops for all their goods. As travel was more difficult and the option of going online didn’t exist the butcher or baker in their town or village was their only option. As a result, customers were regular visitors and a relationship could be built with the shopkeeper based on personal preferences. When we consider this situation, were the customers loyal? Or were they simply repeat business due to a lack of viable alternative?
The difference is quite stark when we compare this to the situation today. We drive miles to the supermarket and have seen the internet revolutionise the way we buy. We can purchase the same item cheaper by going online and at the same time we can see the views of others through social media. We are looking for other customer opinions on Facebook and Twitter and changing our purchasing plans according to positive or negative feedback. With so much competition in today’s market, building customer loyalty has never been so important - yet equally so difficult to achieve.
This is further complicated for physical stores as the internet and smartphones mean a customer can be in store, holding a product and yet still choose to go elsewhere. Physical stores are becoming showrooms where customers inspect products in-store before going on to buy them for less online.
However, while technology is seemingly undermining customer loyalty, brands are also adapting technology to engage with customers in order to create long-term relationships. Popular restaurant chain Nando’s this year upgraded its long standing paper loyalty card system to a plastic card and smartphone app. This is a positive move for Nando’s, but plastic cards still seem quite outdated when compared with smartphone apps and even more so when you consider how many loyalty cards consumers may be carrying. In addition, the data on these cards is valuable but it still only tracks purchases and not what the route to the purchase was.
An example of the shifting loyalty landscape came from Starbucks in 2013, with the company bringing out an app and plastic card to replace paper loyalty cards used for many years. The data from the app showed that the best use of a loyalty card is not to reward loyalty. It should be used to ensure that customers who are at risk of lapsing or going elsewhere are rewarded. For example if a customer buys a coffee every day, the introduction of a loyalty scheme may mean that the sixth cup is free. Has this scheme driven loyalty or would the customer have paid for the sixth cup anyway? Can the scheme really be said to be leading to loyalty customers, or would that coffee have been brought anyway? If it's the latter, the shop is reducing its revenue without increasing loyalty.
The data held on each customer’s plastic card allows Starbucks to protect revenue by tailoring offers that prevent customers from going to a competitor. This is not the same as rewarding loyalty which was assumed to be the purpose of loyalty schemes for many years. The main advantage of a plastic card can be summed up in one word: data. However, despite most brands storing this data there are not many who are actually using it to convert it into intelligence to improve customer experience and build loyalty. Giving real value to a customer builds long-term emotional engagement that can evolve into true loyalty.
Companies like Nando’s and Starbucks are recognising that within a multi-channel world the paper card simply isn’t enough. With customer experience king in the modern retail environment, data is the facilitator which can tell us what the experience needs to look like. Brands have to be better at understanding the complexity behind capturing customer loyalty while there is considerable change in consumer habits and technological advances. Some do appreciate this shift but simply don’t know how to make it come to fruition. The largest challenge lies in the management of all the information received from and about customers and successfully integrating back into established processes. If you can’t exploit the data, you can’t use it intelligently to increase revenue.
To successfully promote loyalty, brands have to ensure that they have a single customer view that allows them to personalise content and deliver an outstanding customer experience. Customers today expect this as standard, so the differentiator has to come in the personalisation. Customers want to have offers tailored for them rather than having to wait for the right deal to come along. Over the coming year we are likely to see this adopted with more brands shifting away from plastic cards to exclusively digital, mobile and social engagement.
The loyalty landscape has shifted and loyalty programmes need to catch-up.
By Josh Morse, Marketing Director at CloudSense.
PrivSec Conferences will bring together leading speakers and experts from privacy and security to deliver compelling content via solo presentations, panel discussions, debates, roundtables and workshops.
For more information on upcoming events, visit the website.
comments powered by Disqus