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What do your customers want from loyalty in 2018 and beyond?

  • 9 mins read

In this post we look at loyalty programmes, where they originated, and the challenges faced by brands operating loyalty programmes today.

Rob Verheul
by Rob Verheul
Managing Director

Graphite's Managing Director and a BIMA 100 winner. Also on the BIMA Young Talent Council, which is focused on creating a pipeline of future innovators in all areas of digital.

Published on Tuesday 19th September 2017

We recently spoke to 14 well-known brands about how they use loyalty to increase engagement with their existing customer base, improve consideration and learn from their customer’s behaviours.

A lot of the challenges that these brands face are the same, and we’ve summarised them here along with our thoughts on how brands can move beyond these concerns and deliver long-lasting value for their customers through loyalty experiences in 2018 and beyond.

Off to a good start

Loyalty programmes are certainly nothing new. The concept of loyalty and rewarding customers has been first credited to ‘Trading stamps’ - a scheme offered by Sperry & Hutchinson which operated the first rewards programmes for United States retailers in 1896. Retailers would buy stamps at a price less than their face value, and systematically distribute them to customers with every purchase. The theory being that customers would be motivated to shop with a retailer that was paying back additional value over one that wasn’t.

In the late 1950’s the UK high street became home to a very popular programme, as ‘green shield’ stamps launched. The scheme was very simple, a stamp would be issued for each 2½ pence spent. After having saved them up, customers could redeem them from a catalogue or S&H Green Stamps shop. Fun fact - this store later became the well-known British retailer, Argos.

The loyalty model - where retailers systematically reward individual customers in exchange for their continued loyalty has always been compelling, and seen as a ‘win-win’ for retailers and consumers.

Over a hundred years after the concept launched, loyalty is still a popular feature on the high street. The stamp card format still exists in some retailers, though for the majority, customers carry swipe cards, or retailer apps, that are scanned at Point of Sale (PoS).

For the consumer - each format change has ushered in a new level of convenience in the customer experience, with brands benefitting from new and improved streams of data that allow them to plan and evolve their offerings. Now, with the digitisation of every transaction, the retailer is able to track and analyse every purchase, building up a far greater understanding of their customer and tailoring offers to appeal to their tastes - and their wallet.

Key challenges in loyalty

Due to the vast number of loyalty programmes in place on the high street, consumers are often already participating in several schemes and not immediately driven to engage with more. This means that the cost of acquisition can be high, especially on app-based programmes - where registration can take some time, and passwords are regularly forgotten as users move from device to device. How can new customers be attracted and converted from an anonymous user into a trackable member?

Data

Customers are realising the value of their data and questioning whether they are happy to share this information in return for ‘just’ points. With GDPR being enforced from 25 May 2018, brands must also be clear about how they are using customer data, and ensure customers have explicitly opted-in to that usage; quite a challenge for many brands who have acquired huge databases over several decades of operation - for example Wetherspoons which has publicly deleted and started again with their database.

Acquisition

Due to the vast number of loyalty programmes in place on the high street, consumers are often already participating in several schemes and not immediately driven to engage with more. This means that the cost of acquisition can be high, especially on app-based programmes - where registration can take some time, and passwords regularly forgotten as users move from device to device. How can new customers be attracted and converted from an anonymous user into a trackable member?

Engagement

Social channels are great at delivering content and offers to consumers who follow them, but previously this was the primary role of loyalty scheme eCRM. With so many brands regularly blasting offers, the inbox is cluttered and consumers primed to ignore them. What can be done in order to stand out and encourage engagement? There are many brands (particularly in the food & beverage space) that suffer from reliance on vouchers and struggle to attract users when there isn’t a voucher available as they have trained their user to expect an ever increasing flow of incentives.

Value

Some brands haven’t engaged with loyalty in a bid to protect their margins, which may already be razor thin. For those brands where the perceived value is already low and further discounting is unlikely to impress customers, or those opposed to discounts - what does ‘loyalty’ look like?

Personalisation

How can loyalty programmes be made to feel personal, when they are anything but - with potentially millions of customers, each with their own expectations and preferences? This is even more important for premium brands, where the store experience and personal service has long been vital to their proposition.

Some thoughts on creating an effective loyalty programme

We’re working with a number of brands facing the aforementioned challenges and asking ‘what’s the answer’? What opportunities exist beyond points, and what should they do next?

Every scenario and programme is different, however we’ve identified three key areas for discussion:

Understand your customer and your brand value proposition and amplify it

The great opportunity of the loyalty relationship between a brand and the customer is that there is a common understanding of what the brand stands for, so when thinking of what to do next to elevate the programme - the answer is almost always to expand upon that understood value proposition.

For example, members of the Hilton Honors reward program can download a mobile app to their phones and then use it to check the status of their hotel room, check in when the room is ready and even use the phone as a key to get into the room - all of this without ever having to visit the front desk. This is a good example of an brand understanding their value proposition and providing unique experiences to members - in this case by providing genuine utility which supports the customer experience.

Experiment with rewarding customers for non-transactional behaviours as well as transactional

It’s likely that your customers participate in multiple loyalty programmes, each with their own different points or rewards paradigm; yours is one of many. Whilst some customers definitely still enjoy collecting points, the various models, or ways in which they can be collected are just one component of their relationship with your brand.

One way to differentiate your programme and engage your members is to incentivise not only sales, but other engagement in the brand or even the product experience. Callaway Golf rewards individuals for watching training videos, listening to podcasts, registering details and even visiting the website - but why stop there? Incentivising improved performance on the golf course would be an interesting next step - perhaps measuring it through wearable technology like the Apple Watch.

Grow your loyal customer base through your loyal customer base

The most credible form of advertising comes straight from the people we know and trust. Eighty-three percent of online respondents in 60 countries say they trust the recommendations of friends and family (according to the Nielsen Global Trust in 2015) - yet the opportunity is often overlooked.

Your loyalty programme members are the greatest opportunity to not only to drive more incremental revenue (through incremental, incentivised sales), but can be a key to growth - through advocacy. There should always be a clear method to invite friends, and often it doesn’t always need much incentivisation - some brands are scaled almost entirely through networking effects, with happy customers sharing the brand virtues, in the case of Monzo - existing customers are motivated by the personal satisfaction of being able to offer a ‘golden ticket’ to the friend to ‘jump the queue’ into membership.

How Graphite can help

Graphite is a digital product agency which works with global organisations to create loyalty platforms and programmes with value and purpose. We know that running a programme is more than a full time job, so we work alongside internal teams and provide them with the tools and resources to look at new opportunities - to work ‘on’ the programme, not just ‘in’ the programme.

We are working alongside several digital experience leads and loyalty managers to consider, define and refine their loyalty propositions and we do this in a really focused way. As a Product-focused agency we think big but start small; using design sprints to quickly create prototypes which are tested and proven with customers in just a week.

When we know what works (and have the evidence to prove it), we’ll work with our customers to bring ideas to life, and help implement them in their live programme if needed.

For some customers we also offer a one-stop-shop for loyalty design and technology, with strategy, design and technology expertise built over the last 6 years through working on some of the UK’s biggest and busiest schemes, we’re happy to run your customer experience technology so you can focus on the customers, insight and your business.

Contact us

Rob Verheul (@rob_v) is the Managing Director of Graphite, a Digital Product Agency which has experienced these challenges (and more) throughout the years working with clients’ organisations. If you need support with bringing to life your ideas and products we would be delighted to hear from you.