What makes a loyalty programme effective?

Comarch’s recent study on the future of shopping identified emerging trends in the European retail market.

The study found that 71% of respondents were part of a loyalty programme. Loyalty card holders were most numerous in the UK (where 79% of respondents held a card), while the fewest resided in The Netherlands (where the figure was 58%).

Loyalty schemes were more popular with women, 77% of whom were loyalty card holders, as opposed to 65% of men. While 76% of 35-44 year-olds were programme members, the figure fell to 61% when looking at 18-24 year-olds.

Loyalty programmes are clearly important to us as customers, but what makes us use them? What makes a loyalty programme truly effective for both retailers and customers?

Our loyalty varies by retailer

Loyalty is an emotionally driven concept. While retailers may strategise ways to make their customers more loyal, there has to be a bond between the retailer and consumer for people to develop true loyalty to the brand.

Our study found that people felt greater loyalty to beauty and fashion retailers than they did other retailers. Of course, beauty and fashion both serve as tools for self-expression. They help us define and shape our identity to a degree that other forms of retail therapy don’t quite match.

As shoppers, we’re also socialised into shopping around when it comes to things like household equipment and electronics. If I’m looking for a branded item, like the latest games console, I may visit stores and research online retailers looking for the best bundle deal, or the cheapest offer. I’m less likely to do this shopping around for fashion and beauty products, as fashion and beauty retailers often have a more defined brand image – one that we can more closely identify with.

What do we want for participating in a loyalty scheme?

Our study revealed that customers were much more interested in getting tangible rewards for their loyalty, than they were in less-tangible rewards or simple engagement with the retailer.

In total, 86% of respondents were mostly interested in offers and promotions generated by their loyalty programmes, while 81% rated the quality and quantity of the reward shop, and being able to collect points, as important elements of loyalty programmes.

More than half of respondents weren’t interested in participating in competitions or lotteries, while 67% dismissed engagement elements like digital achievements and games.

Customers participate in loyalty schemes to be rewarded for being loyal. These rewards work best when they’re tangible or can be traded in for something of value.

Personal data, for a price

It’s no surprise that people take the security of their personal data seriously. By joining a loyalty programme, we’re giving retailers access to a rich source of valuable data, but what do we get in return?

The study found that, across Europe, younger generations of consumers expected personalised offers from the retailers they were loyal to. Loyalty should represent a relationship, one where the retailer knows what their customer wants and helps them towards their goals. If the retailer fails to use the data they have on customers to provide them with tailored rewards, what does that say about their commitment to the relationship?

As retail becomes more mobile and digital focused, and the amount of data available on customers grows, more loyalty scheme members will expect these personalised rewards as standard.

How we want to exercise these benefits

The study found that, in general, we prefer retailers to communicate with us online, and that our preferred way to receive digital coupons and vouchers is via email and the web. However, every fifth respondent preferred to print their digital coupons and use them in-store.

When we shop in-store, we still prefer to use physical loyalty cards – 88% of respondents preferred them over using emails and usernames (6%) or a virtual loyalty card on their smartphone (6%).

Again, this could be because dealing with physical forms of ID in-store is easier for many customers. It means they don’t need to play around with their phones or have emails and usernames to hand.

Retailers need a programme that’s flexible enough to follow member preferences, rather than forcing people to engage with the loyalty programme in a way that’s easier for the retailer. Fail to implement such a system and customers are less likely to collect and redeem their rewards – making the loyalty programme redundant.

As consumers, we don’t see channels – we simply use the methods that suit us at the time we need them. We change the way we interact with a retailer depending on things like the time we have, our current mood or what we happen to be doing that day.

By understanding the consumer’s need for flexibility, retailers can create multi-channel loyalty programmes that are adaptable enough to service both the needs of the retailer and the customer. It should be able to take the data provided by members, analyse it, and provide personalised rewards that members can work towards and redeem whenever and wherever they want.

While, as customers, we are willing to give retailers access to our data; we’re becoming more aware of its value and its usefulness. We don’t just want to be rewarded for our loyalty, we want retailers to use the data we give them to surprise and delight us. We want loyalty programmes that make us come back for more.