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Customer loyalty programmes: Time to factor technology into the formula?

17th Sep 2012
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Loyalty programmes need more than emotional engagement and financial rewards, indicates a new report.

The traditional formula for customer loyalty success is one part emotional engagement and one part transactional engagement. But a growing body of evidence is demonstrating that the chemistry of customer loyalty is volatile, and the precise balance of ingredients is in a constant state of flux.
Furthermore, a new report indicates that not only is the traditional balance shifting, but other new factors are increasingly playing a part in this complex concoction – something that brands seeking to capitalise on loyalty programmes should take note of.
The Customer Loyalty Report 2012, conducted by The Logic Group and Ipsos MORI, is an annual survey looking at the current customer loyalty landscape, focusing on understanding what motivates customers to be loyal and how best loyalty should be rewarded in today’s environment. The findings reflect the tough economic conditions consumers find themselves in, with Ipsos reporting that 47% of British adults claim their current financial situation is ‘weak’ and 26% expect it to be weaker in six months’ time.
And, unsurprisingly, the Loyalty Report reveals that consumer loyalty is therefore presently influenced by transactional and economic rewards much more so than any emotional engagement with a brand.
“There is always an aspect of brand engagement – is the brand relevant to me and my lifestyle,” explains explains Jon Worley, principal consultant of customer interaction experts The Logic Group. “That’s always a strong theme and good loyalty programmes work to leverage that emotional attachment and engagement. But it is being dampened down.
“The other aspect is ‘what’s in it for me’ – the reward needs to be strong and relevant. That aspect is always there too. But what we’re seeing right now is that this is heightening in importance and programmes are being driven to hard cash and hard discount.”
With the global economy continuing to struggle, the 2012 findings continue the trend of previous Loyalty Reports, with consumers disengaging from loyalty programmes that are associated with non-essential spending. This has hit some sectors harder than others.
“In times like these, consumers have to look after finances and attention turns to financial rewards,” continues Worley. “The discounting trend has continued and obviously it is difficult for the luxury end of the market to deal with that trend because they thrive on emotional attachment. The Jaeger programme, for instance, has moved to strengthen the rewards it provides through its loyalty mechanic, presumably in reaction to the market conditions.
“Rather than just discount, Jaeger has continued with its focus on accumulation type mechanics but is recognising that it needs to increase the value of it. So there are obvious examples here of retailers pulling levers and turning dials, and they seem to be doing that to strengthen the more financial/transactional aspect of their programme.”
Technology and loyalty
While these findings are perhaps unsurprising, elsewhere the Loyalty Report throws light on a more interesting development – the emergence of technology as a loyalty dynamic.
“The technological changes we are seeing in society today are bringing real benefits to customers’ interactions with loyalty programmes. As such, consumers are no longer only interested in reaping the benefits from traditional card-based programmes, but are looking to alternatives such as social media and real-time discounting to stay loyal,” says Antony Jones, CEO of The Logic Group.
Indeed, while social media is still in its infancy as a loyalty tool, Jones believes there is tantalising evidence that it could pack a useful punch in the loyalty war if used correctly.
“From a customer point of view, social media is changing the way customers interact with companies. For businesses, using social media platforms such as Facebook adds another channel to customer interactions and greater business opportunity to influence and engage with customers along their purchasing journey; whether that’s greater availability of information, a more relevant and customer-friendly tone to communications, responding quickly to an enquiry, or offering a targeted loyalty deals to followers,” he says.
Amongst the findings, the Loyalty Report reveals that 27% of respondents said that they will visit the Facebook site of a company they are loyalty to, and 16% of those questioned said they will follow companies they are loyal to on Twitter within the next 12 months.
Nonetheless, only 9% of adults in Britain have received a loyalty offer via a social networking site in the last six months.
“While it doesn’t look like loyalty programmes are really exploiting social media channels to any great extent yet, we’re seeing a growing proportion of the public engaging with brands through social media,” notes Worley. “There are some strategies that are beginning to take shape, and there are some examples of retailers distributing coupons and offers through that channel. And as the industry gets to grips with how to develop an ROI model in that channel, we’ll see more and more coupons distributed through social channels.”
Mobile and immediacy
One technology that is at a more advanced stage of maturation, however, is the mobile – with 13% of adults having received loyalty scheme offers via their mobile phones in the last six months, with a further 7% extra expecting to receive offers via their mobile phones in the next 12 months. Furthermore, 24% of British adults stated they will use their phones to check product details/product reviews in store in the coming 12 months.   
Worley believes the key factor with the mobile is the ‘immediacy’ that it offers to shoppers while they are out and about. “This is a general trend in the way we all go about our day-to-day lives and we are seeing that in how consumers want to interact with a loyalty programme – they don’t want to wait for a reward, they want it immediately, and they want to be able to access it quickly and conveniently,” he explains.
“We found that 42% of shoppers actually prefer to receive offers while they’re shopping not after, so that is a clear indication that while I’m out and about and shopping and my mobile phone is with me this is when I’m most likely to accept and take up an offer. It gives us the opportunity to deliver coupons to consumers when they are shopping and deliver them coupons that are relevant, so taking advantage of that golden moment.”
Summarising the report findings, Simon Atkinson, assistant chief executive of Ipsos MORI, says: “This year’s results are a reminder that, in the eyes of customers, loyalty is about more than just emotional attachment. Customers don’t necessarily expect something for nothing. But they expect recognition for showing loyalty to services, products or brands.”
However, he is more circumspect about the influence of technology at this juncture: “What’s less clear is just how quickly new technologies will change the landscape, and in what ways. We’ve all seen the growth of high-speed internet, smartphones, social networking and apps. But it’s still early days in terms of what this means for loyalty.”
Worley largely agrees with these sentiments: “It is important for a good programme to satisfy emotional needs and transactional needs, and whilst we might see the balance shift a little bit, the programme has to address both.”
But when it comes to technology’s role in the loyalty landscape, he recommends that smart businesses should be thinking long and hard about how the likes of mobile and social will fit into their programmes.
“Retailers need to be planning how they are going to leverage technology over the next 12-18 months, laying the foundations of those plans now so that they are in the right shape at the right time, because we’re at the point where consumers are open to using technology. One of the points in our report is that it needs to be rolled out with care so that we don’t upset the applecart and get things wrong. So we advise good strong planning around the use of technology, that is largely mobile focused, is key.”

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