Opinion: Loyalty 2.0 - linking loyalty to customers

With social networks influencing 40% of all offline sales and consumers ditching brands in one click, is your customer loyalty programme completely mouse-proof?

By Natalie Kouzelous, Oracle

As a loyalty marketer, how do you feel when reading statistics such as 30% of Google searches on the world's top 20 brands provide results that link to social media on the first page, or that social networks influence 40% of all offline sales - calm?

Unless you have thought about how your loyalty strategy is going to leverage social media, calm is not how you should be feeling. This is especially true when we consider that with one click of a mouse, consumers can ditch your brand in favour of any number of your competitors, anywhere in the world.

The fact that price comparison service uSwitch estimates that 40% of retail sales in the UK will be made online by 2020 is a testament to the extraordinary growth of internet shopping, adding another dimension to the key challenges facing businesses today: winning and retaining customers while reducing costs.

The power of the internet has never been more prominent, with over 50% of US-based broadband users claiming that the internet has influenced a recent purchase, according to a study from online consumer trends research firm Media-Screen.

More than ever before, customers are expecting to take an active role in their relationship with a brand. Launching blanket offers to entice customers is no longer enough. Instead, they expect to be rewarded accordingly for their long-term commitment and presented with personalised offers each and every time they engage with a business. Consumers are savvier today than ever and businesses need to respond.

Disconnected

Launching successful loyalty programmes has traditionally been complex. Although they have been able to use and act on data obtained from customer transactions, the reality is that it has been a largely impossible task of analysing multiple reports in a vain attempt to decipher customer trends and apply promotions appropriately.

Due to the complexity of the systems underpinning the programmes, loyalty initiatives were often set up and then left to run untouched and in isolation from the business. Also, the database was often mined for tactical marketing campaigns but took too long to alter the rules of the programme to embed short-term promotions.

As a result, loyalty schemes were unable to rapidly adapt to support tactical sales issues, which has left many completely disconnected from sales and providing only minimal support to tactical marketing. This has been principally due to the limited options for organisations, which included:

• Building a bespoke system and managing it internally.
   
• Outsourcing schemes to third-party, specialist loyalty agencies.
   
• Participating in another company's loyalty programme.
   
• Purchasing a specialist solution and shoehorning it into the existing IT infrastructure.

  So, until recently, companies were limited in their options - lose control of the loyalty programme or invest in additional IT resources.

  Handing the loyalty back to marketing

  With the right technology, the complexities involved in managing a campaign have now been dramatically simplified, allowing marketers to regain control of their loyalty programmes. Moreover, this can be achieved across all channels of engagement between the business and the customer.

  Technology is now available that allows information relating to customers held in disparate systems, across all departments, to be analysed and then actioned - all within one application environment. Armed with this information, companies can then build highly tailored loyalty offers for customer segments or specific individuals.

  "Customers expect communications with businesses to be as quick, interactive and personalised as when they log on to Facebook to interact with friends.

  It is also possible to do this analysis in real-time, so businesses are able to present the most appropriate offers and rewards while the consumer is engaged online, or across all channels of interaction. Foe example, one US online insurance broker saw sales climb by an average of $20 per customer with this approach.

  Considering that offers based on an individual's lifestyle and interests have conversion rates of up to 20%, companies simply cannot ignore the opportunity to increase profits through targeted communications. However, the real value for the business is the ability to easily identify the key loyalty drivers, both online and offline, against a whole host of variables.

  For example, a major French supermarket recently faced low sales for one of its premium, specialist cheeses, which had a niche customer base. The company considered discontinuing the product. However, after analysing purchasing trends for the niche customer base, it quickly realised that they were actually the company's most valued, loyal customers.

  Having this level of visibility, the company understood the need to continue stocking the cheese at a loss or face losing some of its most devout customers. In this case, the supermarket achieved the right balance between generosity and loss. But without this insight, a simple decision such as this could have had long-term negative implications for the business.

  Social media has caused a radical shift in consumers' expectations - they expect communications with businesses to be as quick, interactive and personalised as when they log on to Facebook to interact with friends. The loyalty 2.0 approach offers the potential to respond to this shift.

  Failure to embrace it will severely hamper loyalty efforts as customers tune in to more interesting, engaging and rewarding businesses.

  Natalie Kouzelous is loyalty executive at Oracle.