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Why the customer loyalty landscape has changed

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25th Jul 2013
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The British High Street has undergone significant changes recently. Ongoing economic woes, as well as the growing challenge presented by online commerce, have seen many businesses struggle, and some iconic retail brands, like Woolworths, leave the market altogether. This period has also seen a change in the mindset of the average consumer – spending attitudes, shopping behaviour, and brand loyalty have all been impacted in one way or another. As a result, businesses are now engaged in a race to discover the best practice customer engagement strategies that will help them to compete and survive in an evolving retail environment.          

The UK is one of the largest economies in Europe with 62 million people and an above average retail spend per capita. Take the online space for example, recent estimates suggest UK shoppers have the highest average ecommerce spend per shopper in the world, reaching $3,878 in 2013. The country has a mature and highly complex retail market, framed by a lengthy history of innovation and invention, but the sector has suffered of late, paying the price for the UK’s wider economic problems. Big names such as HMV, Blockbuster and Jessops have all fallen by the wayside, and there are others still at risk.

Recent research from Epsilon provides interesting insights into the changing consumer attitudes that are so negatively impacting traditional retail organisations. For example, many respondents were less confident about their financial situation and claimed to be more cautious spenders as a result. Only 22% felt strongly about their own or their family’s economic prospects, 57% admitted they will go to great lengths to find the best deal for an item, and only 15% said they were willing to pay the premium associated with luxury or new-to-market products.  

For retailers, one of the most interesting parts of the research showed possible connections between this on-going economic instability and changes to consumer loyalty. For example, only 15% of respondents believed strongly that it pays to be loyal to their favourite brands. Worryingly, one of retailers’ key tools for generating loyalty is waning in terms of its effectiveness.

The loyalty scheme marketplace appears to have reached saturation point and it is not unusual for the average consumer to be signed up to as many as 20 loyalty cards. Many of these loyalty programmes are morphing into a commodity for consumers when there is no significant added value to differentiate between the schemes. In fact, only 28% of respondents to the study said they viewed rewards programmes as an incentive to secure their loyalty.

The good news for many businesses is that placing emphasis on high retail standards will continue to endear your brand to its customer base. Value and quality were deemed the most important criteria to earn loyalty from half of consumers, while preferential customer service, good after sales service, convenience, and new personalised offerings or products also play important roles in shaping loyalty for up to one-third of the respondents. 

So, it seems that while consumers are seeing the advantages of brand loyalty schemes via discount cards, price reductions and coupons, there’s limited gain for brands because customers do not necessarily remain loyal. Businesses need to reassess the methods used to promote loyalty, how they use consumer data, and the communications they share with customers. For example, at present many organisations are failing to deliver relevance and need to embrace more data driven strategies, based on actual customer behaviour and implicit affinity.

This is important as UK consumers have little patience when it comes to misjudged marketing communications. Between 71% and 85% of respondents said they would ignore offers and messages they deem to be irrelevant, and there is little excuse for employing untargeted strategies of this nature. Most brands now have large amounts of data, acquired in part via loyalty programmes, that they can use to more effectively generate bespoke messages, relevant to specific consumers, and delivered via their medium of choice. The key is to harness data from multiple sources to underpin direct customer activities. Fully understanding the customer landscape and how the business can take control of spend and ROI requires investment in the development of a single customer view environment. This will allow integration of the functions of analytics, targeting, channel deployment, and customer engagement to build authentic customer experiences that are measured in terms of ROI. 

While rewards programmes are currently failing to promote loyalty amongst many consumers, they are generating valuable data that can help brands to boost their relevance to customers. Retailers need to re-assess their approach to the generation of consumer loyalty and look to the added value that customer data can provide. In addition, social media needs to play a greater role in strengthening brand trust and supporting data strategies, not merely for increasing brand visibility. Technology is providing a platform to deliver real relevance to consumers, and it is this relevance that will help retail brands to succeed on an increasingly competitive high street.

Phillip Singh is vice president of business development EMEA at Epsilon International.

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