The future of loyalty: not just point scoring

As the battle for share of wallet rages on, it is becoming increasingly critical for businesses to cultivate long-term customer loyalty. The concept is no longer just a way to ensure customers are not lost to competitors – it is a crucial element of sustainable growth.

Despite being on the mind of every business leader, loyalty is a challenging concept to get right, and advances in technology mean that the options now go far beyond a stamp card for your morning coffee.

I caught up with Sophie Birshan, Industry Head of Retail at Google, to discuss the changing face of loyalty in an increasingly data-led world. “You can no longer guarantee loyalty,” she tells me. “Truly loyal customers, who don’t need extra help returning to a brand, are harder to find these days – thanks to the complexity of a customer’s purchase path and the aggressiveness of the competition.”

Indeed, a quick look at the news shows major retailers grappling with their loyalty strategies in a constant process of refinement and re-evaluation: Sainsbury’s has recently scrapped plastic Nectar cards and is taking its scheme fully digital in the form of an app; the John Lewis Partnership is trialling a new card scheme after Waitrose’s ‘pick your own’ proposition failed to resonate with customers; and Marks and Spencer is in the process of redeveloping and simplifying its Sparks scheme following Steve Rowe’s announcement that it was ‘too complex’ and had ‘confused’ shoppers.

All this change is indicative of the growing importance of loyalty for brands, and the shifting landscape of loyalty and CRM.

Photo credit: Pets at Home

From structured rewards schemes to business models focused entirely around loyalty, there are plenty of examples of companies getting it right. Companies like Pets at Home are successfully driving loyalty with their VIP club which capitalises on their emotive product offering; the free scheme offers an ecosystem of benefits, including a pet-finding service for lost animals and donations to an animal charity of the customer’s choice when they shop. As a result, the business has created a community of passionate members in the same way that football clubs maintain lifelong relationships and dedicated supporters. The health and beauty space also offers some strong case studies, with Boots Advantage Card and the Sephora Beauty Insider programme successfully driving loyalty in a highly competitive space. The incentive does not necessarily need to be complex or substantial; though a simple gesture, Waitrose’s complimentary hot drink proposition served to delight their customer base.

With customer data easier to gather and capitalise on than ever before, many businesses are implementing data-led schemes to target customers and drive loyalty, to great effect. Sophie and I discuss a recent piece of Google-led research, which found that young people feel positive about algorithms that allow online brands to suggest really relevant products. “These algorithms,” she says, “drive loyalty by helping young people cut through the cluttered digital shopping space. They love that they’re being recommended products which suit them, resulting in a more enjoyable shopping experience.”

“Retailers need to think about their customers holistically, considering every aspect of their purchase path instead of just the moment of sale,” says Sophie Birshan, Industry Head of Retail at Google.

Whilst it is possible to understand customers and their habits on a more detailed level than ever before, this development presents a new challenge for businesses to tread the line between helpful and invasive. You may be familiar with the legendary story of Target sending coupons for baby items to the home of a pregnant teenager based on her shopping habits, much to her unaware father’s alarm.

Beyond the plethora of dedicated schemes and programmes on offer, loyalty itself is a broader concept that is impacted by every customer touch point, and which many businesses are increasingly trying to weave into their cultural fabric from the shop floor to the board room, requiring a cross functional approach. Sophie agrees: “Retailers need to think about their customers holistically, considering every aspect of their purchase path instead of just the moment of sale.” In this regard, the retail sector remains undeveloped in many ways, with the rise in Chief Customer appointments testament to the growing importance of creating a seamless customer experience and ensuring the customer is front and central to all decision making.

Functional sectors like insurance and financial services, for example, have long understood this and have developed their propositions to include smart branding and partnerships. A key example is Vitality health insurance which offers a range of benefits – including Ocado discounts and free Starbucks – designed to reward customers for engaging in healthy activities, adding significant value to what is a broadly function product.

Photo credit: Harry’s

Moreover, new business models are emerging that offer innovative ways to secure an ongoing relationship with a customer base. Subscription services, for example, have loyalty hard-wired into their proposition. A number of successful FMCG businesses such as Harry’s and Birchbox have emerged under this model, with retail beginning to wake up to its possibilities: Urban Outfitters recently announced the launch of Nuuly, its clothing rental subscription service whereby subscribers receive a box containing six items of clothing monthly to wear and return, or keep.

Indeed, it can be argued that the most effective way to cultivate true loyalty is simply by providing a superior offering consistently. This has never been truer than now, with the emergence of the hyper-aware customer demographic that is switched on to a brand’s activities across the board. ‘Generation Z’ and ‘millennial’ consumers are eager to be loyal to the right brand, and will reward positive actions, personalised services and convenience-focussed approaches with spending. Sophie suggests that “companies need to use relevant messaging at every touch point to build a brand that customers are proud to be aligned with.” But she warns that “ease of shopping and time efficiency for customers is also key.” By delivering a product that combines strong brand messaging with a truly customer-focussed approach, businesses can secure the next generation of loyal customers.

“Companies need to use relevant messaging at every touch point to build a brand that customers are proud to be aligned with. But ease of shopping and time efficiency is also key.” 

It is evident that there’s no one size fits all approach to loyalty, and the same can be said for emerging talent in the space. While CRM has traditionally sat within or alongside the marketing function, those leading the charge on loyalty may come from multiple routes: data science, traditional marketing or broader commercial or customer-centric roles. What is clear, is that the whole company must work together to drive loyalty. Sophie speaks impressively about the need for businesses to integrate loyalty into every team. “All teams must work together – loyalty can’t be siloed off,” she says. “Data teams, digital marketing and CRM must work in tandem to ensure the customer is accessed at every touch point of their journey”.

Whatever the method, loyalty is well worth detangling for every business. As well as enabling brands to get closer to the customer and better serve them, when done right, it develops true brand champions and passionate advocates to build true long-term value. | @TheMBSGroup