As the loyalty scheme landscape matures, what should brands be focusing on?
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1 As the loyalty scheme landscape matures, what should brands be focusing on?
2 Some things for you to think about What is your plan to build loyalty for your brand? Does it differentiate you and add real value? Is it future proof? Do your customers understand it? How well is it working?
3 What s the value in loyalty schemes? The last few years have seen a massive emphasis on loyalty schemes almost every leading brand has one in retail, leisure and telecoms, and increasingly they are being developed in other sectors such as travel and financial services. Customers have embraced them enthusiastically 92% of us belong to at least one loyalty scheme and up to 30% belong to 3 or more points based schemes. Not only do people join up, they are actively engaged and often have developed well defined strategies to help them get the most from the potential benefits on offer. But as schemes proliferate there is a danger that the benefit to the brand is diluted. They become a hygiene factor that increases costs rather than a differentiator. They all become rather similar a combination of points and offers that can be difficult to put a value on, hemmed in by rules that leave consumers feeling wary at best, and disappointed at worst. And far from encouraging true loyalty, scheme participation can become an end in itself almost a game consumers can be more interested in exploiting a scheme than in building a relationship with your brand. 4 of the strategies we see consumers following The farmer Keen collector, makes rational choices, saves and spends. Tends to engage with a focused portfolio of favoured brands, and is more likely to experience true loyalty The hoarder Focused on collecting points. Likes to have something in the bank but is less interested in spending them. Engaged with the scheme but not necessarily with the brand The hunter Deal hunting is a passion and a way of life. Highly engaged, but promiscuous and difficult to hang onto The survivor Saves points and benefits as an insurance against tough times. Often hard up with less to spend, and may easily feel embattled and confused by what s on offer As the loyalty scheme landscape matures, what should brands be focusing on?
4 Loyalty from points to meaning Loyalty schemes are a value lever for brands in the battle to connect to customers. In the current climate, where people are spending less, and looking for reasons not to buy as much as reasons to buy, brands need to make the most of every resource at their disposal. Plus it is accepted wisdom that selling to an existing customer is more cost effective than winning a new customer. However, is it true to say that loyalty schemes always create genuine brand loyalty? psychological rather than a practical need, and is about feelings and relationships, connection and meaning. In 2011, the introduction of mywaitrose marked a departure from traditional approaches, with stronger emphasis on relational rewards. Schemes launched or refreshed in 2011 We know from the hundreds of hours we spend with consumers every week that they have a huge appetite for brands: they are very open to the idea of getting closer and building deeper relationships provided that it is on the right terms. But when we asked consumers to give us images of what loyalty schemes feel like now, and what they could feel like in the future, it exposed a huge gulf. One consumer drew a tree to portray her ideal relationship organic, growing and natural. To show reality she drew a pair of handcuffs. A key reason for this is that most loyalty schemes are rooted first and foremost in transactional rewards: points, offers & deals that incentivise people to buy more. But true loyalty in the customers mind is much less tangible it satisfies a Primarily points/ offers based Holland and Barrett Superdrug IKEA Focus on experiences and relationships npower MyWaitrose PruHealth
5 What can give schemes true meaning? Although different people are interested in different things, there is a surprising amount of common ground. Consumers voice a list of bugbears such as lack of fairness (giving more generous rewards to new customers than existing ones), small print (points that lapse), or complexity (eg paper-based schemes in a world which increasingly runs off technology). But equally, there are common opportunities: many people are more interested in collecting experiences than in collecting points. And they want to do business with organisations that help take them to a higher place and offer personal meaning - such as the themes shown on the diagram on the previous page. If there is such a thing as a hot topic in loyalty, it is customer engagement - Wise Research And of course, the loyalty landscape is not static. Opinions of any one scheme are influenced by what else is in the market and by the circumstances that people find themselves in. In the current climate where the media is constantly blasting pessimistic messages, consumers present a complex mix of desperation (they yearn for peace of mind, security and control), and optimism (they are fed up hearing bad news and want distractions, excitement and treats). Creating a successful scheme is not just about understanding customers and their needs it s about working with them collaboratively to co-create solutions. Brands that have a strong relationship with their consumers find that they don t simply have to give, give, give. They can ask their customers to participate in the design of solutions and that if they truly listen and respond, the very act of participation makes customers feel rewarded. I want brands to be on my side Sources of personal meaning I want brands to make me feel I belong I want brands that share my values I want brands to help me grow as a person As the loyalty scheme landscape matures, what should brands be focusing on?
6 What will the future look like? Driven by a combination of consumers needs, and what brands are capable of offering, we see a continual evolution of schemes, with a growing emphasis on... Personalisation. Consumers are willing to share data if it benefits them, but not if all they get in return is a snowstorm of irrelevant offers. MyWaitrose makes offers based on known preferences and spending habits Ease of use. Although some people like paper-based schemes the trend is towards greater use of technology and particularly mobile. Consumers want schemes where everything is integrated and as simple to use as possible. My Starbucks Reward and their app that enables payment via smartphone Multi-channel. When consumers think of loyalty, they think of the brand and the idea behind it not the sales channel. Loyalty programmes are a great opportunity to provide links across channels and encourage customers to try new things. Nectar is increasingly becoming a multi-channel, interactive loyalty brand Experiences rather than points. Increasingly people define themselves by their experiences rather than their possessions. Genuinely new and memorable experiences can be harder to acquire than points, and hence they can have greater value. Global Hotel Alliance with GHA Discovery, which gives people experiences money can t buy
7 What will the future look like? Social rewards. The ultimate non-financial reward for many people is something that shows how clever they are, how well informed, how popular, generous or whatever matters to them. Schemes that recognise this, and visibly acknowledge an individual s interests or achievements can be a powerful motivator. Care2.com gives consumers the chance to support causes they believe in and exercise influence Differentiation through communication. One of the reasons why schemes seem so similar is because they lack strong positioning, and are all using similar language. Behind any scheme must be an idea, and it must be clearly expressed. mywaitrose talk about a conversation rather than a scheme Partnerships. Many brands realise that the benefits their customers really want may come from outside their own business, and that they have buying power they can exercise. PruHealth with Vitality that rewards people with a range of benefits including holidays and days out Time General direction of travel for all schemes More personalisation More multichannel Easier to use More data driven More experiential Personalisation and Customisation As the loyalty scheme landscape matures, what should brands be focusing on?
8 So, what are the essential ingredients for success? We ve identified 6 key themes for anyone putting together a new scheme or refreshing an existing one 1. A clear Loyalty Strategy Your loyalty scheme should be part of a wider loyalty strategy Brand loyalty is a much bigger idea than a loyalty scheme. Brands need a loyalty strategy and they need to know what part the scheme plays in this. For example, the specific role of the scheme might be to attract customers, to lift sales volumes, to keep them or shift them towards a new and more profitable mix of products or services 2. Sector Relevance Your sector will set the ground rules for success Our relationship with businesses behind high ticket items that we rarely buy, like expensive holidays, cars or jewellery, can be like close family members that we don t see that often. There s often a lot at stake and although contact may be infrequent, it s usually one-onone and relationship based. When buying lower value items, we ll accept (or maybe prefer) a more transactional relationship (perhaps more akin to that we have with our next door neighbour). But even here, brands that invest in going deeper can build a long term competitive advantage
9 So, what are the essential ingredients for success? We ve identified 6 key themes for anyone putting together a new scheme or refreshing an existing one 3. Differentiation A loyalty scheme shouldn t just be a defensive move. It s an opportunity to stand out and be better Our analysis shows that 9 out of 10 schemes offer a very similar benefits. This means that most of them are investing resources into creating a level playing field. Although it s true across the board, we see this in the hotel sector particularly. Global Hotel Alliance, a network of upmarket hotels, has invested in giving loyal guests an experience that money can t buy a proposition that has persuaded over a million guests to sign up. 4. Build from the brand Your brand must be the starting point and the source of value for any loyalty scheme Although sophisticated CRM systems can collect and manage data to help drive sales, the heart of any loyalty scheme must be the brand. So the starting point for any scheme must be loyalty to what?. If you can t answer this question, your scheme will never be more than a simple incentive or reward scheme. And whilst that might be OK in the short term, you ll be playing one man short on the field. As the loyalty scheme landscape matures, what should brands be focusing on?
10 So, what are the essential ingredients for success? We ve identified 6 key themes for anyone putting together a new scheme or refreshing an existing one 5. Stay Relevant Make sure your scheme is designed around what your customers want not just what is easy for you We are frequently surprised by the size of consumers vision for brands. Often, they are ready to let you into more of their lives and have a closer, more loyal relationship than most brand owners expect. What they experience instead is a brandscape which is slow to adapt and respond, whether it s a highly regulated field like financial services or a highly competitive sector like travel. Co-creating ideas and solutions with customers and staff together can be a powerful catalyst for change especially for brand owners. 6. Total Personalisation Your loyalty scheme should be part of a wider loyalty strategy It s 10 years since Minority Report showed Tom Cruise going into Gap and being addressed by name - with a reference to his previous purchase. Consumers know that companies hold vast quantities of personal data and they expect in return to get benefits that recognise who they are and what they are interested in. But instead they feel bombarded with generic offers and messages - which just don t cut through.
11 What are our qualifications? How can we help you... Bullet proof insight having the customer and a deep, accurate understanding of what they really want, need and hope for as the fulcrum for every decision that you make. Strategic brand planning use the intelligence from the business, the market and your customers more effectively by creating clear and compelling brand ideas that live within the business. Co-created brand innovation making your customers and staff part of the innovation process; from generating ideas to creating the business case to prototyping, testing and implementation. We believe great innovation is a based on creativity and commercial awareness. What are our qualifications? Promise helps companies drive growth. Some relevant loyalty challenges we have worked on Creating and launching a new experiential loyalty scheme in the travel sector Developing a brand proposition resulting in increased membership in the health sector Co-creating mission, vision and value driving internal loyalty in the FMCG sector Embedding consumer insight when innovating products and services in the financial services sector Developing and deepening existing loyalty schemes in the retail sector British Airways Orange Monarch M&S GHA Kuoni As the loyalty scheme landscape matures, what should brands be focusing on?
12 Clare Fuller Group Managing Director Contact us Bethan Haycock Business Development Manager Promise London 75 Wells Street London W1T 3QH United Kingdom Tel: +44 (0) Promise North America 99 Madison Avenue 4th Floor New York, NY USA Tel:
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