Loyalty schemes have proven to be a success in the UK, with the number of programmes having increased two and a half times in the past ten years, according to industry analysts. However, research from Arvato Loyalty Services suggests that the future of the loyalty industry might lie in brand clubs.
When Arvato studied public attitudes toward customer loyalty programmes and customer clubs, the company found that 46% of people surveyed were interested in joining a brand club rather than a simple loyalty scheme. Perhaps more surprisingly, 21% said they would be willing to spend at least 100 to do so.
What's a brand club?
Brand clubs can best be described as loyalty programmes offering exclusive content or information for their members. According to Andrew Mitchell of Arvato Loyalty Services, "After the success of loyalty schemes across the board, it looks like brand clubs might be the next big thing in customer marketing."
There is an important difference between a traditional loyalty programme and a brand club. For example, many traditional loyalty schemes aim to reward customers for shopping at a particular place by offering discounts for future purchases. The idea is that this will encourage consumers to consolidate their spending with one company (rather than its competitors) as well as providing valuable information about their spending habits and preferences.
The risk of loyalty fatigue
Because of the popularity of loyalty schemes, particularly in the retail market, many consumers now have a range of loyalty cards that they feel they need to carry with them when they go shopping. As a result, loyalty schemes have a reduced effect in terms of encouraging consumers to shop in one place and are at risk of simply providing discounts and rewards for existing behaviour.
So, according to Arvato, while traditional loyalty schemes primarily allow people to do the same things they already do but for less money, brand clubs are all about creating unique opportunities that differentiate the company from competitors. Mitchell explained: "Perhaps the most important aspect of brand clubs is the change they can create in how people interact with the companies they buy from. For example, members of a club linked to an automotive brand might get the opportunity to go to Silverstone for a day to test drive the company's new car before it is sent to dealerships."
More personal relationships
Brand clubs can also enable a company to have a more sophisticated relationship with its customers. Rather than offering a discount on products that customers may be interested in, companies can offer exclusive experiences related to customers' known interests. The company found that 40% of people would be willing to pay to be a member of a brand club, with 29% being willing to pay up to 40, and 21% being willing to pay over 100 for the privilege. This suggests that brand clubs do not only have the capacity to be self-funded but also to make a profit.
And, while companies will clearly need to offer strong incentives to attract customers to their clubs, the idea also provides an opportunity to form much stronger and relevant relationships with those who have a self-declared interest in the brand.
Club membership drivers
But what is it that encourages consumers to join brand clubs? The research found that people were attracted to clubs mainly by discounts and special offers. However, they were also attracted by exclusive and in-advance access to products and special offers from similar companies.
The consumers surveyed were most enthusiastic about clubs linked to supermarkets, but many also expressed a high level of interest in clubs linked to leisure venues, holiday destinations, and restaurants.