Customer loyalty marketing: What comes next?

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By: Wise Marketer Staff |

Posted on November 5, 2007

Customer loyalty marketing: What comes next?

The loyalty market globally, in terms of both consumer and business to business (B2B) programmes, continues to grow rapidly with much new interest being seen in emerging markets, according to loyalty expert Peter Wray of Loyalty Matters, following the Loyalty World conference and exhibition in London.

The growth of China and India is creating a huge new economic group of middle class and high net worth consumers. Developed markets in the USA, Canada and Europe are maturing and loyalty schemes that have been established - in some cases for decades - are now searching for new ideas and inspiration. It is the "best of times and the worst of times" for customer loyalty strategists as they seek to make sense of a potentially confusing and fast developing global market.

Looking for answers To help put this into context, The Wise Marketer felt that a good place to start looking for answers would be the annual Terrapinn Loyalty World conference which took place in London in September 2007. The conference itself was typically commercial and well organised, and reviewed and debated many of the key challenges brands face surrounding how to engage with and understand 21st century consumers in a world of over-supply and increasing technical complexity. Those who travelled half way around the world to hear some of the leading consumer loyalty schemes described in their current context by the people who run them were not disappointed.

The event attracted the major coalitions and retailer centric schemes senior managers from Western developed markets. With the CEOs, directors and department heads of some of the largest global loyalty schemes attending and presenting, the conference also delivered on the registration promise to "join the leaders in loyalty".

Toyota's rise Day one saw a fascinating contrast between a classic 'eyeballs' above the line (ATL) marketer's view of the world when Mark Hall, marketing director for Toyota UK, discussed the rise of the Toyota brand to the top global car manufacturer position based on operational efficiency and brand quality, with some research suggesting that the emotional linkage of customers to the brand still required focus but the popular 'net promoter' score was very high for the brand. This was an excellent example of brand growth turning into market domination using traditional marketing techniques.

Tesco Clubcard Andrew Mann, Clubcard director for Tesco, followed the Toyota presentation with an outline of what has now become a global reference programme for a "customer centric, data-focussed" approach to growing a business. The book of the Tesco Clubcard story, 'Scoring Points', is now in its second edition. (We can't help wondering how long it will be before they make the film.)

The Tesco Clubcard story is a textbook example of the use of a data analysis approach (developed for Tesco originally by Dunnhumby - which became so central to Tesco's success that the company acquired a controlling interest in this independent supplier of data analysis service).

The story is now well told, so few new insights were offered in Mann's presentation. But this does not mean that the message has lost any of its impact, Tesco continues to power ahead in the UK market and is becoming a formidable global retailer. The statistics of the Clubcard programme are impressive, with £100 million each quarter being handed back to customers in vouchers. Some 9 million different versions of the Clubcard quarterly statement are mailed out, and 95% of vouchers issued are actually redeemed. Similarly, 35% of coupons issued are redeemed, and 10,000 customers per week advise Tesco that they are moving.

But in the midst of these large numbers Mann reiterated the importance of simplicity working well where complexity does not. He also reinforced the message of trust: "Never, never take the customer for granted, and never abuse their trust in your guardianship of their data".

The contrast between the success of Toyota driven by classic ATL marketing and Tesco driven by best practice in customer insight was evidence that the debate in this area of marketing still has some distance to run. What was especially interesting was that, when questioned about future developments for the Clubcard, Mann stressed the need to continue focusing on the basics and down-played any dramatic changes or evolutions in the Clubcard programme.

Other presentations during the first day of the conference included:

  • Nicolette Wuring from UPC, focusing on the importance of trust in post-industrial consumer society;  
  • Chris Sedgwick from BP, outlining the importance of ethics and environmental standards;  
  • An interesting new initiative from SelektPoints in the private label market;  
  • Rick Ferguson from Colloquy, who discussed some recent research that highlighted the fact only 40% of consumer loyalty programmes in the USA are active.

PayBack Day two featured a keynote presentation from Steve Gray, COO for Loyalty Partner in Germany, who discussed the theme of "He who knows the customer wins in the end". The statistics of the PayBack loyalty scheme in the German market continue to be impressive: With 1 in 3 German families collecting PayBack loyalty points, and with 15 billion Euros issued and 90% of points being redeemed, the popular coalition loyalty programme has also signed a high profile sponsorship of the German Olympic Team.

As COO for Loyalty Partner and managing director for the Emnos Loyalty Partner subsidiary that is performing the Dunnhumby-style insight analysis within the programme, Gray's perspective on the future direction of customer loyalty schemes had the impact of informed insight: The future - in his opinion - will be based around growth, innovation in financial services, smarter data analysis, and the internationalisation of loyalty schemes - a future strategy The Wise Marketer predicted last year in its global loyalty bible, The Loyalty Guide.

Air Miles Canada Gray was followed by Bryan Pearson, president and CEO for the Air Miles Rewards Programme in Canada, which is probably - by many measures - one of the best established and profitable coalition loyalty programme in the world. Another impressive array of statistics backed up the claims of the programme: 85% participation in Canada (compared to the US average of 57% for loyalty programmes), 2 out of 3 consumers engaged, and over 100 partners.

The rest of the day was also memorable, with Michael Dwyer, CEO for Pigsback, telling the story of how the Pigsback online "trusted community" rewards its members for their interaction with brands, and with innovative developments at the Turkish Garanti Bank being energetically outlined by Asli Germen (senior vice president of communications for Garanti Bank).

Lessons to take away While the conference was a great success, what was missing, it seemed to Wray, was the "new", the "leading edge", and even the "downright risky". How are loyalty programmes going to play a role in the future corporate and social responsibility (CSR) debate that all CEOs of large corporations are now grappling with? With Al Gore winning a Nobel prize for his work in raising the awareness of climate change - and a huge task facing the whole planet - what part should behaviour-changing schemes such as loyalty programmes play?

Overall, Loyalty World provided a great summary of the state of the loyalty market today, but there are questions - such as the role of social media in consumer behaviour and loyalty - that are going to have a significant impact on the business of tomorrow. Where will this activity lead, how it can contribute to sustainable business models, and what impact will these seismic shifts have on loyalty marketing? While you can't expect all the answers at a conference, there was the an opportunity that was largely untapped for leading exponents to start hinting at what will be next in the evolution of consumer loyalty programmes.

Contributing editor Peter Wray offers customer loyalty marketing consultancy and services, and can be contacted via Loyalty Matters or CM4P.

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