Guest article: Sparks fly in UK loyalty programmes

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By: RickFerguson |

Posted on February 22, 2016

In today's Insights column, guest author Dr. Alexandra Ranzinger offers her take on the changing landscape of customer loyalty in the United Kingdom. Her key point: Stiff competition, reduced loyalty programme value, and increased complexity will require UK marketers to simplify programme participation, expand programme scope, and deliver a seamless multichannel experience.

The United Kingdom has traditionally set the pace for loyalty programmes across the globe. The country has set some benchmarks and broken many myths - and, over time, it has become a complex marketplace. With the recent launch of the Sparks loyalty programme by Marks and Spencers, the competition for customer loyalty is now more complex than ever.

For many years, traditional retail-driven loyalty programmes dominated the UK marketplace, with Tesco's Clubcard, Sainsbury�s and Nectar, and Boots leading the pack. With the growing awareness around data driven marketing, ease of digital data capture, and low cost solutions for small retailers, more schemes are being launched. However, in the name of being innovative or different, many of these programmes have turned out to be too complicated to understand.

To add to the complexity, stiff competition from German retailers Aldi and Lidl has intensified the price war. In response, most retailers carried on with a price-matching scheme, and strong loyalty players like Sainsbury�s reduced the point value for Nectar card members. Terms and conditions attached to price match, selective incentives at limited stores, and in some cases, new loyalty schemes jargon are putting off consumers swiftly adapting to a digital lifestyle. Meanwhile, behaviours such as mobile payments, retail showrooming, and online shopping are fast transforming consumer DNA.

A recent YouGov survey conducted in the UK market for the Loyalty Partner Group highlights the transformation of the UK loyalty landscape. Here are the key trends:

Simplification and choice: First things first: it's time to simplify. According to the survey, 88% of customers preferred a simple, easy-to-use programme. Two out of three respondents preferred earning simple points on their shopping rather than complicated mechanisms with conditions attached. Also, 54% of respondents wanted the freedom to redeem their points without being forced to shop back at the same retailer.

Expanding the scope: Secondly, with the reduced incentive levels from some top programmes, customers feel they aren't getting enough value. 70% of respondents also wanted to see local stores and retail brands from their neighbourhood being added into their loyalty programme. Surprisingly, however, shoppers did not wish to defect from their favoured shopping destination. If their brand moved into a multipartner programme, they demonstrated 59% likelihood to shop more at the same retailer.

Despite market saturation, UK consumers still love coalition programmes: nearly half of respondents preferred a multi-partner programme over a proprietary programme. Also, 65% of respondents showed willingness to join another coalition multi-partner programme as long as it has the right partners and is easy to collect and redeem points.

Adapt to digital, stay multichannel: Lastly, though print communication is going strong, digital consumers are catching up. The omnipresent millennial customer wants multiple channel access, both print and digital, simultaneously. In the survey, almost 75% of the younger respondents (18-34 age group) want to access their loyalty programmes via multiple digital channels. Conversely, approximately 60% of their older counterparts voted for this ability.

Traditionally, retailers have earned significant revenue from manufacturer-backed print offers. However, more consumers now get their first impressions of a brand or an offer via smartphones and online discovery. Marketers should leverage this trend with a synchronised multichannel communication platform. However, given the importance of simplicity, we must eliminate complicated mechanisms to make participation a "one-touch" experience.

With the rapidly changing digital and retail landscape, loyalty marketers must build a multichannel experience with the flexibility to evolve over time. Much of this experience can be achieved via collaboration and simplification of the core offering. A multipartner shared platform model provides the collaborative cost benefits and flexibility to adapt to the changing demands.

Marketers can lay the foundation for next phase of successful UK loyalty programmes by following a few fundamental principles: practice simplicity in both process and communication; expand the scope of loyalty programmes to offer wider choice for earn and burn; and provide a synchronised multichannel experience. Supported by world-class analytics, these principles offer a strong foundation for the next generation of customer loyalty programmes.

Dr. Alexandra Ranzinger is owner-consultant at Munich-based workinghead.

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