Have loyalty platforms caused commoditisation?

Aberdeen Group and The Wise Marketer recently conducted a survey of retail customer loyalty and commitment strategy, and found that while 93% of retailers run a loyalty programme for their web site, stores, or catalogue customers, nearly three-quarters reported very little improvement compared to their competitors.

The survey report, entitled 'Responsive customer loyalty: Creating customer commitment in retail', noted that the main types of loyalty campaigns offered by retailers include (but are not limited to) point perks, rewards, frequent buyer offers, and private label credit cards.

Need for a loyalty review
According to Aberdeen Group analyst, Sahir Anand, "Of those retailers that currently run loyalty programmes, 74% reported 'partial to no tangible improvement' in their programmes compared to their competitors. This suggests a need to review current and future loyalty processes and solutions."

The survey of 231 retail enterprises during May and June 2008 aimed to determine the loyalty-related pressures and strategies affecting retailers today, with the final research report detailing the end-to-end loyalty processes (i.e. preparing, planning, implementing, and optimising) and enabling technologies for loyalty programmes.

Key findings
Among the survey's most significant findings:

1. According to 58% of best-in-class retailers, the top business-critical pressure associated with loyalty programmes of retailers is the need to develop Customer Lifetime Value (CLV) to provide an assured revenue stream for the retailer;
    
2. The top strategy of 58% of best-in-class retailers is using loyalty tools that are personalised to suit specific customer segments based on product affinity and lifestyle preferences for micro-targeting customers with specific loyalty offers. These include building a customer profile for specific loyalty elements such as frequent buyer programmes, friends and family referrals, and private label credit card offers. This strategy enables a better focus on consistent top line sales, effective customer relations, and profit margin enhancement;
    
3. Half (50%) of best-in-class retailers currently plan, optimise, and execute 'surprise and delight' benefits either moderately or frequently, to help ensure customer commitment to the retail brand;
    
4. Best-in-class retailers are 2.2 times more likely than Laggard companies to have a cross-functional team that leads to more focused and pragmatic planning, execution, and analysis of loyalty programmes and their data;
    
5. Best-in-class retailers are 5 times more likely than Laggards to be tracking, storing, and analysing customer analytics data to identify specific customer buying insights, therefore leading loyalty programme innovation;
    
6. 98% of best-in-class retailers reported an average year-on-year same-store sales increase of 7.4%;
    
7. 81% of best-in-class retailers improved their repeat customer orders (i.e. customer retention rate) by an average of 21.8% compared to the previous year;
    
8. 49% of best-in-class retailers reported reduced customer attrition by an average of 20.3% compared to the previous year;
    
9. The objective of best-in-class retailers is to ensure that customers continue to increase in terms of lifetime value (CLV) by not only spending time in the various sales channels but also by providing frequent referrals among family and friends.

Download the report
The report explains the key attributes for creating long-term customer relationships that can enhance a retailer's capability for sustained differentiation and development of new customer segments.

Until 29th August 2008, the full report has been made available for members of The Wise Marketer to download free of charge - click here (free registration with Aberdeen Group is required).