IT trends and their current effect on loyalty schemes

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By: Wise Marketer Staff |

Posted on May 9, 2006

Modern loyalty schemes have become more exacting than ever, needing increasingly deep knowledge of customer preferences and spending patterns combined with sophisticated IT systems to capture and use that data, according to UK-based loyalty programme provider The Logic Group.

According to The Logic Group's marketing director, Mark McMurtrie, there are several trends and developments that are affecting today's loyalty programmes. For example, IT systems are undergoing radical changes, as new sales channels, new card types and new functionality are making new demands on technology resources. Indeed, a customer loyalty programme is an increasingly specialist requirement that doesn't quite fit into either the IT or marketing camp. Instead, there is a new need for hybrid programmes that draw on cross-functional skills.

However, according to findings from research specialists Martec, the market is highly fragmented in terms of loyalty providers, which range from systems integrators to marketing agencies, card processors, EPOS suppliers and other loyalty specialists. So how are loyalty programmes changing, and what capabilities are needed in today's loyalty market?

Above the line
Perhaps the clearest example of the need for a cross-functional approach to loyalty lies with the growing importance of customer insight and data-driven marketing. Even the most eye-catching loyalty marketing campaign will not deliver the desired results unless segmentation and targeting are effectively backed up by detailed insight analysis (of consumer's preferences and spending patterns).

According to McMurtrie, "The linkage of consumer information with analysis of transactional data represents a formidable combination for driving sales and customer loyalty. Many astute retailers are breaking away from the norm and launching new and innovative schemes. In particular, insight into consumer data is the number one factor for all next generation loyalty programmes and is an increasingly critical factor for new promotional tools like electronic gift cards."

Lack of integration
Nonetheless, Martec's survey of tier 1 and 2 retailers found that loyalty programmes are typically not integrated with wider marketing activities, and that the data collected from them is rarely used. Less than one-third of the companies surveyed (31%) reported that their loyalty programmes were integrated into the entire business - and these were the companies that scored highest in terms of overall satisfaction with their loyalty programme.

Interestingly, 62% of the firms surveyed said that the key challenge for their loyalty programme was to make effective use of the data and gain real insight from their customer data. This is a challenge that retailers must take up quickly as the high street becomes dominated by "big name" loyalty programmes.

What lies beneath
Promotional campaigns and vouchers are arguably the most high profile aspects of any loyalty programme. However, they are only the tip of the iceberg, with a range of specialist areas from data warehousing to card production and helpdesks also being required to drive a successful programme. A well-developed IT infrastructure is what provides the platform for bringing loyalty-based initiatives to market, particularly at a time when rapid technological change is affecting loyalty programmes and their operators.

According to Martec's loyalty survey, 46% of respondents view real-time loyalty as an important area for the evolution of next-generation loyalty programmes, as consumers expect to be able to view and redeem their points immediately, whether in-store or on the internet. Almost one-third (31%) felt that linking the loyalty programme with electronic gift cards was the way ahead, while 23% saw multi-application smart cards as the key to the future.

The keys to future loyalty
According to The Logic Group, there are several examples of programmes that signpost the way ahead, ranging from high-street programmes such as Tesco's ClubCard and the Boots Advantage Card to programmes in other sectors, such as BAA's WorldPoints loyalty programme. For example, the WorldPoints programme provides a twice-yearly glossy magazine, supported by a targeted monthly e-mail, underpinned by detailed insight analysis, customer segmentation and spending patterns.

With consumers being given access to their loyalty programme through all possible channels, the programme fulfils both their needs and expectations convincingly. The same can be said of Tesco's ClubCard, Boots' Advantage Card, the Nectar coalition programme, and many other leaders.

By combining the insight needed to drive promotional campaigns with the IT infrastructure needed to deliver more innovative programmes, McMurtrie expects loyalty programmes of the future to expand and evolve significantly. And, as loyalty programmes increasingly come to address changing technologies and evolve to use consumer spending data to a much greater extent, the need for more innovative and sophisticated programmes will continue to increase.

Editor's note: On 1st May 2006 The Wise Marketer published its new 950-page report, The Loyalty Guide Volume II, on customer loyalty marketing, including technologies, methodologies, best practices and techniques, full market summaries, and practical how-to's. For more information about setting up, maintaining, promoting and growing loyalty programmes, see

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