Loyalty programmes should be the weapon of choice for retailers when it comes to surviving and thriving in times of recession, as consumers welcome them as a source of real value and are happy to trade personal data for the benefits that come with membership, thereby enabling truly targeted marketing, according to Andy Wood, managing director for GI Insight.
As British companies fight to gain a competitive edge in the shadow of a 'double-dip recession', many will find more 'promiscuous' shopping behaviour among customers as an increasing proportion of cash-strapped consumers seek deals. With customers more willing to shop around for bargains, companies need to decide how best to secure their interests.
Is their precious marketing budget to be spent protecting existing customers, or poaching those of competitors? With studies showing that it costs up to ten times more to generate a new customer than to maintain an existing relationship, retailers should be doing all they can to hold onto the customers they already have. The challenge is to determine the best way to actually keep current customers faithful.
One of the most effective ways to do this, it transpires, is a well-implemented loyalty programme. GI Insight surveyed more than 1,000 consumers across Britain and found that 68% say that, with at least one of the companies they buy from, a loyalty scheme that has been a factor in keeping them purchasing during the last few economically turbulent years. Through loyalty schemes companies can capture and utilize valuable data that will allow them to offer their customers a more personalised service and in turn strengthen the relationship between the consumer and brand.
Customers are aware of the benefits loyalty schemes can offer and have come to have confidence in established programmes. According to the research, 77% say they don't like giving details about themselves to a company unless it is through a 'proper loyalty scheme'. This confidence in recognised schemes is further evidenced by the loyalty programmes that have prospered - even in a tough economy: Tesco boasts of having 16 million active cardholders on its website and Boots reports having more than 50% of UK women over the age of 16 on board, with holders of the Boots Advantage Card spending, on average, double that of non-cardholders. Moreover, Tesco's Clubcard showed that it was more popular than ever in the downturn, with more than 1 million consumers signing up since the economic slump began.
By using the data that customers provide when they're part of a loyalty scheme, brands can personalise the communications they have with each individual - for instance, alerting a regular buyer to discounts on relevant products they might need or sending a timely offer to a customer who has not purchased recently to get them shopping with the brand again. It is service such as this that helps a customer feel valued and, in turn, value the relationship they have with a brand. The result is stronger loyalty and an expanded relationship that can even stimulate customers to buy more and more frequently.
Indeed, the research indicates that consumers have noted - and do respond to - such relationship-building efforts on the part of brands. The survey revealed that 74% of respondents have seen companies 'wake up to the need to give their customers better, more individual service, attention and offers' as the downturn has dragged on. Moreover, 58% or those surveyed say they have stayed loyal to certain brands, retailers and suppliers over that time, feeling that they have 'somehow given me value in return for my loyalty' despite the fact only 40% noticed the schemes they belong to increasing points, improving rewards or providing more bonus point opportunities.
Clearly, the efforts brands put into loyalty schemes are acknowledged and appreciated by consumers. Companies do need to note, however, that different consumers respond differently to loyalty initiatives, which can affect the tone, timing and type of communications sent to customers.
Looking at gender, the findings show that women more readily acknowledge the benefits of belonging to schemes than men, with 72% saying a loyalty programme has played a part in keeping them buying from a brand versus 64% of men. Yet men seem more aware of the results of loyalty-based marketing, with 77% saying they believe the economic slowdown has made companies wake up to the need to improve individual service, attention and offers compared to 72% of women - and 60% acknowledging the brands they have stayed loyal to through the tough times have given them value in return for their loyalty versus 56% of female consumers.
When it comes to age, the research revealed that the younger the consumer, the more likely they are to see a loyalty programme as a factor in a brand retaining them as a customer, with 75% of the 18 to 24 age group confirming that a scheme played a role in keeping them purchasing from a company during tough times compared to just 62% of the over-55s. The younger groups also feel companies have made a greater effort to retain them as customers, with 66% of 18 to 24-year-olds and 64% of 25 to 34-year-olds believing this is true versus 51% of 45 to 54-year-olds.
Regardless of the demographic variation, companies need to realise that all of today's customers are highly attuned to each brand's efforts to understand them, to connect with them in appropriate circumstances, and to earn their loyalty. The research reveals that, even as the UK appeared to be on the road to recovery last year, consumers were aware of companies continuing to make efforts to retain their business. The findings show 58% of those surveyed noticed that many of the companies they buy from have been sending a greater number of relevant and personalised communications and offers over the last year. Similarly, 54% believe that companies they deal with have used knowledge of their preferences and needs to improve the service provided over the last year.
With a 'double-dip' recession threatening to shatter the hopes of recovery in 2012, many companies need to continue to do all they can to preserve the strength of their business. To continue to endure - and even flourish - in this difficult economic climate firms must take full advantage of the opportunities they have to gather data on each consumer and use this information to reach those individuals with the right communications at the right time.
The fact that the research indicates companies across the board are maintaining loyalty and retention activities - and that customers are responding - demonstrates that these businesses have found that loyalty programmes are paying off, and that employing the data gathered though these schemes to build a more solid, lasting and profitable relationships with customers is proving to be a winning strategy.