Loyalty schemes have become crucial marketing platforms for a huge number and variety of UK businesses today, with 94% of consumers belonging to at least one programme and many signing up to a number across different sectors, according to Andy Wood, managing director for GI Insight, who here explains why, in order to really get consumers flocking to a brand and forming a strong bond with it, a company needs to do more than merely have a loyalty scheme in place.
These programmes are coming to be seen as a must-have for most retailers and many other businesses - more recent converts have included John Lewis, Morrisons, Pets at Home and ASOS - leaving a lot of different brands vying to get their card in consumers' wallets. It is therefore paramount that companies offer meaningful benefits to stand out and become rooted as a go-to brand with those consumers.
To be meaningful, a benefit has to have some sort of value and relevance to the consumer you are offering it to - if members don't find it useful, with rewards and features they want, they'll abandon it. Indeed, 50% of UK consumers will quit a scheme or not join at all if the benefits are not strong enough, research by Nielsen shows.
Loyalty is the first step
Establishing a loyalty programme is just the first step. Running a scheme successfully is about using the data to better understand its members and meet their expectations with appropriate and attractive rewards, offers and other benefits. In other words, it is about knowing your customers and having a means of building longstanding and growing relationships with them.
A well-structured scheme becomes a platform for understanding and interacting with customers. In addition to capturing basic personal details, a scheme should afford unique data on preferences, personal circumstances, buying habits, transactions and interests.
Achieving this level of customer intimacy is no easy task. Customers have high expectations of companies in the age of Big Data, demanding precisely tailored communications, services and offers. People will not remain active in a loyalty programme if they feel the brand behind it is not giving them value in return - and our research showed that many schemes are in fact failing to engage a significant proportion of members.
Do consumers really want points?
The research found that only 50% of people who are actually registered in a loyalty programme are actively participating on an ongoing basis - showing that there is substantial opportunity for companies to get more out of their schemes. So what do consumers want from their schemes?
The findings revealed that, while collecting reward points does rank highest in the list of factors that drive people to enlist and take part in loyalty schemes, there is a wide range of other factors that attract them. So, although 74% of the 1,000-plus consumers surveyed for a series of reports last year said that earning redeemable points is an incentive, 60% say they are excited by vouchers and coupons giving cash or a percentage discount and 53% point to a special offer as a major motivator for scheme membership and use.
Women are particularly drawn to the cost savings offered by loyalty schemes. Female consumers are likely to be drawn by redeemable points, with 78% of female consumers citing these as a key factor when deciding to enter and remain in a loyalty scheme compared to 70% of men. More women are also persuaded by special offers (55% versus 50% of men) and want to receive savings from vouchers and coupons (65% versus 56% of male respondents).
In terms of age demographics, a greater proportion of older consumers cite redeemable points as a motivator, with 80% of people over the age of 65 saying points are a key factor when it comes to loyalty schemes. However, for younger consumers it was less of a driver with only 64% of 18-24 year olds listing redeemable points as a key motivator, while a higher percentage of this age group than any other cited special offers as a factor for joining and staying active in loyalty schemes.
The convenience factor
Convenience is another key motivating factor for a significant minority of consumers, with roughly a quarter of respondents favouring schemes that are easy to both sign up and to use. The research showed that factors related to regular habits, fit with lifestyle and ease of use were generally more important to older consumers than their younger counterparts.
Scheme extras such as free drinks and snacks, special deals linked to events such as birthdays and other select opportunities are seen as an important reason for joining and staying active in a scheme by a significant minority, as 17% of respondents cite complimentary treats, 12% list event-linked deals, and 12% point to exclusive/first access to new products and deals. Women are more motivated than men by perks such as free coffee or cake (19% versus 15% of men), and 13% of women are also more impressed by special deals tied to personal events, as well as exclusive/first access to products and deals (versus 10% of men in both cases).
Is mobile the answer?
While some marketers may think that mobile technology would be a major motivator for a loyalty scheme, so far this has not proven to be the case. The research showed that, despite the ongoing growth in the use of smartphones, the accessibility of loyalty schemes through an app was shown to be the least important factor, with only 6% of consumers saying this was an element that excited them about a scheme.
Nevertheless, younger consumers were more excited by mobile loyalty scheme apps, though the percentages remain relatively small but not insignificant: 10% of 18-24-year-olds and 14% of 25-34s say they are positively influenced by the offer of mobile access, compared to just 2% of consumers in the 55-64 age group and 1% of those aged 65-plus. Some brands - particularly those aimed at youth and those using mobile technology as a springboard - may see potential in promoting and developing a loyalty app as a differentiating feature going forward.
Insight is the key to success
Just as important as luring customers to join and use a loyalty scheme is the capability to leverage the insight the data gathered via the programme. Evidence indicates, however, that not enough companies are effectively using their loyalty scheme data to communicate more effectively with customers. Our research showed that just 27% of loyalty scheme members feel the companies providing them are effectively analysing the needs and sending relevant offers to them.
If used correctly, however, scheme data can help a business to build stronger bonds with customers - allowing companies to target them more precisely, personalise communications correctly and foster loyalty, while encouraging more, and more frequent, spending. Indeed, for many successful brands, providing the right loyalty scheme benefits and using the data to further cement member relationships is critical to attracting a range of consumers and keeping them coming back.