Customer loyalty is a key growth strategy in the retail market, according to research by Eccomplished, which found that 74% of all UK retailers (and specifically 88% of online retailers) say they are prioritising investment in customer loyalty and retention programmes.
However according to Steve Rivers, managing director for Intelligent Reach, a founder member of Eccomplished, if these retailers think they can buy loyalty, they are missing the point.
But if this is the case, then how can retailers build a truly loyal customer base? According to Rivers, Tesco's Clubcard loyalty programme illustrates a central point very well: "The Clubcard gave Tesco a huge advantage over its competitors, but not because it created loyalty in its own right: instead, it gave Tesco the ability to gather and act upon copious amounts of customer data and insight. That insight was then applied to everything from in-store promotions and store layout, to pricing, customer communications and more. In other words, it gave Tesco the ability to earn loyalty by giving its customers what they wanted, when and where they wanted it."
Tesco used the data to find out about its customers at every touch point, whether in-store, at the petrol station, or online. That insight, and not necessarily the customer's ability to earn and spend points, is what ultimately underpinned the supermarket giant's customer loyalty and contributed to the company's spectacular performance (admittedly, aided by a booming economy at the time).
This, then, is the lesson that retailers investing in customer loyalty and retention must learn from the outside: you can't create loyalty - you have to earn it. In fact, from an online retailer's point of view, failure to draw together rich customer insight from every touch point, and then to organise, analyse and understand it all, is to ignore one of the most significant advantages of online commerce over bricks and mortar. It is much easier in the online world to gather detail about customers' behaviour, above and beyond what and when they buy things.
Intelligence drawn from every interaction, whether on an e-commerce website, via an electronic newsletter, or any other online channel, can be easily drawn into a single customer view that tells us not only what customers do and when, but also, vitally, what they do not do.
It is exactly this kind of deep insight that enables brands to earn loyalty, not by selling more efficiently, but by serving more efficiently - making it easy for customers to buy what they want, when they want, and to closely target and personalise promotions and customer communications.
"The point is that if brands want to build loyalty amongst customers online, they need to make the effort to really understand them and how they behave across an increasingly complex set of channels. It doesn't even require any action from customers like the Clubcard did - the data is already there. Retailers only need to acquire the tools required to organise it intelligently, interrogate and understand it," concluded Rivers. "I firmly believe that the brands which make the effort, rather than simply 'playing the loyalty card' will win in the short term, but will also build a lasting advantage - and not just in terms of customer loyalty. They will be in a position to base future investment on real insight, rather than what amounts to educated guesswork."