The loyalty backlash - is it there, or isn't it?
There has been much debate in the UK national media about retail loyalty programmes, with a number of suggestions that they may not be as popular with consumers as they have been in the past. But Tony Clarke, director of ICLP (International Customer Loyalty Programmes), questions such speculation about 'consumer backlash'.
Clarke says that, while many consumers may be saying that they are becoming disenchanted with loyalty cards, the majority still carry their preferred cards and use them on a regular basis. The issue should be considered from both the consumer and the company perspective; both have different viewpoints and want different things from the loyalty programme relationship.
Acquiring, retaining and earning more from customers is at the heart of a successful business, and delivering and recognising value is top of the agenda for customer retention - both ways. With the simple act of holding a loyalty card, the consumer has already demonstrated some form of commitment by which they are bound to the company - albeit to varying degrees - but a commitment nonetheless. A company in turn is therefore duty-bound to return that commitment by delivering enhanced value, whether in the form of rewards, relevant service benefits, offers or communications. An effective loyalty initiative provides all of these.
Beyond the reward Where an increasing number of companies are failing is in the delivery of value beyond the reward. A consumer may well be earning rewards in the form of points, for example, but they could get these through a simple sales promotion. What the consumer wants is the added value benefit - the 'money can't buy' aspect which is so seductive and influential - and recognition.
British Airways' Executive Club is one good example of this. Not only do customers earn Air Miles but they also obtain the right of entry to the BA lounge while travelling, and priority on the reservation 'wait list'. These are benefits that are valuable, enhancing the product for the best customers. It may be a relatively simple reward for the traveller but it makes them feel valued.
Burnout The potential for burnout is high when companies fail to offer added value beyond the rewards. Although there may be nothing wrong with the product, the consumer can begin to feel undervalued and this can be the main reason for defection from such loyalty schemes.
The effective execution of a loyalty scheme lies in the ability of the company to analyse the information gained from consumers at the reward stage and to act appropriately upon it. By profiling how customers behave, companies can gain insight into the value of a particular customer, and gain the knowledge to communicate relevant propositions at the most relevant time. This can influence their buying behaviour.
Tesco's programme Clarke says that Tesco is a best-of-breed example of this. It rewards people and then responds to them with relevant benefits (such as offers and discounts that fit with that customer's lifestyle and purchasing habits). For example, Tesco can establish when a family no longer has young children by monitoring their shopping habits, and therefore doesn't make the mistake of targeting the family with inappropriate offers such as discounts on nappies. Relevant product enhancements, services, and communications can then be developed and delivered to the customer.
The talk of consumer backlash is a symptom of a standard hiccup in the journey of a product, and is unlikely to bring about the complete downfall of loyalty schemes. It does, however, serve as a prudent warning to those currently not benefiting their consumers and shows that delivering value - enhanced by loyalty strategy - is what loyalty programmes are all about. In other words, there is much more to loyalty than the points and the rewards.
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