UK study heralds change in retail loyalty strategy
An annual survey on the state of customer loyalty among British adults online has signalled a need for an overhaul of in-store retail strategy by merchants, including how and when customers receive offers and rewards, brand engagement through social media, and the need for instant rewards.
The survey, conducted by The Logic Group and Ipsos MORI, looks into the current customer loyalty landscape, focusing on understanding what motivates customers to be loyal, which sectors consumers feel loyal to and how best loyalty should be rewarded in today's tough economic environment, as 47% of British adults claim their current financial situation is 'weak' and 26% expect it to be weaker in six months' time.
Antony Jones, CEO for The Logic Group, explained: "The technological changes we are seeing in society today are bringing real benefits to customers' interactions with loyalty programmes. As such, consumers are no longer only interested in reaping the benefits from traditional card-based programmes, but are looking to alternatives such as social media and real-time discounting to stay loyal."
Simon Atkinson, assistant chief executive for Ipsos MORI, added: "This year's results are a reminder that, in the eyes of customers, loyalty is about more than just emotional attachment. Customers don't necessarily expect something for nothing. But they expect recognition for showing loyalty to services, products or brands. But what's less clear is just how quickly new technologies will change the landscape, and in what ways. We've all seen the growth of high-speed internet, smartphones, social networking and apps, but it's still early days in terms of what this means for loyalty."
Technology-driven change Customers' attitudes toward the use of technology in driving loyalty are changing. In the past six months, 13% of adults have received loyalty scheme offers via their mobile phones, with a further 7% extra expecting to receive offers via their mobile phones in the next 12 months. To date, Britain has had a slow uptake in mobile payments use, with only 7% of adults having used their mobile phones for payment in the past six months.
However, looking forward there are high expectations amongst customers with 17% expecting to have paid for goods using their mobile in a year's time. This same number also expects to use their phone in place of a loyalty card in the same period.
The social consumer The research also shows the growing importance of social media as a medium to drive loyalty through increased customer interactions. While Facebook looks set to remain the dominant social media channel in the coming year, it is Twitter that will experience the largest growth in people using it to show their loyalty. In the last six months, over a fifth (22%) of Brits have visited the Facebook site of a company they are loyal to. In comparison, only 8% have followed a company they feel loyal to on Twitter. 9% of adults in Britain have received a loyalty offer via a social networking site in the same period.
However, in the next 12 months, the projected number of customers following companies they feel loyal to on Twitter could double - in a year's time, more people say they will be following a company on Twitter that they feel loyal to than there are currently British Twitter users. With 24% of British adults saying they will use their phones to check product details/product reviews in store also in a year's time, social media use on mobile will be a key medium to help drive customer loyalty.
"From a customer point of view, social media is changing the way customers interact with companies. For businesses, using social media platforms such as Facebook adds another channel to customer interactions and greater business opportunity to influence and engage with customers along their purchasing journey; whether that's greater availability of information, a more relevant and customer-friendly tone to communications, responding quickly to an enquiry, or offering a targeted loyalty deals to followers," said Jones.
Winners and losers of 2012 Banks & building societies, supermarkets and mobile phone network operators make up the top three sectors that British consumers feel loyal toward: 66% feel loyal to banks/building societies, 62% to supermarkets and 53% to mobile phone network operators, although these figures change as we look at different age groups.
Banks & building societies still rate as number one for 15-24 year olds (55% feel loyal to them), however the loyalty levels are far lower than for the older generation (55-64 year olds), of which eight out of ten (79%) feel loyal to their bank/building society. The same disparity is seen with supermarkets as half (50%) of 15-24 year olds feel loyal to supermarkets compared to seven out of ten (71%) of 55-64 year olds, despite 68% of Brits being a supermarket loyalty scheme member. The organisations that attract feelings of loyalty least often in Britain are hotels and electrical/IT retailers.
Discounting as a customer drug? Six out of ten (62%) consumers in Britain agree that they are more concerned with the cost of the shopping than they are social and environmental issues; and over two fifths (44%) believe the economy will worsen in the next 12 months.
To combat struggling financial situations, the British consumer prefers receiving offers or rewards while out shopping, rather than later (42% agree) and many are searching online for discount vouchers - over 13% have received loyalty scheme offers via their mobile phone in the past 6 months.
"At a time when businesses are feeling the economic pressures, understanding what consumers demand in return for their loyalty and the role new technologies can play, is going to be vital for developing successful in-store strategies," Jones concluded. "Over the next 1 to 2 years we expect the use of mobile interactions in-store to grow as more NFC-enabled handsets hit the market."