Are loyalty cards fit for purpose? CloudSense’s Josh Morse looks at why brands need to be doing much more to take loyalty to the next level in 2014.
A person shopping who has few options is likely to buy repeatedly from the same brand or shop. This was the case in the past with individuals relying on local shops for their goods as there simply wasn’t any other option. Businesses could then develop strong relationships with customers and learn their preferences, delivering good customer service. Looking back at this, were those customers loyal or were they simply repeat customers out of necessity?
The comparison with today couldn’t be more stark. We think nothing of driving miles to visit a supermarket or browse through the January sales. We are acutely aware that we can search for the cheapest price online and we are keen to find out the opinion of others through reviews and social media. With the power of smartphones in our pockets we increasingly view physical stores as more of a showroom from which we can assess a product before deciding whether a cheaper price online is more appealing than being able to buy it then and there. With loyalty increasingly difficult to achieve but also more important than ever for profitability and growth, how can brands instil loyalty in customers?
Taking advantage of tech
While technology is seemingly undercutting the old order when it comes to brand loyalty, many companies are adapting and using the new tools to create stronger long-term relationships. The Waitrose loyalty scheme, myWaitrose, received considerable media exposure towards the tail end of 2013 for the popularity of its new loyalty rewards, in particular free coffee and newspapers. This rewards scheme is unique and quite different to existing competitor offerings. But Waitrose was very late in bringing a rewards scheme to market, having only launched two years ago. The app also has limited digital functionality, with users unable to buy Waitrose goods through it. Waitrose and many of its competitors are failing to put the digital and mobile customer at the heart of their loyalty offerings as they are simply not moving quickly enough. The myWaitrose loyalty scheme puts digital customers, who are not eligible for the free coffee and newspapers a very distant second to its in-store customers with the lack of mobile e-commerce solution demonstrating this. Waitrose is the second largest server of coffee in the UK as a result of myWaitrose, but how does this affect customer loyalty? Are customers more loyal due to the rewards or is Waitrose simply providing existing and occasional shoppers with access to free coffee on demand?
A further example of the changing loyalty landscape comes from Starbucks in 2013, with the company also producing an app and plastic card to replace the paper loyalty system. What Starbucks found from the data they stored was that the best use of a loyalty system is not for rewarding already loyal customers, as these customers are likely to buy coffee regardless of the loyalty scheme in place. By previously offering free coffee to loyal customers based on a certain number of purchases they were simply reducing their own revenues. Could such a system be said to be creating loyal customers? Probably not.
Gaining a single customer view
Now, what the data on each Starbucks card and app does is allow Starbucks to protect its own revenue by tailoring offers that help to prevent a customer from going to competitor. If a usually regular customer doesn’t visit their local branch for some time, an offer can be sent through the smartphone app that entices the customer to come back and become a regular customer again. This is the main advantage of a combined app – plastic card loyalty scheme, it gives Starbucks access to valuable data and provides a single customer view they can use to personalise content and drive loyalty. This is very different from simply rewarding already loyal customers.
Storing customer data received from loyalty cards is not a new initiative and a company like Tesco has being doing this since the early 1990s. We are now seeing the evolution of the loyalty card, with mobile apps for the digital customer increasingly taking the role that cards played in the nineties and into the noughties. But despite this, not many organisations are effectively utilising the data by turning it into actionable intelligence. The data can be used to improve customer experience and drive customer loyalty, giving real value to brands and driving a long-term attachment that can evolve into customer loyalty. Ultimately brands are paying to store data, so why are they not using it properly?
Companies such as Waitrose and Starbucks recognise that in a multi-channel environment, just having a paper card is not enough and it needs to be underpinned with a truly digital approach. Customer experience is the key to growth and success and data is the key to telling us what areas need to be improved upon. Brands need to consider the complexity behind the capture of customer loyalty and appreciate that there have been dramatic changes in consumer behaviour driven by technological advances. Many recognise this shift but simply struggle to work out how that process can become a reality. The steepest challenge for many is managing all the information received about customers and bringing it back into front-line processes which generate value. If you can’t exploit data, you won’t be able to use it to drive revenue growth.
To secure modern customer loyalty brands have to ensure they have a single customer view that allows them to provide a superb level of customer experience. This is expected as standard by customers today and over the coming year we are likely to see more and more brands move away from the simplicity of plastic cards towards the integration of digital, mobile and social into customer loyalty schemes. 2014 will belong to those companies that do this successfully and use data intelligently to provide real customer benefits.
By Josh Morse
Marketing Director
CloudSense
www.cloudsense.com