What’s really going on in loyalty marketing?
According to the consumer press loyalty marketing is all on the decline. Our wallets are overstuffed with cards that no one uses. People are sick of points that give them nothing. And consumers would all just rather you gave them a discount, which isn’t really loyalty.
Which isn’t surprising given that the prevailing wisdom has been to build bigger and bigger schemes, then systematically erode the value that’s on offer. These coalition juggernauts – where a group of large scale non-competing businesses link their programmes – create, on the face of it, a very appealing business case: they offer the customer greater choice and value, and the assumption is that the perceived joint value is greater than the sum of its parts. If you are a loyalty marketer, that’s the Holy Grail – greater perceived value but at less cost to the provider.
However across the ditch, some interesting trends and counter trends can be observed – while Supermarket Countdown was joining AA Smartfuel in a coalition, Green Cross Health was leaving the FlyBuys coalition – with 1.2 Million customers getting their own scheme. So what’s going on?
Some are realising, that when it comes to loyalty, bigger isn’t necessarily better. If your vision for loyalty is one that attaches the customer to your brand by building in experiential benefits that are unique to your business, that may be a far better long term strategy than simply piling on the value. But it also means that you are probably better off going it alone.
And when it comes to experience – what’s best? Well the macro research out there says, rather disappointingly, that people still want a card rather than an app, which is a massive driver of cost. Trends and Macro-studies can be the ultimate in bikini statistics – what they reveal is interesting, but what they hide is critical. While the appeal of loyalty apps is growing, it’s not nearly at the rate you’d expect given our smartphone penetration. And we all know that we hardly use any of the apps on our phone…
Our bet is that what’s going to tip this ratio quicker than anyone expects is payments. As payments become mobile, the players that integrate payments and loyalty in a compelling way are going to take the new high ground in loyalty. What we used to call “front of wallet” will now be called “mobile default”. You can stand back and let the banks own this space as they have for decades, or you can seize the moment.
The only caveat is that you’ll need decent scale, since it’s hard enough to get people to sign up to a free loyalty programme let alone a new payments model. The real win here is data – knowing how and where people spend beyond your specific relationship, you’ll be able to tailor your offer and experience even better to their needs.
If that’s not you, the thing you need to figure out is, “what are the services that some customers are prepared to pay for?” And if those customers also happen to be your most valuable customers (hint: they often are) then that has to be the central focus of your loyalty programme. The fact that it doesn’t appeal to your entire customer base is entirely the point.
Of course, there’s more to it than that: talk to us about the six pillars of loyalty we’ve identified and how they can be applied to your business.
By Colin Jowell, 8th December 2016