Justifying the spend on points – why retailers struggle to optimise loyalty ROI
The cost-of-living crisis has prompted retailers to become hyper-focused on loyalty schemes. It has also led to a polarised reaction from brands across different verticals.
On the one hand, some retailers have reduced benefits available through their reward schemes. Tesco, for example, cut the value of Clubcard point cash-ins in June (at a time when the supermarket was struggling to appeal to investors). On the other hand, some retailers have invested more in loyalty schemes now than ever before. In fashion, both River Island and Little Mistress have adopted this strategy.
Article by Stuart Russell, Chief Strategy Officer, Planning-inc
Only time will tell which approach pays off in the long-term, but in my experience, investing in loyalty is crucial to a retailers’ survival during periods of economic austerity. And, loyalty programmes are one way to do it.
With the growing influence of AI, there’s a brilliant opportunity for customer marketers to ‘supercharge’ the relevance and effectiveness of loyalty programmes. Here’s how.
Why retailers struggle to optimise loyalty scheme ROI
Loyalty programmes are beneficial to retailers because they deepen relationships with customers. If implemented effectively, they can lead to an increase in repeat purchases, as people often base their purchasing decisions on access to certain exclusive discounts or deals.
But, the current retail market is flooded with loyalty schemes of one sort or another. This, in many cases, negates the power of loyalty schemes. When people know that they can access at least similar discounts or rewards elsewhere, individual loyalty schemes no longer boast the same appeal.
That’s why deeper customer insights have become vital. The more personalised the loyalty programme is towards individual customers, the more likely it is that it will increase repeat purchases.
But, loyalty programmes can also become an important stream of data for customer marketeers. They can help teams track the purchases of each individual customer – whether paying with card or cash, online or in store. This can enable retailers to start building a comprehensive profile of each person who shops frequently with them. And those profiles could, in theory, enable retailers to target customers with ultra-personalised communications, improving their experience and increasing the likelihood that they’ll remain loyal.
The problem is that, for some retailers, these benefits remain exactly that: a theory. Many are unable to use the customer data at their disposal, despite collecting more data than they ever have before. This is because many customer marketing teams don’t have access to the people and technology capable of unifying this customer data, making sophisticated personalisation practically impossible.
Simply put, if retailers want to reap the rewards of effective loyalty schemes, they need to become better at unifying their customer data, enabling them to then activate it. That’s where AI comes in.
How AI can help retailers realise the benefits of loyalty schemes
In retail, effective marketing combined with AI can transform a company’s potential in very little time. AI is specifically useful because it can help marketing teams rapidly and comprehensively analyse their data to uncover hidden patterns in an individual customer’s behaviour. It’s these patterns, or insights, that hold the potential for marketeers to optimise loyalty programmes.
Halfords, for example, wanted to find a way to engage its motoring customers on a deeper level. They implemented their flagship Motoring Club loyalty program in 2022, delivering complex hyper-personalisation using data-led automation across web and email to deliver relevant content, reminders, discounts and motoring advice, tailored to each customer and their car. This resulted in an increase in shopper frequency, value and NPS scores.
But, again, the foundation for these results is retailers having their data unified in a way that enables the technology to reveal patterns of behaviour on a customer by customer basis. Advanced AI models can perform magic, but not without some basic ingredients: a unified customer data asset being fundamental.
Today, that customer data asset should be in the form of a continuous 360-degree ‘single customer view’ (SCV), meaning that all the data relating to individual customers can be found, unified and attributed to a single customer, and is constantly updated..
Using Single Customer Views as a foundation, customer marketers can then activate their data, targeting customers with ultra-personalised communications and loyalty rewards that align perfectly to the interests and behavioural patterns of customers. They can also begin to project each customer’s ‘future value’, drawing from customer behaviour, purchase history, and demographics. This will enable marketers to focus their efforts – and indeed, marketing and promotional spending – on influencing the behaviours of customers who are most important to the future of the business.
In times of economic austerity, it’s an easy decision for retailers to divest from their loyalty schemes, which they view as sources of short-term revenue loss. But, with today’s advanced analytics platforms and targeting capabilities, powered by AI, those that choose to do so will be missing out on an enormous advantage. Personalised marketing is one of the best ways to ensure retention. With loyalty schemes, retailers will be supporting their marketing teams with the best data available.