What loyalty means to customers and why businesses should pay attention
Most consumers are aware of the major loyalty schemes – but does this translate into increased sales? Article by Anamaria Chiuzan, Customer Insight and Loyalty – Senior Marketing Manager at The Logic Group
Most people would agree that loyalty is a good thing; whether in terms of inter-personal relationships or in the choices we make about who we do business with.
In a commercial context, creating a loyal customer base is critical to any organisation that relies upon repeat business – and it’s hard to think of many that don’t. Indeed there are two main areas of focus that all marketing activities are based on, one is in attracting new customers and the second is ensuring that existing customers become a source of recurring revenue.
Providing the right product at the right price simply isn’t enough anymore, which has led to a growing number of businesses seeking new ways to make their proposition more appealing, to demonstrate their loyalty to the customer and – so the logic dictates – have that loyalty repaid.
Most people are at least aware of the kind of loyalty schemes favoured by many of the large retail brands, such as Boots or Tesco. But does this awareness translate into loyalty and ultimately into increased sales? While some businesses (and indeed some business sectors) have made good progress in rolling out their loyalty programmes, many lag way behind and the jury is still out regarding whether or not such schemes are really hitting their targets. So where are the loyalty success stories to be found, and what can be learned from them?
Despite the recent economic turmoil and the erosion of confidence in the banking sector, 72% of people surveyed by IPSOS Mori for its Imperatives for Customer Loyalty report earlier this year said they felt loyal to their bank. This surprisingly high figure is the same for supermarkets, many of whom go to great lengths to deliver loyalty programmes, unlike the banks who are not famous for handing out money-off vouchers.
But before one gets carried away with the notion that the supermarket chains have cracked the loyalty programme conundrum, it is worth looking at what people expect and what they receive from loyalty schemes and whether they actually perceive any value in those they have joined.
Loyalty is important in boardrooms
To give this topic a little context, and to prevent anyone running away with the idea that the notion of loyalty is rather nebulous and inconsequential, IPSOS Mori’s Captains of Industry survey highlighted just how important this issue of loyalty is in the boardrooms of the UK. Some 57% of respondents said customer retention will be more important this year than last. This is more than double the amount that cites customer acquisition as its number one priority (23%).
Commissioned on behalf of loyalty and payment specialists, The Logic Group, Imperatives for Customer Loyalty survey looked at how important this issue is from the customers’ point of view.
Forty six per cent of people told IPSOS Mori they were not part of any loyalty scheme. Which is almost the same number that are enrolled in a loyalty scheme with a supermarket or other retailer (47%). The number participating in schemes in other sectors, such as financial services, are very small by comparison – typically in the region of just three or four per cent.
But how are the 47% enjoying the retail loyalty schemes they are enrolled in? Given the high penetration of loyalty programmes in the retail sector, one could be forgiven – as stated earlier – for believing the retailers are giving customers what they want – how else would they find themselves in a position where almost three quarters of people have joined one of their schemes? Yet IPSOS Mori found fairly lukewarm responses regarding people’s membership of retail-based loyalty schemes.
Fifty one per cent described themselves as being ‘fairly satisfied’ with the programmes they are in. While only a handful expressed outright dissatisfaction, this moderate response cannot be what retailers hope for when attempting to engender the kind of loyalty that leads people to become faithful customers.
Perhaps one reason for this lacklustre reaction is a disconnect between customers’ expectations of how their loyalty should be recognised and the reality of what they receive.
Good customer service is most important
Rewarding loyalty needs to be about more than just cumulative points or one-off discounts, according to the research findings. Good customer service (34%) was the aspect most likely to encourage people to spend more in the shopping and retail sector, followed by personalised rewards they felt were relevant to them (30%). Both are rated more highly than reward points (25%) or vouchers (16%). At the other end of the scale, poor customer service (44%) is the feature most likely to put people off increasing their spend, as are unachievable rewards (28%), unrealistic points expiry deadlines (20%) or receiving too much communication (18%).
Good customer service is harder to quantify and measure than something as tangible as reward vouchers or discount codes. But it is clearly important to customers. Pushed further on this topic, 71% of respondents felt that a company was more likely to be offering good quality products and services if the staff seem happy.
Hard as it might be to incorporate something like good service into a loyalty scheme, it highlights an opportunity for making great strides. Rather than service being part of loyalty, perhaps loyalty needs to be incorporated into an over-arching philosophy of being a leader in the provision of good service to the customer and rewarding them for their loyalty using a variety of mechanisms that meet a variety of needs.