The future of loyalty
The first in a weekly series of articles analysing the challenges and the opportunities for loyalty in 2014.
Speaking with conviction: Industry experts give advice on what loyalty professionals should be focusing on.
So it is finally 2014. We can put the old year behind us. Forget all the predictions and trends we got wrong, downplay the failures and concentrate on the positives and the certainties for the next 12 months.
At Europe’s Customer Festival, held a few months ago, and at other retail conferences, industry experts gave their advice on what will be important looking forward, and in this and following articles, we will be picking out trends and specific areas that justify special attention. In this article we focus on the comments that people made with conviction.
Aimia is one of the world’s largest loyalty companies, that concentrates on the use of analytics to work out what the customer is thinking and doing. Jan-Pieter Lips (right), president and CEO of Aimia EMEA sees it like this:
Certainty: Customer loyalty is more important than ever before. It will be a driver for mobile payments, and a key component of every marketing and sales campaign by retailers. Not everyone will use points or rewards, but retention of customers through loyalty initiatives, and clever use of analytics will remain key.
Certainty: The mobile will grow in importance as the connecting device for the consumer, who bought a handbag every 30 seconds via a mobile device during 2013.
Certainty: Omnichannel is the new normal. Four out of five consumers who were asked in a recent survey admit to price matching. The only possible outcome of this is that all retailers will eventually sell goods at the same price, which mean other differentiators are needed. Will this be quality of goods, level of service, the number of surprises and offers, clever communication or a general understanding of the customer’s needs and requirements?
Danger area: Only 4% of customers questioned look forward to receiving emails from businesses. They are appalled at the thought of receiving sales text messages, of being harangued through Facebook, and resist following retailers on Twitter. Social media is seen as well, social, and businesses step into the water in this area at their peril. Forget the concept of tempting passing customers into your store by pinging then a jolly text message. They won’t let you know they are there – unless there is a really important benefit. This means personalised offers, and just a few companies are doing this well. Safeway for example, in the US, is doing ‘just for you’ offers, Neiman Marcus is encouraging shoppers to tap to say they are in store so they can receive a personalised experience and perhaps connect with a sales assistant who helped them last time. According to research, a customer who has been helped three times or more will spend ten times as much.
Challenges: To keep customers loyal, to keep refreshing the offer and to notice when they are no longer satisfied. An increasing challenge is what do you do with customers who have been extremely loyal and valuable in the past, but who are now not so valuable. BA for example is considering a tier recognising lifetime worth. It sounds a great idea, but to qualify, frequent flyers will have had to put in the miles. A transatlantic flight every month for ten years is needed to qualify for gold membership for life.
Alan Lias, worldwide head of loyalty and ancillary revenue development for Virgin Atlantic emphasises the need to keep the customer offering relevant. “Relevance, reward and recognition. This is the holy grail. The challenge for us is that most customers are leisure, and long haul is infrequent. The first transaction is seen as the trip of a lifetime but then it is important to keep the engagement going, which is in itself a loyalty driver. We use partner programmes to fill in the gaps in the three to four years between trips.
Certainty: Customer expectations are greater than they have ever been, which means customers have to move fast to satisfy the demands. Technology is providing the tools to do much more than just market and sell, and should be used intelligently. Pamela Conway, director of P&L Marketing and Loyalty for British Gas admits that a utility has nothing tangible to sell but its service. So it is installing meters that will give half hourly reports downloadable to people’s mobile devices, to report on energy use. Soon this will be possible room by room. This is a level of service that has the potential to equate to customer retention – until everyone else is doing it anyway.
Question: How often do customers want to interact. How often is too often? How to we manage restraint? Conway of British Gas, takes the view that a company should be there when the customer needs them, but that they should not over-communicate. But is this the same for a retailer? ASOS is the largest digital fashion business in the UK, which aims to be “the world’s number one online fashion destination for 20-somethings” which also produces a print magazine. Matthew Knight, head of CRM for ASOS explained: “A digital magazine and the online site fulfil very different purposes. People hang onto a magazine longer, and so we can engage with them in a very different way to digitally. It is important not to focus just on the online messages. People still need a physical experience.
Question: Is it possible to have loyalty without points or rewards?
Plenty of companies are doing this. Asda for example, competes on price, First Direct offers to ‘be there’ for the customer.
Alan Lias of Virgin believes that loyalty is achieved through many different ways, and that it is down to the company’s DNA. Points and rewards should be just the icing on the cake.
Advice to those with distressed inventory who want to sell this at a discount: “If anyone is discounting, you are mad. You should be looking at this distressed inventory as a business advantage, as a low cost of entry, which will equate to loyalty. All online retailers now will have near perfect data so there are plenty of opportunities to interact with customers.
Knight of ASOS stressed how important it was to bring the rest of the business with you, no matter what the initiative you have in mind. “Customers will be much more fickle. There are more retailers online, but there are more tools at our disposal to enable us to differentiate. Those who get it right will have the advantage.
Lias of Virgin Atlantic put it a slightly different way. “As we think how social will develop, we need to think how the customer can serve themselves and each other. This is an important part of the mix.”