I was recently a speaker at Retail Bulletin’s 5th Customer Loyalty Conference in London, where I gave a presentation dispelling some of the myths surrounding loyalty schemes. It was a great event to be associated with and the other presenters included some exciting brands: Sainsbury’s, Orange, Subway, Whitbread, Home Retail Group, and loyalty newcomer Waitrose, a number which gave interesting presentations.
In my slot, I tackled a number of prevalent myths surrounding loyalty. Among the most pernicious and widely held is the fallacy that loyalty schemes are expensive. They’re not. The reality is they pay for themselves by generating business that not only covers the cost but far exceeds it, building bonds between consumer and brand, expanding buying relationships, and creating greater lifetime customer value.
Sure a few pounds per customer each year can run into hundreds of thousands of pounds, even millions for big national operators – but the payback is customers who will go on to spend hundreds, in some cases thousands, of pounds each year with a business because of the effective use of information gathered from a loyalty programmes. A loyalty programme generates a huge incremental increase in profit.
But the myth that I really saw in action at the conference was that companies can utilise the data they gather from loyalty programmes simply by buying a piece of software and handing it over to IT. A lot of people were either selling marketing automation, CRM and analytics software – or looking at it. I’ll say it now and I’ll say it again: buyer beware.
No off-the-shelf software will do what you want when it comes to understanding and communicating with your own specific customers better. So you either pay for customisation (if it’s even possible) or you compromise. And then what do you do with your spiffy new kit? IT won’t know how to use it the way that is necessary to get the right analysis and effectively guide your marketing to a more profitable place.
Those looking at standalone technology solution should look at their motivations. Efficiency is a noble and desirable aim, but it should not be confused with cheap. The most expensive commodity is time. Do not under estimate the amount of analytical resource (internally or externally) that you need to generate any return on a standalone technology purchase.
The fact of the matter is that it takes analysis by a person who actually gets to know your business inside out, understands its customers and has the ability to read what the data is telling the company in order to get a return on a scheme and the data it produces. Otherwise a loyalty programme is simply generating reams of transactional data in a vacuum.
Getting the software actually necessitates an investment in staff – usually more than one person. Why have the software and not the right analysts?
On a more positive note, I enjoyed the presentation by Sainsbury’s director of customer data and relationships, Helen Hunter, on its Nectar-based programme. It was a ‘by Jove they’ve finally got it’ moment, as after taking different approaches in the past, they seem to have found a good one.
Their stated vision is perfect: “To be the most trusted retailer, where people love to work and shop.” Their strategy plays to the history and previous loyalty Sainsbury’s has enjoyed. It is uplifting and sets their sights where they should be focused. Sainsbury’s is not just playing to the rational needs of customers – realising they need good offers – but to their emotional needs as well. As Hunter noted, the two elements cannot be separated, so you need to address each in your scheme – as well as use the right blend of metrics.