Why loyalty schemes face a defining choice: delight or dilution

When Tesco cut its Clubcard benefits last year, it was a sign of the times. Consumer demands of loyalty schemes are changing, and there’s some confusion among brands about how to deal with these shifts in consumer behaviour.

While still boasting millions of members, the once-dominant schemes backed by Tesco, Sainsbury’s and other national retailers are trying to adapt to the whims of the marketplace, which differ by each generation of shopper . But not all are being successful.

As the marketing saying goes, don’t just take our word for it. A poll by Forrester Consulting in late 2018 found two thirds of retailers do not interrogate their loyalty data to understand more about customer retention and brand advocacy.

The study also discovered that barely more than half (55%) of retailers track and analyse what happens when loyal customers interact with their brand, in order to improve the overall loyalty experience. Which seems like an absolute like an absolute waste of resources and “free data”.

Following the release in 2016 of our previous report, Redefining Loyalty, we wanted to investigate what modern marketers think loyalty is - and whether that shows a common understanding of what consumers want. For our latest study, Loyalty 2020, we asked a panel of 75 brand marketers to define loyalty.

Although just over half (54%) agreed that loyalty is “a positive attitude between a brand and its customers”, there was clearly no overall industry consensus. A further fifth think loyalty is all about repeat purchase.

Meanwhile, 15% say the concept is rooted in customer allegiance to a particular brand. And just over one in 10 (11%) say loyal customers always choose a specific brand rather than reaching for a rival product. This is a fairly pretty lazy way of looking at customer retention, almost like the husband or wife who think they don’t need to put any effort to keep their partner.

This divergence in understanding is important. A key challenge in any business - ideally to be overcome before going to market - is defining what the customer experience looks like, and how that therefore spins out into retention, loyalty and advocacy.

If brands jump straight to customer reward without thinking about the implicit values they are trying to create and promote, they and their customers will end up in a transactional cycle. Rather than delighting people with the more personal and unique rewards they crave, the brand message could be lost and values diluted.

Emotional bonds won’t be strengthened and relationships will likely break down quicker - perhaps when a better offer comes along or simply because consumers like to try something new. That’s why we’ve introduced our new Loyalty Framework, which you can read more about here.

Using primary research conducted among a 1,000-strong panel of UK-based consumers, Loyalty 2020 also investigates people’s attitudes towards loyalty to help brands understand the type of programs they should build and, if done well, what the benefits can be.

Rumours of the death of loyalty schemes may be greatly exaggerated. But there’s plenty more to know about what savvy consumers want if we are to write a singular definition that heralds a return to the golden era of retailer and brand loyalty.

To find out more about Rare’s latest research and report, Loyalty 2020, get in touch at xxx.

Rare: Consultancy