Headline News5 things you need to know about loyalty

5 things you need to know about loyalty

With Sainsbury’s hitting the headlines for all the wrong reasons after making changes to its Nectar programme, loyalty is high on the agenda. Here are the key things you need to know to make sure you're getting it right.

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jodie_thumbOur latest .rising leaders post comes from Jodie Hopperton, Managing Director of the Institute of Promotional Marketing (IPM).

With Sainsbury’s hitting the news over the past few weeks after making changes to its Nectar programme, loyalty is high on the agenda. Jodie recently chaired The Great Loyalty Debate, an event organised by IPM member company Hive that included contributions from Clive Humby of DunnHumby, Steve Mader of Kantar Retail and others. Here are her key learnings from the morning…

 

5 things you need to know about loyalty

 

1. We need to redefine our definition of ‘loyalty’

By definition, loyalty has to be a long term, not a short term consideration. But have we been distracted by our short term financial goals – be they personal or those of corporate shareholders?

Clive Humby spelt out the main challenge when he told the audience that 60% of FMCG sales come through price promotion. This, he argued, represents far too heavy a reliance on one promotional mechanic – particularly considering it’s one that erodes brand value.

loyalIt was also made clear that FMCG marketers and retailers need to find other ways of promoting products which add value to them and build brand equity – an argument which the IPM fully endorses.

Loyalty isn’t something that customers owe retailers or brands – it’s something retailers and brands owe their customers. At its simplest, loyalty is about saying ‘thank you’ to your shoppers for supporting you and encouraging them to stick with your brand in the longer term.

2. Surprise and delight  

It seems that consumers have become conditioned to expect a certain level of reward through points-based schemes.

Instead, marketers need to inject some ‘surprise and delight’ into their loyalty programmes – an idea that I love. It moves us away from that feeling of entitlement and expectation.

For example, rather than a consumer having a ‘loyalty’ card, collecting stamps each time they have a coffee and getting their 10th one free (an expectation), why not give a coffee shop’s manager the discretion to give away a percentage of coffees every day for free? It reintroduces some excitement into the relationship.

3. Take back ownership of your brand   

amazinMany products are out there on sites like Amazon, with price points that are far removed from what the brands would like them to be. Amazon is successful because it makes the path of purchase easy, and brands are often becoming one or two steps removed.

Both Clive Humby and Steve Mader from Kantar encouraged brands to explore ways to take ownership of their brands back by having direct relationships with online retailers and by using loyalty schemes to drive shoppers to their official sites, and then reward them for remaining loyal.

Linked to this, there was a clear message about the need to connect sales and marketing better. Often, marketers don’t have any control over price, which is craziness – price is one of the fundamental ‘Four Ps’, after all!

4. Personalise     

Loyalty is not just about data. We talk a lot about ‘big data’, but what is actually needed are those small nuggets of real consumer insight amongst all the noise.

Data needs to be contextualized around an individual shopper – through a loyalty scheme or from ePos records by marrying it up with their activities on social media – to create a real, valuable picture of their purchase paths. Look at what they love and share, and build your rewards offering around that core understanding. Data is wonderful – use it wisely.

5. What comes next?  

loyal323Shoppers may get fed up carrying around a wallet full of loyalty cards, let alone being bombarded with messages from a range of different loyalty schemes in various forms of media.

We need to be smart about how and where we target. Can we use mobile phones more effectively, for instance? I, for one, don’t necessarily want to exchange a card for an app, but I’m open to integration in some way.

Consumers want rewards which are relevant to them and to their relationship with a particular brand or retailer, and they want to be excited by what they get offered.

As yet, the Great Loyalty Debate suggests, nobody has cracked this particular brave new world although it doesn’t seem we are far off. Should we start bets on who will get there first?

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