Why brands need to approach loyalty like Amazon

“Retailers need to move towards a more Amazon-like relationship with customers, and to do that they need data,” according to loyalty expert Sir Keith Mills.

Mills says: “Creating customer propositions on a one-to-one basis works very effectively online with companies like Amazon. Offline retailers need to be able to do what Amazon do online with the normal shopping experience.”

Founder of the Air Miles and Nectar loyalty schemes, Sir Keith Mills is long accustomed to using data to get closer to consumers. In an era where personalisation is being pursued by brands across every sector, Mills believes the answer lies in using data-driven insights to replicate the one-to-one experience that shopkeepers offered their customers in the 1950s – except on a mass scale.

“If data and insight can help you tailor your proposition on a one-to-one basis with the consumer then you’ll see your best return. In the future, the one-size-fits-all model won’t provide companies with the same sorts of returns. You might as well do mass marketing,” says Mills.

Companies that don’t know who their customers are, or what their customers are buying, are at a competitive disadvantage

Keith Mills, Air Miles founder

Marketers need to have a suite of communications and offers in their arsenal in order to tailor the experience to the customer’s specific needs. This means exploring a variety of reward options as not all loyalty is discount-led, argues Mills.

“There is clearly a subset of any consumer market driven primarily by price, but that’s by no means the majority. In all the work we’ve done we’ve found 15-25% of any consumer group are promotionally sensitive to an offer, but the majority want good value and that can be determined in a number of different ways,” he explains.

“Look at the grocery market, we have seen incredible growth in the price sensitive sector with Aldi and Lidl, which have grown really well in the last few years. But then so has Waitrose and that’s a completely different offer.”

READ MORE: Can loyalty exist in the grocery sector?

The nuances of consumer behaviour mean loyalty programmes must be more flexible and responsive than ever, especially as loyalty translates differently according to sector and brand.

Over the past two years a host of retailers have chosen to reboot their loyalty schemes. Both Asos and Harvey Nichols developed schemes giving consumers access to tiers of experience linked to how much they engage with the brand, while Marks & Spencer positions its Sparks programme as a personalised member’s club.

Whatever the approach, the key to success is an intelligent use of data, says Mills, who compares offering broad financial discounts to everyone in your customer base to using a sledgehammer to crack a nut.

Beyond cards and points

While card based loyalty programmes are one method of collecting customer data, detailed information can be captured via transaction by tokenising a payment card and tracking the customer’s spending habits.

This could become more prevalent as Mills expects to see consolidation in the number of card based customer loyalty schemes due to the sheer volume fighting for limited space in consumer’s wallets.

READ MORE: Loyalty cards aren’t convincing British consumers to shop

However, while brands may be changing their data collection tactics, obtaining insight on consumer behaviour remains essential, he argues.

“I find it interesting to see companies like Asda that don’t believe it’s necessary to collect information on customers so they can create better products and services for them. I suppose it’s a Walmart culture.”

The benefits of implementing data insights go beyond pure retention. Marketers can use data to identify occasional shoppers and increase their share of spend – known as lift revenue – as well as define each consumer’s value to the business.

“When I came into marketing we didn’t know how profitable our customers were, but now you can look at any customer in a major loyalty programme and determine what their profitability is, and whether you are getting more or less of their business,” says Mills.

“That’s an incredibly unique position to be in. If advertisers spending money on television could get that information it would be worth a fortune.”

Stay relevant

Relevance is crucial to nailing the loyalty proposition, particularly as consumers are savvier than ever and have the ability to easily switch their spending to competitor brands worldwide.

It was for this reason that in February Mills and a group of partners invested £12 million in point of sale marketing specialist Ecrebo. The system captures customer purchase information in real time and provides relevant, personalised offers at the point of transaction from discounts to vouchers for a free cup of coffee.

The system’s ability to analyse data instantaneously at point of sale is the most interesting element of the technology, says Mills, who believes the scale of insight needs to be enhanced over the next five years for businesses to gain a real competitive advantage.

However, he concedes data and loyalty are only part of the picture. The overall customer experience and product quality have to live up to the promises or all the insight in the world is meaningless.

“Fundamentally, if you have a poor product or a poor service you will fail because the consumer is very discerning and if they have a bad experience in a store or they buy a bad product then there are plenty of alternatives for them to choose from,” Mills concludes.

“So customer loyalty is as much about staff training and recruitment as it is about giving points away. Loyalty is a range of things that build a relationship of trust between the consumer and the brand.”