The going rate of exchange for loyalty

“One of the biggest challenges with the area of reward is that you can be rewarding people and yet not be building any loyalty,” says Paul Trueman, head of marketing UK and Ireland at MasterCard.

This is a consideration for all brands operating loyalty schemes. Coca-Cola, for example, recently closed down the points system on its Coke Zone loyalty website after finding that people were visiting it to win prizes rather than collect points to gain rewards. “We are therefore making these changes to ensure Coke Zone offers the type of experiences that most of our consumers want from it,” a spokesperson says in a statement.

Trueman argues that marketers have to be more considerate of what consumers want, how they think and how they operate, which involves ensuring that customer data is understood enough to make initiatives relevant and not intrusive (see viewpoint below).

MasterCard uses data from its community of members to glean insights that are then used to inform its programmes. Costa, E.ON and Western Union also claim to take this customer-led approach.

By asking your community of customers what they want and reflecting that in the offering, a smart and targeted approach to loyalty points and rewards can be achieved. MasterCard is currently offering Priceless London members a VIP package to see Beyoncé for $1,300 (£835) and two-for-one entry to Madame Tussauds in response to member feedback. Trueman believes the key to loyalty is measuring what is done against whether it adds real value, which results in consumers seeing a brand as useful to the way they live their lives and prompts their interest in what the brand does next.

This will help raise the profile of a scheme above others, according to CEB,a company that offers business advice and which researched how building emotional connections accelerates loyalty (see box, page 30). If a scheme has ‘shared values’ with what consumers want, it will be successful, the research suggests.

The Co-operative Group uses a mix of traditional points collection and rewards and trying to appeal emotionally to people. The group’s director of insight and planning, Neil Carden, says: “Ideally loyalty should be about both rational and emotional engagement with the brand. Rewards and points are strong drivers of rational engagement, sometimes to the point of changing behaviour so much that it obscures the true customer experience. But on their own they don’t drive emotional engagement. They need to be backed up by other elements, otherwise you’re just running an expensive discounting scheme that’s easily supplanted by the next big thing.”

Market research and engaging with the community will help brands to align with consumer wants and needs and therefore be able to differentiate themselves from other loyalty programmes.

“People like to feel involved in brands. Like anything in life, you are more likely to feel comfortable with something you are familiar with and have a strong relationship with,” says Trudy Exell, executive research manager at broadcaster Discovery Networks UK.

Discovery believes that, although different things work for different industries, engaging people and building strong relationships through the use of community panels is a great way to build a loyal audience. The network uses supplier Vision Critical for the software and management of the community, insights from which help shape future programmes.

This technique is similar to the one used by Costa as its Coffee Club loyalty members are polled via email for feedback. Ben Cook, loyalty manager at Costa, says: “Coffee Club gives us access to our customers in a way that we might not have otherwise, which is a great privilege and we use this access as responsibly as possible.”

Costa uses the Coffee Club for collecting customer feedback on stores. With the data collected in-store, the brand is able to poll customers by email after their visit and make sure that their in-store experience is as good as it should be.

Recently, the brand spent some time with customers to find out their take on the Costa Coffee Club scheme, what they liked and what they would change. Cook adds: “Overall, we found that they were happy with the scheme but there were also a few exciting ideas and we’re working on incorporating them at the moment.”

Energy company E.ON also has a 28,000-strong panel it uses for research and recently asked its customers for their views on loyalty. Eighty-two per cent said they thought energy companies should reward customers for their loyalty and based on this feedback, the energy company launched a new set of rewards, which include Tesco Clubcard points and tariff offers.

However, as Carden warns: “When it comes to loyalty, there is a difference between what customers say they want and need and how they behave. That needs to be understood. For example, while customers typically claim that points accumulation and redemption are strong motivating forces, it’s a surprisingly small proportion who actually change the way they shop. The real effect is on how often they come back.”

E.ON worked with marketing and technology agency LBi to create a digital tool for its ‘Best deal for you’ activity that enables customers to assess their tariff options, having learned from community panel research that this is the most important thing customers want to know about.

The brand also launched a social media campaign as part of the loyalty drive, which gave people the opportunity to ‘thank a friend’ by nominating them via a tweet or Facebook app for a prize, which ranged from experience days to cinema tickets to enjoy together.

Costa is also using social media in its loyalty scheme, launching the Coffee Club Facebook app last year that allows people to access their accounts from Facebook and for Costa to deliver promotions to cardholders through the site.

Although digital elements are allowing ease of access and use for consumers, the use of mobile might present a challenge rather than a bonus for brand loyalty schemes, says Cook.

“Mobile presents some great opportunities but also some real challenges for brands when it comes to loyalty and reward schemes. While plastic cards are popular, consumers have limited space in their wallets and so only carry the cards they really want to use. With mobile loyalty, consumers will be able to carry an almost infinite number of loyalty cards. However, the problem of at what point does a reward for continued custom become an expected discount remains.”