Loyalty is for life, not just for Christmas

Christmas is a time when retail sales ramp up but how can the seasonal rush be converted into loyalty that lasts?

Christmas cupcakes

Christmas cupcakes: personalised gifts help generate higher levels of loyalty

When it comes to sex toys, Christmas sells, beating even Valentine’s Day, according to Matt Curry, director of ecommerce at online sex toy retailer Lovehoney Group. But though the sales opportunities are plentiful, the brands that win out at Christmas tend to be those that differentiate themselves and personalise the experience. The result can be a long-term relationship rather than a one-night stand on Christmas Eve.

While most brands won’t see too many similarities between their products and sex toys, the festive season is a time when everyone is fighting for attention no matter what their industry sector, and most will already know their strategies. Curry explains: “Christmas is an expensive time for any retailer. As everyone wades in to pay-per-click, social channels become flooded, customers are bombarded with messages and loyalty is rare. That means you could find yourself in a race to the bottom unless you have set yourself apart from the competition.”

Lovehoney sex toys collection
Lovehoney ecommerce chief Matt Curry says Christmas is an even bigger sales period than Valentine’s Day for its ranges of sex toys

It’s a similar scenario that plays out on the high street, where there can be discount anarchy and the sales and offers begin earlier each year. But people are not just looking for the cheapest products, says Will Shuckburgh, managing director at loyalty brand Nectar. “People have grown used to the very big discounts available on the high street [in the run-up to Christmas],” he explains. “But we’re seeing brands that have developed a personal, ongoing relationship with customers getting the most cut-through.”

So are shoppers at their most promiscuous over Christmas and, if so, how can brands ensure that customers don’t stray?

Unspectacular forecasts

Table detailing the results of survey on spending habits at Christmas

Last month, research company Mintel published its Christmas 2014 forecasts for the retail sector, predicting that total sales will hit £36.5bn in December this year, a rise of 3 per cent. This “unspectacular” growth is due to the prospect of interest rate rises, which deter people from spending with the knowledge that mortgage and credit card payments are set to increase, says Mintel director of retail Richard Perks. Lower inflation will depress retail sales too, as prices aren’t rising as fast as in previous years. Unsurprisingly, more people will be shopping online, with internet sales expected to reach £4.7bn (13 per cent of all retail sales). Given these modest predictions, competition for the shoppers’ pound will intensify further this year.

The good news for marketers is that what they do counts. Brands will spend millions trying to entice customers to action and, according to a survey carried out by agency Cherry London last Christmas, two-thirds of customers agree that marketing will influence their decisions to some extent. Half said that regular contact throughout the year influences them to spend.

Those that use big data and analytics to show that someone didn’t want a kettle but was hoping for a watch will succeed

Philippe Vella, Gumtree

This inter-Christmas relationship is something that retailers are tapping into. “Loyalty is for life and not just for Christmas, and there’s been a lot of development from retailers in this area,” says Nectar’s Shuckburgh. The likes of Sainsbury’s, through the Nectar card, are trying to build a personal relationship that used to be the domain of the local corner shop. In the era of ‘big data’ they can do this on a mass scale.

One trend that has “snowballed” in the last five years, Shuckburgh says, involves shoppers saving up their points and rewards to treat themselves in December. Cherry London’s research found that almost half of shoppers can be influenced by rewards and the grocers in particular have begun to concentrate their biggest offers in the run-up to Christmas. Sainsbury’s shoppers, for instance, redeemed £120m of Nectar points during the 2013 festive season, £10m more than in 2012. With more retailers having rolled out loyalty cards this year, the personalisation of offers is set to become a key battleground.

Web personalisation specialist Qubit has calculated that UK businesses lost £1.5bn last Christmas by neglecting to adopt an online strategy that took a tailored approach to customers. Of 170 retailers surveyed by KPMG, only 8 per cent collected information on shoppers’ tastes and preferences and yet some were sending up to eight emails in the week before Christmas. If data isn’t driving this strategy, then there’s a risk of spamming customers and turning them off your brand at a time when their spend is likely to be highest. Price might not be the be-all and end-all either. Clinton Njie, director at online gift brands ToxicFox and ClaireaBella, believes that a common misconception of loyalty has been the propensity to see it as a reward. “This lazy form of loyalty marketing completely misses the point,” he explains. “Discounts and vouchers do not build loyalty – they are behaviour motivators and only lead to a race to the bottom. True loyalty is hard-earned – it’s about more than discounts and the monetisation of the marketing strategy.”

Table showing what will make consumers loyal to a retailer at Christmas

But is it easier to attain loyalty in-store than on the internet? Not really, he says. Online retailers have the benefit of data but as a result savvy shoppers expect a personalised service. On the high street, the personal touch and product range can go a long way. The reality, however, is that consumers are buying online and offline – and comparing across channels.

Showrooming once struck fear into bricks and mortar stores but some are now seeing the emergence of “reverse showrooming”. Roger Binks, customer experience director for Intu shopping centres, says: “People are now researching online and then going in-store to buy. It’s an evolution as the digital and physical channels come together. People want fulfilment.”

Could this happen more at Christmas-time, when shoppers are less reluctant to risk their gifts being misplaced or delayed by a courier? Binks isn’t sure but there are certainly signs that click-and-collect could be a major battleground this year, even though consumers don’t rate it as a high loyalty driver, according to an ICM poll commissioned by Marketing Week (see tables above). At retailer John Lewis’s Christmas preview event in July, managing director Andy Street nonetheless predicted that click-and-collect will account for more online sales volume than home delivery this festive season.

I think we’re now seeing more people researching online and then going in-store to buy.

Roger Binks, INTU Shopping Centres

House of Fraser is also trialling upgraded services, with fitting rooms adjacent to the collection desk so clothes can be tried on and, if necessary, returned immediately. Bringing a customer in-store also provides an opportunity to upsell and engage. Martin Francis, online trading director at House of Fraser, says click-and-collect can “further customer engagement and brand loyalty” if it’s done well.

Given that sales through physical shops might only increase 1.5 per cent year on year, the battle for Christmas could be won online, according to Mintel. There are also key times to target promotions for maximum returns, according to Qubit’s research, which analyses shopper behaviour across websites. Last Christmas, it identified a sustained increase in visitors to European ecommerce sites in the last week of November and first week of December. There were also spikes in visitor numbers on Christmas Eve, Christmas Day and Boxing Day, but with a drop-off in conversions. Mobile sales, meanwhile, grew by 138 per cent compared with Christmas 2012.

Brand Alley
BrandAlley’s strategy at Christmas is to ensure products are easy to find online and delivered on time

Time-pressured and cash-strapped, shoppers are looking for brands that ease their pain, says BrandAlley UK marketing director Melissa Littler (see Q&A, below). Retailers that don’t keep their delivery promises and are slow to respond during the festive season will “run into trouble”, she warns. Curry at Lovehoney agrees. “As we move closer to Christmas, purchases become more distressed. Customers are looking for reassurance, be it an excellent and reliable delivery proposition, or an issue-free and extended returns policy. If you are looking to bring these customers back post-Christmas, you need to exceed expectations. Don’t over-promise then under-deliver,” he adds.

Indeed, a poor fulfilment service can undermine all a brand’s marketing efforts. With Christmas Day one of Twitter’s busiest, it pays to ensure that those giving and receiving gifts are happy, otherwise you will risk an instant social media backlash. This is also when the returns process is tested, and when some buyers become sellers. Sites like eBay and Gumtree are flooded with items on December 25 and this means more sales opportunities as people hunt for what they really wanted.

The dynamics change almost overnight but the winning brands will still be those that understand their customers best, says Gumtree B2B marketing manager Philippe Vella. “Christmas brings more volume and that means businesses with automated marketing programs will be rewarded with better conversions. Those that use big data, analytics and smart marketing to work out someone didn’t really want a kettle but was hoping for a watch, say, will succeed.”

The Big Three Challenges

1. Personalisation

Consumers are bombarded with marketing messages at Christmas as brands look for even a small slice of the bigger pie. Cutting through the noise is essential and those that have developed longer-term relationships with customers will win out. FindMeAGift, for instance, has just started working with a company that can analyse customers’ behaviour on-site and identify what’s important to them: money-off options, fast delivery, customer service and so on. This will allow the etailer to program money-off codes, delivery offers or initiate the ‘Chat now’ box depending on the individual shopper.

2. Timing

Selfridges opened its Christmas store in August but the best time to start festive marketing isn’t an exact science. “People will buy when they want to buy,” says Roger Binks, customer experience director for Intu shopping centres. However, brands may start to use technology to adapt quickly to change. With the arrival of near field communication and digital wallets, the physical loyalty card could be replaced by mobile apps, says Thomas Arenz, head of marketing communications for Samsung Semiconductor Europe. “If a particular promotion isn’t providing a strong enough return on investment, it could simply be updated or removed through the mobile app. This could be a fantastic opportunity for marketers.”

3. Customer service

Whether online or offline, customer service is paramount at Christmas. Shoppers can be stressed but many are also more focused. Online, the process has to be pain-free. “Customer service plays a huge part in generating loyalty at Christmas,” says BrandAlley UK marketing director Melissa Littler. “Shoppers are bombarded with choice, but what they’re looking for is ease of shop. If they can find what they want easily, buy it and have it delivered on time with minimal fuss, they will keep coming back.”

Q&A: Melissa Littler

Marketing director, BrandAlley UK

Marketing Week (MW): How loyal are customers at Christmas-time?

Melissa Littler (ML): Our customers are loyal at Christmas but will still try to stretch their budget as far as they can. While they will be looking for deals, customers will come back to the brands they know because they want to feel confident in the level of customer service they will receive and, most importantly for an online retailer, in the guarantee that their items will arrive before Christmas.

MW: What is important to customers at Christmas?

ML: People will stick with brands that make it easy for them to find exactly what they want. Time is at a premium, so online retailers can use this to their advantage. By targeting specific gift ideas to certain customers, not only can they offer a more relevant shopping experience, they can also increase conversions by cutting through the noise.

MW: Will personalisation play a part for you?

ML: Yes, the lead-up to Christmas is all about gifting, then on Christmas Day there’s a distinct shift to people treating themselves. With this in mind, we launch some of our biggest brand names in the ready-to-wear category from Christmas Day, engaging with customers when they’re stuck at home and looking for inspiration.

MW: How do loyalty strategies differ between online and offline?

ML: Online retailers, like us, have to be able to commit to a delivery promise and honour it; this is the heart of a loyalty strategy at Christmas. Offline retailers will focus on special deals and added extras that can be redeemed in store.

More analysis

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Loyalty schemes vs price promotions – which work better?

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The fabric of retail is changing

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