Using personalisation to transform loyalty offerings

Offering customers personalised incentives is a priority for many retailers and that means having tailored marketing and communications. Choosing the right channel is vital and in today’s digital world social media, online and card-linked offers are replacing traditional schemes.

150205 AAG Special Report

Increased personalisation has been highlighted as a key priority for many retailers in 2015. As part of that drive, there is a distinct move towards offering personalised customer incentives in order to differentiate loyalty programmes from competitors.

Although only 26% of retailers send out individual offers and rewards based on data from consumers, more than half (59%) are considering adding personalisation to customer incentives, according to research conducted by Marketing Week in association with Quidco.

Over a third (37%) of respondents, comprising 227 Marketing Week readers, use generic incentives and the same number use a combination of generic and personalised messaging when offering customer incentives.

“Loyalty on the high street is a fairly standard exchange of goods,” says Kester Dobson, head of technology at Tesco-owned coffee shop chain Harris + Hoole. “We are trying to personalise the experience through our app.”

Dobson believes that consumers who order the same coffee from the same shop every morning may feel loyal because they occasionally get a free coffee but they will not necessarily feel like a valued customer, so the brand is trying to build that relationship. The coffee chain operates a loyalty offer that gives consumers a free coffee after they have purchased six via its app, developed with payments partner Judo and tech provider Ribot.

This may sound fairly standard, but staff are made aware when a loyalty customer is due a free coffee on the till at the point of purchase, so it removes the need for consumers to have a loyalty card, although they can still use the paper and stamp version.

“Coffee is a fairly crowded marketplace, so the more you can be treated as an individual the better the experience is going to be; the more we deliver that personal experience, the more we hope to create customer loyalty,” he adds.

Personalisation can have a major effect on customer experience, particularly in the service sector. Macdonald Hotels and Resorts, which operates more than 40 four- and five-star hotels across the UK and 10 resorts throughout the UK, Spain and Portugal, believes that loyalty scheme members expect special treatment.

Director of marketing Debbie Neate says: “A regular guest who is also on an elite membership tier of our loyalty scheme expects to be recognised, often by name if they are a regular in the same hotel but definitely by their profile if they visit different hotels. They expect to be treated differently, whether that’s by the queue jump check-in desk or the personal gift and card left in their room by the manager.”

This special treatment also plays a part in the marketing and communication of offers to consumers. In the information and data age, this is becoming an accessible option for businesses in order to add a personal touch.

Neate says: “We have a number of tailored communications for our members, [which could be based on] their behaviour, when they last booked with us, which hotels they are interested in, when it’s their birthday or which loyalty rewards they are most interested in.”

Airport lounge operator, Swissport, takes the same approach in influencing new customer behaviour and attracting consumers to its 17 lounges across the UK, with its LoungeMiles loyalty scheme.

Head of marketing for travel services Nick Ames, believes access to and acting on data is vital in allowing the brand to build a picture of its customers and to make sure the services it offers in a particular airport match the needs of the public.

“The data that we collect from our scheme means that we can target specific campaigns that are relevant to specific people,” says Ames. “We recently highlighted a special offer to 14,000 customers who had travelled through specific airports. [By doing so] we experience a far greater conversion rate but not only that; the customer receives an offer that is tailored and relevant.”

The research shows that 91% of respondents believe that retaining existing customers is a key objective of customer loyalty schemes. Other reasons include developing customer insight (62%), increasing spend frequency (57%), and delivering targeted offers (54%).

However, a third of those that use loyalty programmes say that these schemes are ineffective at acquiring new customers (31%) and developing customer insight (29%), and a quarter say they are ineffective at increasing spend frequency (26%).

By using social data, dairy brand A2 Milk, whose product is aimed at people with an intolerance to the A1 protein found in milk, was able to target an offer to enhance trial and loyalty. The brand works with customer experience agency dunnhumby to identify influential customers on social media and provide them with coupons to trial and share stories about their experiences of the brand.

Airport lounge operator Swissport uses data to build a picture of its customers so that its services match the needs of the consumer

Although it does not run a traditional loyalty scheme, it uses social media to incentivise customers and “remove the purchase barrier” of trying the product. “We are in the society of instant communication and people don’t want to wait days for letters or emails,” says UK marketing manager, Rory Knighton.

“Social is the main way we speak to our customers on a regular basis. It is how we talk to our loyal consumers and it’s an effective tool. We do various promotions and send out different vouchers and coupons to keep that engagement there,” he says.

In addition, the brand operates in a “specialist niche market” so it does not want to talk to everybody about the brand. It therefore identifies the right customers via shopping habits, rather than “casting a very wide net”, so that campaigns are more effective.

Consideration for the right channel is also important for any incentive or loyalty scheme. The research shows that nearly three quarters (72%) of customers access incentives online and 49% in-store with a quarter using a phone to redeem offers and 21% using a mobile app.

Online popularity

Online codes and vouchers remain a popular mechanism for customer loyalty with 46% of respondents investing in this area, although printed vouchers are a priority for 28%, and a quarter are investing in loyalty cards.

The balance is still tilting towards more traditional approaches in loyalty schemes. The study reveals that only 8% of respondents are using card-linked offers, a loyalty system where offers are attached to a consumer’s debit or credit card. Only 5% have used them in the past and 8% plan on using them in the next 12 months.

Although it uses data to target offers, Swissport’s scheme follows a traditional loyalty set up, with Marks & Spencer gift cards being a popular choice for its members. Customers collect a stamp on a loyalty card each time they visit a lounge and have the option to redeem seven stamps for a gift card of their choice to the value of £5, or choose a gift certificate for their next visit.

Macdonald Hotels and Resorts uses a similar scheme where members can redeem points against hotel stays or claim gift vouchers through well-aligned partners such as House of Fraser, which makes up 70% of redemptions.

Three quarters (77%) of respondents believe data on customer spending is the most useful information that can be retrieved from using card-linked offers, and both Swissport and Macdonald Hotels are using it to inform their loyalty schemes.

The main reason 36% of retailers are not implementing card-linked offers is because they would not work for their businesses and a quarter (24%) say they are happy using conventional loyalty propositions. In addition, a quarter suggest they do not know how to operate a card-linked offer or do not have the relevant technology (19%) or funding (18%) to use this loyalty mechanism.

With data playing a key role in almost every aspect of marketing, loyalty schemes are also adapting in terms of understanding what consumers are doing, where they are spending and what will keep them loyal to a brand.

Using this data to offer a personalised service, however, is the future of loyalty schemes.

Dobson at Harris + Hoole says: “Loyalty cards are a bit anonymous but personalisation confirms that it’s more than an exchange of money. It’s a step towards what could be called true loyalty and it gives the customer a sense of more than a financial transaction – they are having a relationship with a brand.”

150205 SViewpoint Andy Oldham2

The CLO market will continue to grow as retailers look to increase their relationship with customers. Of course, card-based schemes have proved successful, but CLO represents a credible alternative or a non-competing addition. As the data is captured at the point of transaction, it opens up the opportunity to more customers as a non-evasive solution.

It is possible to align the CLO offer with online activity to deliver a complete view of customer behaviour. Utilising this data to improve customer insight to personalise offers means the customer is getting an experience and the company has more efficient marketing activity.

CLOs are easier to run than in-house loyalty schemes, as they do not require new infrastructure or integration with retailers’ systems, and they avoid the hassle of coupons and an extra loyalty card in a consumer’s pocket.

150205 SViewpoint Mike Glegg

There are four key objectives for customer loyalty schemes. Depending on the retailer and the marketplace, it’s a mix of acquisition, retention, increasing spend or frequency and developing customer insight. But schemes need to be relevant to the consumer. The right offer, for the right person, at the right time is key to relevancy and building performance.

Personalisation is important in terms of relevant offers. Fortunately, financial card-linked offers (CLO) are underpinned by consumer transactional data and thus personalised. Through historic spend data, the retailer can see whether the consumer is existing, lapsed or new to that particular brand; whether they are a high value loyal or an out of category non-spender, or whether they have shopped online in the past 6 months or are a high frequency in-store shopper. The data gives a 360-degree profile view on that customer and as a result you can build relevant offers.

We estimate the UK CLO market will be worth around £1bn by the end of 2016 in terms of spend but there is an education piece that needs to take place as it’s a relatively new channel. The survey shows that 95% of respondents have not used CLOs, so there is more to be done in terms of educating the marketplace about the opportunity.

One benefit of CLOs is that it’s multichannel. It’s also seamless – there is no staff training required, no technical integration at point of sale and no barriers to entry.

The measurement of CLO campaigns is also accurate. If you think about the framework of the financial world and the trust we put in banks for the transactions we make as consumers, we wouldn’t question the accuracy and validity. This is reflected with CLOs in terms of the accuracy of the measurement. It delivers a strong ROI versus other channels.

The survey respondents said their customer loyalty schemes are only 28% effective at attracting new customers. CLO has an acute focus on acquiring new customers through the data. This is because often retailers can’t see where customers have churned from and to which competitor but transactional data can offer amazing insight to deliver pinpoint accuracy.

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