British Airways, Costa and Hilton hotels all suffered cyber attacks on their loyalty schemes last year. With hackers increasingly targeting this type of customer data, brands are starting to rethink how they approach rewards programmes.
However, rather than assume consumers will be turned off such schemes because of real or perceived risks, many brands are evolving their offer in terms of delivery and incentive to make it more valuable to customers.
Indeed, consumers are becoming increasingly used to sharing data online as part of their everyday lives but they expect it to be a fair exchange.
One way brands are meeting this higher level of customer expectation is by delivering real time rewards that provide immediate recognition.
Gemma Sykes, senior marketing manager at Best Western hotels, says her brand is looking to remove effort and inconvenience and to achieve differentiation by offering a system whereby points never expire. Perhaps more importantly, she says that the new system leverages data and technology to offer what she claims is a “truly personalised” experience.
“We want to go beyond transactional data. We aim to serve content at the right time, and in the right way, whether that’s via a pre-stay email at the hotel itself, or in response to a comment left on a review site. So if somebody finds something disappointing about their stay, we know that and we can respond,” she explains.
For Sykes, rewards need to be quick and frictionless for the consumer. She says that Best Western has been investing in its data capabilities in recent months and is working with around 50 redemption partners so that it will be able to offer personally relevant rewards to loyal customers. By way of example, she says that if a customer frequently uses spa treatments, the new data hub will have the capability to feed that to the electronic customer relationship management (eCRM) system and – as a thank you – offer a free mini treatment while the customer is at the hotel.
Loyalty has also been a major focus for fashion retailer Hawes & Curtis in recent months – and will be throughout 2016. Head of marketing Anastasia Roumelioti says the brand plans to introduce a loyalty scheme in the coming weeks together with a competition to win tickets for La Traviata at the Royal Opera House.
She says that Hawes & Curtis is keen to reward its most valuable customers and has run other partnerships in recent months with brands such as Virgin Wines and website Best Loved Hotels, to offer customers the chance to win gifts that reflect the brand’s ‘luxury’ positioning.
“People are more loyal to those brands that deliver an experience,” she says, adding that as part of the new loyalty scheme customers will not be penalised if they do not have their plastic card with them at the till as points can be added remotely.
It costs money, of course, to develop the new reward programme and the associated CRM capability. Roumelioti claims that nearly 40% of the brand’s overall marketing budget for 2016 is going on building its new loyalty proposition.
But its decision to partner with the Royal Opera House at the same time as it launches its loyalty scheme helps to position Hawes & Curtis’ as a “luxury” or “regal” brand and one that delivers an experience, she explains.
In light of the recent high-profile cyber attacks, brands developing an incentive programme must ensure collaboration between IT and marketing, warns Naomi Kasolowsky, managing director for customer strategy at Dunnhumby, the data giant behind Tesco’s Clubcard scheme.
That said, she stresses that at the core of any customer loyalty package is the need to offer an experience that creates differentiation. And as such, she says it is important to consider data within the wider context of the customer’s lifestyle.
“For instance, we’re seeing airlines – which have traditionally been early adopters in terms of loyalty marketing – offer ‘bundled’ incentives with other service providers such as car hire companies or hotels,” she says.
“At the heart of this is the desire to know more about a customer’s interests, in order to create a richer set of experiences and a value proposition through knowing them better. Just seeing one or two leisure flights and one business flight a year only offers you a small slither of information.”
Gracia Amico, CEO at PetsPyjamas and former global ecommerce director at retailer Hobbs, is also a believer in the need for brands to keep the experience in mind at all times. However, she argues that customers are now used to sharing details online and loyalty schemes are merely an extension of this. However, she says they do not necessarily need to entail sensitive data.
“The important thing is not to ask for too much,” she adds, pointing out that the premise of her business is to “pleasure bomb” customers – give them something unexpected that makes them want to come back. For instance, pet lovers who book pet-friendly travel with PetsPyjamas receive a personalised gift for their pet on arrival.
“When they enter their room or hotel, there’s a lovely box of gifts and treats for their dog,” she says. “It’s our gift to the dog. That’s delightful for the customer; they love it. Often they share their videos of the dog ripping open the box on social media.”
Collecting customer data should not be a numbers game, however. “Our customer database has grown to around 110,000. We saw significant growth last year but that’s not a vanity number for us,” Amico explains. “We recently cleared parts of the database. We took off some people who never open the emails. We want our database to be comprised of people [who are] valuable to us. It’s about how you treat people differently.”
Jason Nathan, chief data officer at Dunnhumby, points out that with regard to data security one of the most important things brands must do is ask whether the data they hold is there for good reason. “Sometimes, companies hold data just because they feel they want to, or you find it is because they are not sufficiently organised to ‘clean’ their data regularly.
“In terms of making people comfortable, you must think of proportionate use of data,” he adds. “Bombarding customers with emails is the wrong way to go. And new legislation due this year will increase the scope of fines [for data breaches], to a percentage of a company’s earnings.”
Pete Markey, CMO at the Post Office, is a believer in loyalty schemes that are focused on service enhancements over and above the collection of points. He says that the Post Office’s scheme ‘Drop & Go’ has been a useful exercise for the organisation and is the closest thing it has to a reward scheme. The Drop & Go card allows high-volume parcel sellers such as SMEs to prepay for postage and go to a fast-track queue.
In order to meet the expectations of ever more demanding consumers, Markey believes brands need to be more creative in how they incentivise and reward loyalty. For example, he refers to a scheme he introduced in his previous role at insurer MoreThan that offered customers free contents cover when they took out a buildings insurance policy with the brand, until they made a claim.
“This both encouraged them to stay with the brand but also meant that people claimed less. It led to behaviour change,” he explains.
MoreThan also negotiated deals with its supply chain, for items such as sofas and carpets, which it passed on to its customers. Markey claims this led to double-digit improvements in retention.
Looking at other loyalty schemes, he says the myWaitrose free cup of tea offer is “really smart”, as it offers value in the moment. “The idea that you collect points that may add up to something is less relevant now. It’s got to be more how loyalty fits into the overall offer. So, at Waitrose, if you stop for a cup of tea, you may remember you need bread and milk. This develops a deeper relationship with the brand,” he says
The need to improve overall customer experience in order to develop long-lasting relationships with customers is only going to get stronger. The brands that win will be those that treat customer data with respect and create a true value exchange.
How Yorkshire Tea builds advocacy
Yorkshire Tea came seventh in the YouGov BrandIndex list of top UK brands last month. It was a surprise entry for some, but head of brand creative Dom Dwight puts this down, at least in part, to a focus on rewarding loyal customers and encouraging advocacy.
“Social media has given us an opportunity to engage with loyal fans at scale,” he says, pointing in particular to the fact that customers often post photos of the birthday cards (below) that Yorkshire Tea sends to its most loyal customers. However, he warns that when loyalty gets reduced to something transactional, it becomes impersonal.
Dwight also says that Yorkshire Tea’s efforts to better integrate marketing with its loyalty programme has paid dividends.
“Some loyalty initiatives just reward the one-to-one but I see loyalty and advocacy on a spectrum. For instance, if we send a birthday card – and we put a lot of effort into trying to make them witty – people often take a photo and put it online, thanking us for the gesture. This way, every card is getting shared with [customers’] friends on Facebook, which turns a one-to-one gesture into a small piece of advocacy. That’s why I see it on a spectrum; you can see how it fits together.”
“You overlook loyal customers at your peril,” he adds. “Don’t stop thinking about loyal customers and just focus new ones; don’t treat customers like units. We try to build genuine connections. Sending a birthday card may seem rudimentary, but the principle seems to be working.”