Loyalty hits inflection point as brands embrace mobile and digital

Harvey Nichols has just become one of very few brands to eschew a traditional loyalty scheme for a mobile-only offering but more brands should follow suit as consumers look for more personalised and rewarding loyalty strategies.

Harvey Nichols’ loyalty scheme is a mobile app that offers customers points for pounds spent, as well as perks and rewards for their spend. There will be no plastic card for the wallet and no coupons mailed out to participants, with everything done via the app.

Kerem Atasoy, the retailer’s head of digital marketing, says there are clear advantages to launching a mobile loyalty scheme. It can collect “great data” to offer personalised offers and communications.

It can also be “agile”, updating the app quickly to reflect customer feedback and responding to changing business needs.

Razorfish’s head of planning Neil Fairfield believes mobile is the future because “it can offer a level of personalisation like no other”.

Consumer expectations of loyalty

Mobile is also increasingly what consumers expect from loyalty programmes.

Research on loyalty from Capgemini shows that brands are failing when it comes to living up to consumers’ expectations of loyalty. On social media, 89% of opinions about loyalty are negative, according to the research, while just 11% of schemes personalise rewards in a way that customers expect.

Consumers nowadays are much more demanding than they were when Tesco Clubcard or the Nectar scheme launched. They are a lot more educated around the value exchange of giving data back to a retailer and they expect a reward for their information.

“If customers give a brand their data they expect them to do something with it. Brands are missing out on engaging and rewarding customers.”

Steve Hewett, Capgemini’s head of retail customer engagement and loyalty

Steve Hewett, Capgemini’s head of retail customer engagement and loyalty, summarises: “If customers give a brand their data they expect them to do something with it. Brands are missing out on engaging and rewarding customers.”

Part of the problem has been the legacy loyalty infrastructure brands have which can make it expensive and inhibit brands’ ability to put digital schemes in place, adds Hewett. In many cases it requires new PoS and Wi-Fi in stores – both big capital projects.

Adapting to mobile

However, brands are slowly adapting to mobile. Boots has launched a mobile app for its Advantage card that lets people browse personalised offers, although point collection and redemption still requires the card.

starbucks loyalty

Starbucks meanwhile has launched a mobile loyalty scheme while M&S is trialling a digital loyalty scheme as its in-store cafes. However, just 9% of loyalty schemes work across channels, according to Capgemini.

Hewett believes it is not a case of if but when people can “finally get rid of the plastic in their pocket”.

“Loyalty is at an inflection point moving from the old school transactional paper-based era to one about personalised engagement and adapting for digital,” he says.

However Caroline Parkes, strategy partner at LIDA, says while the mobile option is right for Harvey Nichols it doesn’t signal the end of card-based schemes due to the return on investment they generate.

“Is this the end for other card-based schemes? Absolutely not. Is this right for a brand entering the market with a particular demographic and size of business? Yes,” she adds.

Points versus prizes

Another way Harvey Nichols’ scheme is different to more traditional schemes is in the way it rewards people. Customers will still accrue points – one for every £1 spent – but those will be used on various perks from experiences such as dinner at the Oxo Tower to beauty sessions. Users will also be able to get cashback and access to flash sales.

harvey nichols rewards

Hewett says that mirrors a broader trend in the industry. Points for pounds schemes aren’t cheap to run and brands are looking to lower costs – hence Nectar’s announcement that it was halving points.

Waitrose’s scheme also offers perks such as free coffee and newspapers and money off certain products, rather than points. In the US, Walgreens’ BalticMiles offers rewards for customers that choose healthy options.

“People’s expectations of rewards have changed. They want things more immediately and schemes aren’t keeping up,” says Hewett.

Parkes adds that the tiers are also a “smart move. “They’ve borrowed from the BA approach, which works nicely for a luxury brand,” she says.

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