Growing competition between named and own-label brands has taken retailers and manufacturers into new areas of the loyalty business. The rise of own-label products has forced brand manufacturers to establish new ways of relating to their customers – trying to attract them with samples, vouchers and mailings, as well as traditional advertising, before they even enter a shop.
Retailers are retaliating by also trying to reach customers before they make purchasing decisions in-store. Tesco has rolled out its Club Card nationally, Asda is extending trials of its card and other supermarkets are known to be developing cards along similar lines. These schemes will provide retailers with enormous amounts of information about the buying patterns of their customers.
And the retailers are not the only companies investing more resources in developing customer retention. Virgin is venturing into direct insurance with Virgin Direct and Ogilvy & Mather Direct set up its European Loyalty Centre last December to pull together various loyalty-based services for clients.
Applications may be expanding and developing, but there is still much confusion over what “loyalty” actually means. Some marketers insist it should be seen as a promotional technique. Others suggest real loyalty is about building and sustaining a relationship with your customers.
As loyalty marketing becomes a mainstream idea, marketers must be careful not to lose sight of consumers’ understanding of terms such as “loyalty” and “relationship”. Recent research from the Henley Centre, commissioned by marketing communications company Brann, looked into relationships from the consumer perspective. The study discovered an apparent paradox: that consumers rarely admit to having relationships yet they repurchase regularly and recommend products frequently.
Looked at closely, the apparent paradox dissolves. What remains is a clear message for marketers. Consumers don’t think they have a “relationship” with their bank or their favourite brand of coffee even if they are long-standing and very satisfied customers. The idea is too personal – real relationships exist with friends and family. Marketers must be careful in their use of loyalty terms.