Keep customers sweet with loyalty schemes during recession | Incentive & Motivation

Many firms have found more ‘promiscuous’ shopping behaviour among customers – increasing numbers have hunted for bargains as household funds tighten. Companies have to decide: should marketing spend go to protecting existing customers, or poaching new? With studies showing it costs up to 10 times more to generate a new customer than to keep a relationship, retailers should do all they can to hold on to existing customers.

GI Insight’s research indicates that a well-implemented loyalty programme is one of the best ways to keep good customers, enabling a firm to successfully attack retention from different angles. More than 1,000 UK consumers were surveyed, with 68% saying that at least one of the companies they buy from has a loyalty scheme that has been a factor in keeping them purchasing. The survey revealed that 74% of respondents have seen companies ‘wake up to the need to give their customers better, more individual service, attention and offers’.

Indeed, the research indicates that loyalty programmes played a major role in firms retaining customers and maintaining consumer satisfaction during the continuing economic turmoil. Fifty-eight per cent say they have stayed loyal to certain brands, retailers and suppliers over that time, feeling that they have ‘somehow given me value in return for loyalty’ despite the fact only 40% noticed the schemes they belong to increasing points, improving rewards or providing more bonus point opportunities.

Through loyalty schemes, companies can not only offer rewards but can capture and utilise valuable data that enables them to analyse their customers’ behaviour, needs and preferences. Brands can tailor and personalise the communications, offers and promotions they send to each individual – allowing them, for instance, to alert customers to discounts on relevant products to encourage loyalty, follow-up recent purchases with money-off vouchers for related merchandise, and flag up reward point bonuses when scheme members haven’t purchased for a while. It is service such as this that helps a customer feel valued and, in turn, value the relationship they have with a brand. Indeed, 54% of those surveyed believe that companies have used knowledge of their circumstances and requirements to improve the service provided within the last year.

Customers are well aware of the returns loyalty schemes can offer with 77% of the consumers surveyed saying they don’t like giving details about themselves to a company unless it is through a ‘proper loyalty scheme’. This is evidenced by the loyalty schemes that have prospered despite the economic downturn: Tesco boasts of having 16 million active cardholders on its website and Boots has 50% of UK women over age 16 on board, according to its site – with holders of the Advantage Card spending double that of non-cardholders on average.

Marketers need to know customers so they can talk to them effectively and provide better service than competitors. To do this, companies must take advantage of opportunities they have to gather data on each consumer and use all available channels to reach those individuals with the right communications at the right time. Loyalty programmes provide a level of customer insight that enables firms to make a pre-emptive strike aimed at retaining customers who might stray – but it can be used to get them spending more often, making them more profitable too.

GI Insight specialises in database marketing and loyalty schemes. Visit www.gi-solutionsgroup.com