Brands need tailored strategies to win customer loyalty game

19 July 2017 Consultancy.uk

By challenging traditional beliefs around customer loyalty and cutting through purely transactional rewards, brands can create more intelligent propositions, writes Harriet Mason, an Engagement Manager at Deloitte subsidiary Market Gravity. She explains how understanding different consumer attitudes to loyalty and incentivising behaviours of greatest value to business growth are the key to successful strategies.

As many companies discover to their cost, it’s one thing to win new customers, but another entirely to successfully retain them over time. Brands now need to work much harder to keep customers happy and build a meaningful relationship, which lasts longer than the initial transaction. It demands a deeper understanding of the motivational triggers for purchase and a tailored proposition. 

Levels of loyalty

Consumers all have different aspirations, budgets and priorities but research carried out by Market Gravity reveals three distinct attitudes to customer loyalty.

The Deal Chaser is motivated by ‘playing the system’ to get a good deal. They are attracted to tangible benefits, which go beyond the basic sale and offer an ongoing and exclusive benefit. Mobile providers have been quick to pick up on this. The O2 Priority club, for example, gives customers first access to gig tickets and film or TV experiences as well as regularly refreshed Everyday Deals, while Three offers a rewards app which delivers retailer discounts direct to the user’s mobile. Crucially, only higher value contracted customers benefit from these offers, as opposed to the less committed Pay-As-You-Go; a distinction which appeals to these discerning shoppers looking for a good deal.

Consumers all have different aspirations, budgets and priorities

Of course, the higher the perceived value of the exclusive reward, the stronger the pull for this type of consumer. It may be a purely financial gain, such as Amex’s Shop Small scheme, which awards £5 statement credit for every £10 spent at any participating local business; a delight for discount-hungry consumers who don’t even have to change their shopping habits. Or it may include an experience-led bonus – an angle which is becoming a common theme across the broader marketing landscape. Sponsorship of Britain’s two-for-one cinema offer fits this profile and is widely recognised as one of the most successful reward initiatives. Currently backed by comparison site comparethemarket – which followed EE and 12 years of the ground-breaking Orange Wednesdays – the scheme not only delivers added value to customers, it also grows brand affinity through regular interaction.

What’s more, the commercial rationale is clear – by tying the offer into a mid-week experience, cinemas can fill seats at times when capacity is typically low, thus delivering a high perceived value to the customer at relatively low cost. 

At the other end of the consumer spectrum is the far from active Lazy Loyalist who, as the name suggests, is not self-motivated or interested in searching out new or better deals but stays with those that make life easy – often for a long time. So attracting and locking in this disengaged audience is all about creating seamless experiences and service innovations, which minimise effort and hassle. 

Starbucks certainly recognised this attribute in its customer base when it launched the Starbucks Loyalty app. This mobile platform not only offers standard reward points and promotional benefits, it creates a point of difference by enabling users to skip the queue and order from the comfort of their seat. E-commerce giant Amazon took this approach even further with its Dash platform, designed to offer Prime subscribers the convenience of re-ordering branded consumables to their door at the tap of a button – what could be simpler? In fact, the subscriber model appears to hold strong appeal for this audience; from flowers to pet food and razors, there are a growing number of businesses offering to take away the hassle of remembering key events or frequently used items.

Watch me now…

Of course, what many consumers want is attention – and lots of it. They want to feel that their loyalty is valued and appreciated. That they are not being sidelined by a company or brand which is constantly investing in gaining new customers – while forgetting to nurture and grow existing users. We call this group the Evidence Junkies. In this context, meaningful brand interaction and trusted recommendations are powerful and highly influential tools. 

Of course, consumers want attention. They want to feel that their loyalty is valued and appreciated

Recognition is a core motivational driver so incentives need to reflect the value of an individual’s overall contribution – rather than a one size fits all approach. So while multiple policy discounts may not be revolutionary, they continue to prove an effective way to increase the average product holdings for insurance and utilities providers in particular. In fact, some companies are seeking to further tie in consumers with ongoing incentives such as cashback on bills via partnerships with other high street retailers. 

In contrast, personal gestures and unexpected gifts appeal to the human side this audience seeks out. Executed effectively, this approach can have a hugely positive impact for a brand. High street retailer Boots, for example, makes customers feel special by sporadically sending small gifts with online subscription orders, while Pret a Manger empowers its staff to surprise customers with the occasional free coffee or even lunch. Both schemes introduce the element of surprise – scientifically proven to bring humans joy – and so creates an emotional response. A reaction which will likely lead to a positive boost to brand reputation through word of mouth and be further amplified through social media platforms.

Aviva has announced a commitment to overhauling the insurance industry to ensure its 16 million customers received the best deals on insurance – especially loyal, long-standing customers. CEO, Mark Wilson, has commented that the market is broken and dysfunctional and it requires an industry-wide solution. Aviva has pledged to ensure loyal customers are rewarded and receive discounts year on year, instead of being charged more or missing out on introductory offers. 

What these insights tell us is that the drivers of true customer loyalty are changing – and brands need tailored strategies to win the hearts and minds of target consumer groups. It also means that rewards need to be thought about in a way that incentivises broader customer engagement with the brand and its products or services. 

Brands need tailored strategies to play into the changing drivers of true customer loyalty

The price is right

The process starts by stepping back from the traditional price cutting tactics. Competitive pricing is a basic expectation across all customer groups and only serves to attract new discount-hungry consumers who will quickly move on for a better deal. Instead, companies need to identify customers with the most commercial potential and work out how to retain them by other means. This distinction between customers will force a change in mindset; where investment in loyalty initiatives is allocated according to the most profitable customers rather than treating everyone the same. US-based Southwest Airlines sets a good precedent in this regard – tying rewards to revenue generation by offering rewards proportional to ticket prices instead of miles flown. 

The user experience is also increasingly important to sustained loyalty to a brand. It’s not all about rewarding the financial transaction itself, but rather enhancing interaction and removing barriers. Companies who are perceived as helpful and offer mechanisms to make everyday life easier will lock consumers in and keep them coming back. In fact, some organisations have taken this principle a step further and Amazon’s Prime is a strong case in point. The digital retailer solved the online shopper’s pain of slow and unreliable delivery, while also creating a loyalty programme for suppliers who rely on Fulfilment by Amazon for access to Prime customers. And the commercial payback of this strategy is clear, with Prime members reportedly spending over four times more with Amazon than non-members. 

Where to next?

Loyalty and rewards apply to all sectors, from insurance, banking and utilities, to retail and food and drink and it’s important for businesses to identify new models for customer engagement in the digital age. Technology is raising the bar for customer expectations and experiences so organisations must deliver on services to keep customers coming back for more. Consumers hold a wealth of information and choices in the palm of their hands and can make decisions in a matter of seconds. To effectively reward loyalty in the digital age, businesses need to recognise the significance of technology and personalised engagement to attract new customers and keep hold of loyal fans.

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