Loyalty schemes increasingly mismatched to customer expectations

09 August 2017 Consultancy.uk

Loyalty programmes and schemes may no longer be fulfilling the expectations of consumers, as increasingly competitive consumer markets seek to secure long-term customers. The programmes are no longer differentiating between brands, tend to be relatively expensive to run and unwind, and fail to connect with younger consumers in particular.

Keeping consumers loyal is becoming increasingly more difficult as technology improves consumers’ ability to shop around for better deals and service provision. Loyalty programmes and schemes have for some time been touted as failing to live up to expectations – as brand name alone has significantly diminished in terms of maintaining long-term customers.

In the ‘Consumer Review Customer loyalty: A relationship, not just a scheme’, researchers from Deloitte have considered UK consumer attitudes to loyalty programmes. The report is based on responses from 2,000 consumers across the UK. Among the key findings from the Big Four consulting firm’s paper, is that companies will need to significantly up their game if they expect to hold on to customers in the way they once used to.

Frequency of usage

Loyalty schemes in the UK have reached a point of over-saturation, with the majority of consumers now considering being rewarded for their loyalty as the norm rather than a differentiator. In terms of activity, most respondents said that they using the schemes relatively actively, with 28% once a week or more, 12% every two to three weeks and 10% every month. Only 14% never used loyalty schemes at all.

However, while the research notes consumers have a large number of schemes available to them, and relative frequency of use leading to a large accumulations of “ reward points” for such a large number of consumers with a diminished level of resulting loyalty may mean that businesses are running relatively expensive programmes with no definitive outcome benefits to the businesses.

Attitudes to loyalty schemes

The study noted considerable differences among respondents in terms of their attitudes towards loyalty schemes. Most respondents remained in favour of points-based loyalty schemes, at 54% in total, while the 18-24 year group stood at 60%. The younger age group was however, less likely to redeem their points or take advantage of offers through the loyalty scheme.

The research did find that the experience of how a brand offers rewards in important to programme users, although the research too notes that a large number of respondents need more from a loyalty scheme than just points to make them want to shop with a brand (42%). The younger respondents in particular wanted loyalty schemes to reflect their lifestyle, which might include offering users perks for activities, favoured by 32% of all those polled, and 47% of those aged 18-24.

Drivers of loyalty

The survey also asked respondents about the key drivers for loyalty to companies. The top most cited condition was good value for money, at 64% of all respondents, followed by trust in the brand, at 57%. High quality products/services follows, at 50%, while 41% said they are attracted by great customer service. The loyalty scheme of brands takes seventh spot, cited by 26% of customers as a driver of loyalty.

Consumer sentiment has therefore clearly shifted away from loyalty schemes – which are no longer seen as differentiators for customers, with rewards in particular not fitting what individual consumers are looking for, as Ben Perkins, Head of Consumer Business Research at Deloitte commented, “Traditional loyalty schemes need a rethink not only because of changing consumer expectations but also because they have become expensive to run and difficult to unwind. They still have some appeal, one in five of consumers would stop shopping with a brand if they were to end their loyalty scheme. However, for the majority of customers these schemes are too generic and loyalty should be about more than collecting points.”

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