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Reaping the rewards of loyalty schemes

Posted on: 20 Oct 2021

At a time when consumers increasingly want to develop a personal relationship with brands, and vice versa, capturing customer loyalty can be challenging for SMEs. Morgan Stokes examines at the benefits and difficulties of loyalty and reward programmes, and looks at which one might suit your business best.

 

Today's consumers increasingly want companies to be loyal to them, with customer service and personal care at the top of the agenda. That’s according to Accenture’s 16th Retail Report, ‘Life Reimagined: Mapping the motivations that matter for today’s consumers’, published this June and surveying 25,000 consumers across 22 countries, including Ireland.

 

Irish companies are taking advantage of consumers’ desire to develop a personal relationship with brands and companies by developing social media personalities. Bookmaker Paddy Power’s funny, tonguein-cheek posts have made them one of the most talked-about companies on Irish Twitter. Closer to home for the FMCG sector, egg producers Magners Farm have made a splash with their regular chicken updates, while St Tola Goat’s Cheese court customers with behind-the-scenes farm photos that create a sense of intimacy.

 

But is a sunny social media presence or a friendly voice on the phone enough? The data suggests that savings driven loyalty schemes aren’t quite dead yet. A 2019 KPMG survey, ‘The Truth about Customer Loyalty’, found that 78% of Millennials would switch to a brand that offered a better loyalty or reward programme, and 81% say that a good loyalty scheme would drive them to spend more time with the company.

 

In addition, any savings or reward driven loyalty scheme with a digital element can be a treasure trove of data on customer purchasing and habits.

 

Rewards schemes can also improve staff satisfaction, with supermarkets such as Dunnes and Tesco using plastic card-based staff discount schemes as an employee perk.

 

Things to consider:

Designing a loyalty programme takes time, as does analysing customer purchase data. A smaller operation may find that the man hours necessary could be better spent elsewhere. Cost is a factor when designing an app or purchasing software.

 

The research claims that when customers feel that their relationship with a brand is personal, they can experience brand disloyalty as a betrayal. It’s important to make sure you can follow through on the rewards, and don’t change rules too suddenly or dramatically.

 

You need to be conscious of your legal obligations too: any loyalty scheme that involves the electronic gathering of data, including points-based plastic cards and apps, needs to be GDPR compliant.

 

Mission-driven loyalty – capturing the value-conscious consumer:

Brand-customer relationships in the ’20s go beyond special offers and a friendly social media face; consumers are increasingly making choices based on their personal values. According to the recent Accenture report, “Mission driven loyalty schemes can harness these consumer trends. Customers can give back by donating the monetary value of their loyalty points to charity, or companies can agree to donate a percentage of a purchase to a worthy cause.” Circle K saw recent success with their ‘Here for Ireland’ initiative, which allowed customers to donate reward points towards travel expenses for Irish Olympic athletes headed to the Tokyo games.

 

These schemes are great for PR, but it pays to be careful who you work with; you don’t want to scramble to withdraw support from a charity suddenly caught in a scandal.

 

Points-based plastic:

A plastic, points-based card is often the first thing that springs to mind when we think about rewards schemes. However, designing such a programme does require a lot of thought. While there are many companies out there who will set you up with cards and software to allocate points and examine consumer behaviour, you’ll need to give a lot of thought to how those points are earned, what they can be spent on, and how many to allocate per purchase.

 

You’ll still need to be careful about data permissions, even if you’re only identifying customers based on loyalty card number alone. Plastic cards do have an edge over the higher tech solutions detailed below, though, in that customers of all ages and backgrounds are familiar with them.

 

Embracing the age of apps:

Apps have some very clear advantages over physical rewards cards – for one thing, they’re almost impossible to lose. You can also get an app with built-in functionality for tracking purchase trends. However, if you want an entirely personalised app for your business, there’s going to be a set-up cost. An app can also come with GDPR concerns around cookies and the gathering of personal data.

 

There are some third-party services that will handle all the above for you. Irish start-up Squid charges a subscription fee for businesses to use their app platform, which allows customers to collect reward stamps, covers privacy permissions and analyses data for you.

 

Keeping it simple – the humble punchcard:

Shiny software solutions might have their advantages, but sometimes simple is better for small businesses. The benefits of a cardboard card that can be stamped with each customer purchase are clear; apps, social media and swipecards might be best for gathering customer data, but they come with a learning curve and a higher cost.

 

Printing is relatively inexpensive, and can actually be better for branding – you can select a design that really pops and keeps your company at the top of the customer’s mind. However, these cards are notoriously easy to lose. Upon a recent house move, this author found no fewer than 14 of them, with a single stamp on each, gathering dust in a bedroom drawer.

 

A booklet that customers can fill with paper stamps is more difficult to misplace and can come with a certain nostalgia; consider the number of families that own Superquinn reward Wedgewood sets earned early in the current millennium.

 

A physical punchcard is also useless for e-commerce; a concern with customers increasingly embracing online shopping.

 

Loyalty goes both ways

No matter the size of your business or the type of scheme you operate, one thing is certain; consumers want loyalty to be a two-way street. If a customer has developed a personal relationship with your brand, savings and discounts won’t keep them around if you’re not meeting their needs, any more than buying your friends gifts will win back their favour if you’ve betrayed their trust. Free gifts and savings are a great bonus, as long as there’s honesty, consistency and reliability across the board.