Loyal customers – the holy grail?

peas in a pod, food, vegetables, greenLoyalty – ‘a strong feeling of support and allegiance’ (OED). Assuming that this is what retailers are trying to achieve through their loyalty programs, loyalty is more about what your brand represents than the products and services you provide.

A wise marketeer once said to me, “E-mail and loyalty programs are two peas in a pod”. This may be true, but beware, if not used properly email can prove to be a double edged sword.

As an example, I know of a large retailer here in Australia that uses the ‘my’-company brand for its loyalty program. But when the program doesn’t respond to customers’ personal preferences to produce tailored offers, it is just brand personalisation and does nothing to engender loyalty.

Another loyalty program I work with simply exposes the lack of customer segmentation. In an attempt to create a single program for all customers, segmentation is ignored. Customer behaviours and purchasing patterns are ignored, resulting in irrelevant messages being pushed to customers.

Loyalty and McDonald’s

The concept of one size fits all certainly doesn’t apply. Consider good ol’ Maccas. Who needs a loyalty program, when there is price? McDonald’s is a leading example of low priced, commodity fast food. It continues to define where thousands of Australians eat by introducing lower prices through promotions such as the Loose Change Menu.

Having pushed margins down to accelerate growth, McDonald’s recently introduced the loyalty app, mymaccas’, however, instead of trying to build loyalty in a traditional way, we assume McDonald’s is using the program to gauge consumer delight and excitement around existing and new products. This will most likely serve it very well in the margins game, but to see this as a loyalty play is perhaps missing the point. The key for all of us is knowing what the customer wants.

While lower prices might work for McDonald’s, they are by no means a panacea for retailers.

In recent times, many retailers have followed the trend to provide deep discounts to maintain turnover. In some instances, discounting is inevitable, but the key is not to base your entire offer on discounts. Loyalty is not about giving away your product to those you know will buy it. Discounting as a tool has to be used judiciously as it has the ability to undermine customers’ perceptions of value, and potentially drive away your most valuable, and loyal, customers.

Let’s get some new systems

If you don’t know who your customers are, their age, lifestyle, lifestage, preferences, and purchasing patterns, then how can you expect to attract new and profitable customers and ensure that you create loyalty in your existing customers by communicating the right offer using the right medium?

I have found that one of the main challenges is that retailers are dependent on traditional demographics in an effort to be more relevant to their customers. The trouble is, people don’t fit into boxes marked ‘demographics’, where John Doe is supposed by being classified in the increasingly popular CRM packages and sophisticated databases. People are so much more complex, with individual identities, lifestyles and purchase patterns. They don’t come packaged in an excel spreadsheet.

Why then do we keep relying on ever growing databases and continue the frantic scramble to purchase the next CRM?

Another recent trend is for retailers to announce that they are adopting an ‘omni-channel’ approach, to deliver seamless customer experiences and improve customer engagement, however, there is more to omni-channel than meets the eye.

In a recent article in Forbes, it was suggested that “…to achieve meaningful customer engagement, businesses must first integrate traditionally siloed customer engagement functions – marketing, sales, and service – into a single platform”.

This means delivering a consistent customer experience across all channels and touchpoints, whether it is an interaction in a store, on a mobile device, through a phone call, a tweet, or an email.

Analytics comes before systems

Customer analytics connects the dots between sales, marketing and other divisions, providing simple, practical insights that when applied have led consistently to customer delight. With happy customers, often come sales. So before launching a loyalty program, or buying a new CRM, it would pay dividends to first consider an analytics capability, to convert readily available data into invaluable insights into your customers.

Dr Ian Tho is executive director at Azurium and will be speaking at Inside Retail Academy’s Customer Loyalty and Engagement event in Sydney and Melbourne next month. For more information and tickets, click here.

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