The future of customer loyalty: trends and predictions

Nov 29, 2013 | E-commerce and E-retailing, Online advertising

Brands need to focus on the core customer experience before investing in conventional loyalty reward programmes, according to new research from Underwired, which forecasts customer loyalty trends in the year ahead and beyond. Underwired, which has created marketing strategies for brands including Sony, ASICS, Travelodge and Marks & Spencer, has identified a shift in consumer […]

Brands need to focus on the core customer experience before investing in conventional loyalty reward programmes, according to new research from Underwired, which forecasts customer loyalty trends in the year ahead and beyond.


Underwired, which has created marketing strategies for brands including Sony, ASICS, Travelodge and Marks & Spencer, has identified a shift in consumer attitudes towards loyalty programmes where customer experience is increasingly valued over traditional points-based schemes.
Recent research shows that 86% of UK adults own at least one loyalty card and 29% carry five or more. A recent survey by Plastic Card Services has revealed that shoppers save an average of £100.32 a year by using the loyalty points they have built up but shoppers are still sitting on £351m worth of unused points annually, an indication that the value seen in these rewards is dwindling.
Underwired believes that the only brands to succeed in the future will be those that put customer insight at the centre of their marketing activity, rather than putting loyalty programmes ahead of real customer loyalty.
Here are the four elements, identified by Underwired that brands will need to embrace in the future:
1. The heart rules the head. Neuroscience is revealing new insights into the role played by emotion in influencing seemingly rational activities such as our purchase decisions. What’s really interesting is the extent to which this happens without our being consciously aware of it. Consequently brand owners need to consider the emotional ‘story’ as much as the rational argument.
2. If you have to buy it, it ‘ain’t’ loyalty. A programme that serves to ‘buy’ desired behaviours can provide short-term gains but is just not sustainable as brands find themselves having to out-gun the schemes their competitors set up in response. Simplistic points-based mechanics are easy to imitate and easy to exceed. If one brand can buy loyalty one week, so can a competing one the next. The net result is that you risk being left with a programme that has become an undifferentiated commodity.
3. What’s the real value? Given the cost of loyalty programmes, they can dilute profit and drain resource with little positive effect on consumer consumption habits, simply mirroring existing behaviours amongst existing customers. Furthermore, loyalty programmes can cause brands to waste huge volumes of rich data – viewing customers as blunt generalised groups understood only in terms of functional behaviours.
4. Loyalty is the outcome. It’s important to view loyalty as an outcome of a wider customer strategy. True loyalty is the natural result of ensuring your customer experience is strongly aligned with the needs and motivations of your consumer and understanding what they value most. True loyalty meaning; earned not bought, difficult to replicate, enduring, emotional not simply functional.
Taking a look at the year ahead, Underwired’s Planning Director, Tim Williams, explains the approach brands will need to embrace to achieve sustainable customer loyalty (and a lot else):
“As the airline industry discovered to its cost some 20 years ago, consumers have come to regard traditional loyalty programmes as something of a hygiene factor – one which is expensive for the brand owner to maintain and increasingly ineffectual in actually promoting loyalty.
A smarter strategy, that is both simpler and more differentiating for your brand, is to focus on the key aspects of the customer experience that matter most to most people. Consider where is the greatest risk for something to go wrong and conversely, where is the greatest opportunity for something to go right?
Act on this insight and you will find yourself having created a highly effective loyalty programme almost by default.
Not only that, but as a bonus you will also have created a sound basis for your acquisition, retention, win-back, social media and advocacy strategies.’
www.underwired.com

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