Leaving loyalty behind
- Johnny Morris
- Jan 25, 2021
- 2 min read
What do you think will happen to loyalty programmes in the future? Will they largely continue as they are or evolve into something new? Are changing consumer behaviour, developments in technology or all the new retail channels going to have any influence at all?
Loyalty programmes are one of those autopilot moments for retail marketers when they begin a new role. If their new brand doesn’t have one, then it is proposed pretty quickly as “new strategic thinking” and if there is one, it gets reviewed and changed.
Autopilot mode continues when we use the customer data from loyalty in marketing campaigns. There are few variations on this approach which most good marketers can deliver with their eyes closed:
Sign up as many customers as you can
Analyse the data captured to tell us something we didn’t know about our customers
Design a neat campaign that keeps the VIP customers shopping
Design an inspiring campaign to win back our lost customers
Design an original campaign to tempt typical customers to try something new
If feeling ambitious, add further campaigns to increase visit frequency, spend per visit, and improve recency (The R, the F and the M)
Why is it such a no-brainer? Loyalty programmes have been on my mind fairly frequently since 2004, when I started designing and managing them for brands. The pitch back then was clear; they cost around 1% – 2% of sales to run and generate around 2% to 4% of incremental sales. And here are some case studies where we have delivered more than that. Easy.
But half of this income is supposed to come from these autopilot campaigns that we deliver. The other share, incidentally, comes from the natural reaction customers have to your beautiful programme, where they are tempted away from your competitors as a result. Do I sound a little sceptical? Maybe. When brands go back to try to measure the impact on sales from loyalty, the result is usually marginal and what’s worse, it can easily be challenged by a good data analyst.
So, marketers go into autopilot and produce a series of campaigns that have a tiny incremental impact on the overall business. I’ve seen this so many times now that I’ve realised it’s unusual to deliver anything life-changing with loyalty. Even in large international retail groups, the figures can make for depressing reading.
What’s the alternative? Recently my approach with loyalty programmes is to use the data to understand what the customer looks like, and then go out to find more just like them. I’m challenged by the CRM experts who say it’s five times as expensive to attract a new customer than retain an existing one, but for many brands, there are many more potential customers out there than real ones. Besides, the real ones will come back to you anyway, if you have invested in getting your brand and product right. Take this into the digital world and channels like Facebook will let you create lookalike audiences easily. I like this strategy as it’s very easy to measure. And even the smartest analysts believe the numbers too.
That leaves the existing customer base. What tactic can we adopt that has a bigger impact than the autopilot campaigns above? More on that another time.
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