The Logic Group Blog

Do you trust your retailer to keep your data safe? According to recent research conducted by Ipsos MORI, only 30 per cent of British consumers said that they trusted major retailers to protect their personal information. For many retailers looking to develop multichannel customer interaction strategies, these areas need to be addressed to build consumer confidence.

“The death of the high street” has been bandied about over the last eighteen months, and clearly makes for good headlines. So, it was no surprise to see the Centre for Retail Research make headlines (yet again!) with a research that claimed ‘one in five of Britain's high street shops could close by 2018 as more customers turn to the internet for their shopping’. The internet, especially mobile internet, is a driving force that is necessitating a business model rethink for some of the most established multinationals (!) – the message is clear: Innovate and adapt, or perish.

As a payment service provider and a customer interaction, loyalty and insight specialist, here are some ideas to help retailers fight back – bolster your high street presence.

The latest British retail figures from the ONS emerged recently for April, and for many retailers already feeling the strain on the high-street, they did not come as welcome news. Retail sales suffered their biggest drop in a year, blamed in part by the unusually cold weather in April and restricted household budgets, as consumers continue to feel the squeeze. Read the full blog article...

Retail Technology Business Expo (RBTE) this year was jam packed as ever, if not more. The technology for retail industry turned out to showcase the importance of successful omnichannel strategies and the role of new technologies in extending retail presence beyond the store.

Tourists love the UK shopping experience - so should you! Despite the UK’s economic status, the country can glory in the fact it’s the world’s most sought-after destination for tourists looking to splash their hard-earned cash. A recent study by VisitBritain indicates that the UK is still luring overseas shoppers to come and spend in its stores. Of the 18 million overseas visitors to the UK, 300,000 tourists only came to Britain for one reason – SHOPPING!

In this era of consumer fiscal austerity, customer retention and the encouragement of customer loyalty are two essentials in the survival tool kit for every company. One barrier to achieving this are those ‘promiscuous consumers’ who display no obvious loyalty to a store, instead choosing to shop around for the best bargains and, quite often, holding multiple loyalty scheme memberships. Assuming they are going to be profitable, can you tie them into the commitment of a (more) monogamous relationship with your company? The promiscuous customer is most likely to threaten shops and sectors in which loyalty is easily exchanged and in which innumerable confounding variables could explain why someone decides to switch their loyalty, if, indeed, it can be described as ‘loyalty’, elsewhere.

It’s unimaginable to envisage a supermarket with no customers, no check outs – manned or unmanned, gondola ends with tons of offers, and even the smell of freshly baked bread. But actually, Tesco has five and walk-in customers aren’t welcome. They’re not on the high street or even on retail parks. That’s because they are ‘dark stores’. They exist to serve the ever-growing needs for online shopping.

It’s ironic really: Tesco opened its latest ‘dark store’ in January and it created 700 jobs. In contrast, BlockBuster and HMV were slow to respond to the fast moving Internet-enabled business model, leading them into the red.

Technology has rapidly changed the high street...

A recent study by Deloitte found that in the hotel industry travellers’ purchasing decisions are being driven by having the best deal, with roughly 30% of hotel loyalty scheme members being “at risk” of switching their preferred brand for a better offer. This seems to be the case with an average of 50% of holiday makers’ annual hotel not being with their preferred brand.

This doesn’t come as a surprise when consumers are tightening their purse strings, as disposable incomes come under more pressure. As a result, hotels have been forced to consider discounting, couponing and throwing in freebies (four nights for the price of three, for instance) to retain and attract business. However, as seen in the retail industry, discounting is not a sustainable practice – and the hospitality industry also needs to explore long-term customer interaction strategies based on actionable insights.

At this time of year Valentine ’s Day is surrounding us all. But it’s not just on 14th February that you want your customers to love your business. Customers who positively value your business are more likely to spend more and return to you more regularly adding value back into your business. So, understanding what makes that happen is crucial to growth. Is Loyalty important?...

December retail sales have disappointed. British music industry loses the high street presence of HMV. Another few bite the dust. Britain gets a chilly welcome to 2013...

If you still need more evidence that the Internet has necessitated a rethink of customer engagement strategies, then you may as well shut shop and protect the few assets and cash-in-hand available to you. The onset of the Great Reinvention (as we’d like to refer to the economic depression that started in 2008), marked the beginnings of the evolutionary process that would be driven by the Internet and the shift to online business and shopping. To feign ignorance to the fact that we’re through the evolution phase (of four years) and are now stood at the chasm, would demonstrate poor judgement and a clear lack of understanding of the stark reality that faces us.

2012 has been a tough year for the high street, with retailers struggling to drive sales and many high street stores shutting their doors permanently. By contrast, the online high street saw resilient growth. In fact, the latest figures of the annual IMRG e-Retail Sales Index have revealed that online sales in November are up 18 per cent from last year, as the festive rush has encouraged consumers to reach into their digital pockets. So, 2012 was a year of “Bricks vs. Clicks”, but what will drive retail in 2013?

Here are some of my thoughts for starters, or perhaps predictions for 2013.

In 2012, many media and analyst reports pronounced the high street dead with a new “death of the high street” story seeming to appear every week. Well known brands such as Comet, La Senza and Clinton Cards going into administration, coupled with the recent news that two in three high street stores started their sales two weeks before Christmas suggests that bricks and mortar stores have struggled in 2012.

This doesn’t mean people are no longer buying though, with statistics showing that more people are shopping online and that, at an average spend of over £1,000 per head, the British are the biggest online shoppers in any major country. However, if we drill down deeper behind these figures, it appears that online spend only accounts for 13 per cent total retail sales [3], which begs the question is the high street really dead?

Over 50% of adults in the UK [1] already have contactless credit/debit cards, yet how many of them know what they have in their pockets? And how many would be willing to use contactless payment cards, even in an existing enabled environment? A survey from Which showed that only 54% of 158 Londoners surveyed would be willing to use contactless cards as opposed to Oyster cards, even if it gave them the same benefits [2]. Combine that with the fact that many people feel they are not protected in case of fraudulent use, and one could be forgiven for thinking that contactless cards stand no chance. Is this just a case of lack of consumer awareness and trust?

It's been a grim couple of years for the high street with an estimated 30 chain stores closing daily [1]. A recent PriceWaterhouseCoopers report suggests that, over the last 12 months, major retailers in the UK have closed close to 1,000 stores; caused by a combination of the recession and the growth of the internet shopping (compared to 174 in 2011). With many big names such as Comet, Game and Clinton Cards feeling the strain, the Government recently pulled together a think tank to come up with a solution to the demise of the high street. But, perhaps the rebirth of the high street is possible with the reinvention of retailing through an old foe (the internet), as we see a blurring of the real world and virtual worlds with mobile-commerce.

The Logic Group were delighted to exhibit and speak at the first Mobile Wallet Summit Europe, on 28th and 29th November 2012.

Solutions Marketing Manager, Mark Prior-Egerton gives a summary of the key highlights from the day, and his thoughts and vision around the convergence of payment and loyalty solutions, and the role mobile will play in this.

As the festive season gets into full flow, many retailers and supermarkets are pushing seasonal offers and are heavily discounting their goods for additional custom. However, our customer loyalty research with Ipsos Mori has revealed that, “Discounting Isn’t A Sustainable Consumer Drug”.

The research found that the cash-strapped British consumer will shop around for the best discounts, but a majority (70% of respondents) still prefer loyalty schemes where they can get better offers and services for being more loyal. As well as expecting offers to be available, almost half (48%) of shoppers expect to get better service from their loyalty scheme membership than normal shoppers.

“Black Friday” lasted a whole weekend and was the perfect time to do my online shopping. I would say that buying online is definitely the preferred choice of this blogger, however the experience was a little “flaky” and I wonder how it could be improved?

Retail Week announced on today that “Loyalty schemes such as Tesco’s Clubcard and Sainsbury’s Nectar card are set to be scrutinised by the Office of Fair Trading(OFT) after the watchdog revealed it is to explore personalised online offers” the article continues to state that “The OFT has launched a “call for information” to explore the extent to which retailers are monitoring online shoppers to target them with offers to see if any action is necessary - personalised vouchers are increasingly prevalent in the grocery sector as the big players fight for spend.”

This resonates with the call for “relevance” – too often we have seen Loyalty Programmes used as “promotional” or “discounting” tools. Customer data is such a precious commodity that should be revered for the opportunities it can unleash. As Sir Terry Leahy states in his book “Management in 10 Words” – “just gathering data and knowing more about customers does not in itself create loyalty”, and there is a belief that these “Loyalty Schemes” are really “Reward Programmes” that are a component of customer loyalty.

In recent years, customer loyalty schemes have sought to go beyond the humdrum of price reductions and special offers. Instead, they have been keen to build emotional engagement and attachment between customer and brand but is this really what consumers want in the stagnant economic environment in which we find ourselves today?

 

In a piece of qualitative research Ipsos MORI conducted on behalf of the Logic Group on customer loyalty, we found a group of consumers who described their “loyalty” not in terms of a deep rooted emotional attachment to a brand or company but rather because of the more mundane factors which schemes have tended to shy away from. Price, convenience and even inertia were all cited as key drivers of loyalty, hardly the hallmarks of emotional attachment. With the near future promising a continuation of the economic hardships that have been facing consumers over the past few years, we can expect the drivers of customer loyalty to also stay this way.

We have often been reminded that we live in turbulent times, and certainly this is the case today: the economic certainties of the pre-2008 boom era are apparently permanently behind us, and the long-awaited green shoots of recovery are showing stunted growth, if any. People have less money, in real terms, than they had a few years ago; meanwhile they are dealing with far more uncertainty than they are used to. With this in mind, the importance of having clever strategies to encourage consumers to part with their hard-earned cash has only increased.

On one level, British consumers’ loyalty to the vendors they use is showing little sign of volatility or of going through a step-change. Recent research carried out by Ipsos MORI on behalf of The Logic Group shows that today’s “loyalty consumerscape” is fairly stable. We asked how loyal consumers feel to a number of sectors1 and found only one significant change, compared to similar research conducted last year. The sector that did show change is leisure/entertainment, where significantly fewer consumers say they feel loyal this year (30% last year, 26% now) – suggesting consumer loyalty may now be anchored in more essential spending.

NFC-enabled mobile payments only scratch the surface in terms of the services mobile technology can offer to retailers. For the true value to be recognised, businesses need to understand that it isn’t in the ability to just offer a payment service – it is in the customer interaction opportunities it creates.

 

Focusing on the mobile wallet from a pure payments perspective massively undervalues the impact mobiles can have. It could be said that tapping a phone is as useful as tapping a card, and as such, there’s no real benefit to the customer. However, if a consumer is tapping a phone for payment and simultaneously providing loyalty details and/or redeeming a money-off voucher, while using it to get additional in-store services, it is a bigger incentive for customers and retailers alike.

 

Last weekend there was an interesting article in The Daily Telegraph’s Your Money supplement titled, “How loyalty cards stack up” (14th July 2012, page 8). The article looks at whether loyalty schemes have become too complicated for customers and if it’s now too difficult for customers to compare which loyalty schemes are of most benefit, and which retailer they should spend their money with.  In this time of economic uncertainty, it suggests that the companies that offer the easy to understand, money-off, cash-back schemes will be the winners.

 

The Logic Group’s annual consumer loyalty survey, due for release in a few weeks, captures that the key pain point for consumers in the UK is the cost of their shopping basket; hence why money-off schemes are growing in prevalence.  These are not profitable long-term strategies though. The real challenge, then, is how to bolster consumer spending in the long term, without risking removing discounts entirely, but driving incremental profitable consumer interactions?

Here at The Logic Group we are gearing up for the release of the next Imperatives for Customer Loyalty report, the annual insight into customer loyalty here in Britain.

 

We’ve been working with Ipsos MORI over the past few months collating and analysing the data to find what it means to be loyal in 2012.

 

The full report is due to be released next month, however this past week we were able to give a sneak preview of one section which focused on the use of technology in customer loyalty, and where the mobile operators and handset manufacturers rank in terms of customer loyalty across all industries.

Following on from my last blog, the Diamond Jubilee was a celebration of the best of British - an event that showcased loyalty and the emotions behind it. While market economics have impacted consumer loyalty in recent times, the past few weeks have reinstated a sense of loyalty across Britain - making an unsaid commitment to bolstering the economy. According to the British Retail Consortium (BRC), retail sales by value were up 1.3% on a like-for-like basis in May, following a sharp 3.3% decline in April.

 

In a year that has seen many retailers shut shop and the EU facing troubles of its own, events like the Jubilee have illustrated that the British public can show great levels of loyalty. With the European Football Championships beginning and the Olympics less than 50 days away, UK retailers should now be looking to build on the feelings of loyalty and patriotism that the Jubilee has created. Working out how to best influence this new sense of loyalty in a positive and engaging way through customer loyalty schemes and interactions could be key in guaranteeing and encouraging long-term customer retention.

According to research by Accenture shoppers are readily changing their allegiances when it come to stores, banks and energy companies, with more than half switching loyalty in the last year. The research found that it is often poor customer service not just price that is making customers turn against shops and services they have used to for years. It is interesting that it’s not just the usual phone companies, gas and electricity suppliers who are feeling the hostility - its supermarkets, high street chains and online shops too.

 

With June 5th marking the Queen’s diamond jubilee, have the fundamental principles of loyalty changed? 60 years ago loyalty simply meant good customer service and everything else came after that. So it’s interesting to see that the research, found that poor customer service is a major hindrance to loyalty.

 

Businesses need to realise this issue, whilst maintaining all the other benefits that customers expect today, and look to deliver smarter, easier and more convenient customer interactions to ensure longevity of their custom.

As the social media frenzy spirals on, the challenge for businesses trying to incorporate social networks into their overall marketing strategy intensifies.

 

Fuelled by mobile devices, which give users access wherever they are and whenever they want it, social networks will continue to become an integral part of our lives. And with it, our expectations will grow. Consumers will expect a unique experience, offers, rewards and games in return for their engagement with a brand through social networks. Although this presents a challenge to organisations, the opportunities to reach their consumers and target them with relevant communications at the right time, opens up further. Facebook is already allowing retailers to offer customer promotions specific to location when users “check-in” via facebook places. Not only does this make the offer more significant to the consumer’s location, the message is far reaching, as users also broadcast the offer to friends through the network.

Recently I saw an example of a business using social media to provide outstanding customer service and enhance its brand image. The Dutch airline KLM presented gifts to customers who had mentioned KLM to the world via Twitter prior to boarding the flight. These customers seemed pleasantly surprised that KLM airport staff not only knew they had tweeted, but also knew their interests and the type of gift they would like. They knew all of this because they had a team of people monitoring social network feeds for mentions of their brand. They then looked up the social network profile of these brand advocates to establish their interests, purchased the gifts and presented them to the customer within hours of the tweet or facebook post. The fitness enthusiast was more than pleased to receive a GPS heart rate monitor watch, and the music aficionado an iTunes voucher. One would assume this then lead to more tweets about the “KLM Surprise”, and a very happy customer who would most likely pick KLM as their airline of choice in the future. So, for KLM, mission accomplished. A happy, loyal customer and free positive PR for the brand.

Our latest research for The Logic Group shows that, of those of us who are members of loyalty schemes, an impressive 69% are satisfied with them and only 5% dissatisfied.

 

What the research also finds is that the British consumer is a contrary creature who at once accepts the rewards that loyalty schemes bestow on them, while rejecting the mechanisms that make these rewards useful.

 

So the question remains: will consumers ever be happy with loyalty schemes?

It’s not news that the advent of technologies such as social media has given the brands that we use unprecedented access to our lives.  Gone are the days when our only contact with a brand was on the high street.  These days they are emailing us, texting us, writing to us (but only if we’re ‘old school’) and even ‘reaching out’ to us via social media.

And many of us have happily jumped on the bandwagon, joining, for example, the Facebook groups of our favourite brands.  For instance, at the time of writing, 408,959 of us ‘like’ Marks & Spencers’ Facebook site, and 74,692 of us ‘like’ Debenhams.  We get to know more about the brand and its products, and if we’re lucky we get some useful discounts and offers for the products we like.  Most of us know that the trade-off for these ‘perks’ is the brand knowing more about who we are, and what kind of products/brands we like.   Brands that engage with us in this way are effectively offering financial incentives to gain greater proximity to our lives.

An individual, specialised in a certain field, would probably perform better when part of a group or a team with the same expertise. When a charity organisation launches a new campaign, often the catch phrase used is “together we can make the difference”. In group sports, like rugby, people play different positions, each of which require different skills. If the coach can successfully coordinate these different skills, the unit has the potential to become greater than the sum of its parts. But does the same apply to Loyalty programmes?

Loyal customers are the Holy Grail of the supply world; finding them is the topic of a mountain of business manuals.  But when we stop to think about it, is it really loyal we want?  The dictionary definition of loyal is ‘faithful to one’s friends, country or government.’  Honourable?  Yes.  Emotional?  Yes.  Maybe even a little old fashioned.  But in today’s aggressively consumerist world, these are notions which hardly seem to apply.

 

Take the example of banks/building societies and supermarkets: at first glance, recent research that we carried out on behalf of loyalty scheme consultants, the Logic Group, shows that banks/building societies and supermarkets seem to be doing rather well in the customer loyalty stakes.  Two-thirds 66% of the British public said they feel loyal to their bank or building society and 60% said the same of their supermarket.

The big news this month is that Apple has chosen not to include NFC support in the new iPhone 4S. So what does this mean to the advancement of NFC customer loyalty interactions at point of sale?

 

Right now there are a number of NFC loyalty initiatives in the UK and Europe but penetration of these so far is low. There just isn’t a clear business case for an NFC based loyalty solution in a large retail estate, yet. What will tip the balance is the convergence of other interactions around the mobile device; payment, customer loyalty, couponing, marketing alerts etc. We all see this just around the corner with the likes of Google wallet and other operator led initiatives hitting the news every day. So why aren’t these leading to widespread NFC adoption and why didn’t Apple see the need to jump on the band wagon?

I was recently sent a viral video of a baby who's used an iPad to such an extent, that she tried to use the same tablet UI gestures (swiping, clicking and pinch-zooming) when given a real (i.e. dead tree) magazine.

 

What struck me was how the video appeared to polarize opinion between the people who chastised the parents for 'ruining their child's future' and those who hailed this as a watershed moment in human evolution.

 

As with many things in life, I try to take the middle ground.

Recently I received an email offer from a retailer, 3 for 2 off reptile food…”wow” I thought, as I have a parrot, rabbit and 2 dogs but definitely no reptile. Did they know something I didn’t about me?

 

Another simple case of mass marketing and a spray and pray attitude that not only dilutes the campaign but has completely missed a great chance to engage with a customer. It got me thinking…how often does this occur and am I getting the same offer as the person next door? Does this organisation really value my business and me as a customer? On the flip side, what actually does the reptile enthusiast get and buy regularly from this retailer? The answer to the latter is a reduced price off his purchase that they would have likely bought anyway, the consumer is happy but the retailer has diluted their campaign and given away profit due to an indifferent approach to consumer focused marketing and customer loyalty.

There have been lots of comments in the industry recently regarding changes made to the Tesco Club Card programme. Is this a shift to an EDLP (every day low price) model and will this mean the end of the leading customer loyalty programme as we know it?

 

Would Tesco really undermine the value of the Club Card database? Of course they wouldn’t. The market leading advantage that Tesco obtains from deep customer understanding seems to be easily forgotten. What Tesco have skilfully done is to reinforce the brands values whilst applying a correction to Club Cards financial model which had probably become a little over invested in recent times. This has protected the customer loyalty programme and will ensure that the data asset can continue to deliver insight that aligns the business with its changing customer needs.

Kaeng khiao wan, or as literally translated is “Sweet Green Curry”; commonly known as Thai Green Curry, is a particular favourite dish of mine, to cook, and to eat.

 

In its most basic form, you can buy a jar of paste, stir fry some chicken, or vegetables, and add the sauce – cooking it through. This will give you OK results – quite tasty, hardly fulfilling, not particularly authentic and not as nutritious as a recipe using fresh ingredients. Like many popular dishes, people will have their recipes of choice; my own includes birds-eye chillies (nothing to do with fish fingers!), shallots, fresh ginger, garlic, fresh coriander, lemongrass, limes, kaffir lime leaves, galangal, ground coriander cumin, fish sauce and cane sugar.

I read a news item the other day that a major retailer in the UK has recruited 4 million members to their new customer loyalty programme in the first 10 weeks.

 

This interesting stat got me thinking. Are all of these new members profitable or potentially profitable such that this unconditional investment is appropriate and a sound basis for good return on investment? Should we as loyalty marketers be driving recruitment regardless of the cost?

The return on investment for a customer loyalty programme can be an illusive number and I’m often asked what can be achieved. 1%, 10% or 100%? In fear of stating the obvious, I guess it depends how you measure the benefit and which costs you attribute to it?

 

The cost is usually the easy bit. There will be the set-up costs, the ongoing operating costs, the overhead of managing the programme and the cost of the rewards issued to customers. In a healthy programme it will be the rewards that dominate, overshadowing everything else.

Customer loyalty is critical for repeat business in these challenging economic times and positive customer experiences have been proven to help engender customer loyalty. Business are therefore looking for any means possible to best capture consumer advocacy, spread the good word on positive customer experiences, and use this to acquire, retain and grow loyal customers and tempt them back to more spending. The obvious solution…social networking of course! Or is it?

"Of course the loyalty members outperform the non-members."

 

"The programme attracts the best customers because they have the most to gain.

 

Across all sectors this is a common view voiced by the ‘loyalty naysayer’ usually at critical times in the programmes evolution. Every organisation has at least one; the quite reasonable and understandable contribution that balances the positive optimism of the ‘loyalty champion’.

 

Sometimes customer loyalty programmes take shape and launch on the strength of the loyalty champions enthusiasm and drive but without a clear view of how the benefit will be measured and maximised. The programme often starts well with customer sign-up exceeding expectation and additional cards being manufactured inside the first quarter. The business quite rightly feels good about this clear indication of customer engagement and the loyalty programme budget is adjusted upwards to take care of the unexpected success.

Are you part of the loyalty scheme…Why?

Does carrying a loyalty card make you loyal?

 

Opposite my office is a petrol station. It is all too convenient to fill up with fuel on my way home or at a quiet time of the day. With daily commuting, and customer visits, I would hate to think how much money has been spent in this very garage!

You are a retail business. You have spent a small fortune in time and money to upgrade your systems and processes and a certified QSA has accredited you as PCI DSS compliant. Do you sit back and relax, safe in the knowledge that you have achieved security nirvana and that fraud will never show its ugly face in your business again? Well not quite.

As the global economy slowly emerges from the downturn in what is becoming an ever more aggressive marketplace, organisations are seeking to gain that all important edge over their rivals, with many once again turning to technology to help maximise their competitive advantage.

 

At the turn of the century it was the rise of the internet and e-commerce that led the way in providing businesses with a new channel to market to compete against, or complement, the already well established retail outlet and call centre channels. In the new decade many are looking at the rise of mobile technologies, through the development of contactless, smartphones, and tablets to drive consumer demand for mobile commerce and mobile payments. However, as with all early technology advancements one solution doesn’t fit all and there are a plethora of technology options developing through numerous pilots to allow early adopters to test the market place. With countless technology manufacturers, systems integrators and service providers touting their wares and jostling for position it’s no wonder organisations are struggling to know where to start. So what’s it all about and haven’t we been here before?

I’ve recently become aware of how much the market has been flooded with vouchers. In the post I receive vouchers from Boots and Nectar, but they don’t really help me buy what I need at a better price and they often go unused. Now, I also receive some voucher codes by SMS from brands which I have never shopped with. These types of offers are even less relevant to me. But even more surprising are the voucher blasts that come my way on the web. You seem to be able to find e-vouchers everywhere and for any brand you want telling you to just print and use: Ask, Argos, Asda, B&Q, Sainsbury’s, Pizza Express… I could carry on and on …

I’ve seen so many price deals on the high street: after we passed the months of “Closing sales” when we saw retailers going under immediately after the crisis hit, we saw another wave of front-windows posters crowded over to lure us in the stores : ‘£££ off’ deals & price wars. I’m sure I’m not the only one watching my cash and not spending at my discretion because the wallet just got too tight but one thing I will not do is chase the cheapest deal: I will plan and cut down on my spend but I’d like to think value does matter, service is important and I get what I need.

Most people would agree that loyalty is a good thing; whether in terms of inter-personal relationships, or in the choices we make about who we do business with. However recent debate surrounding the usefulness and validity of loyalty programmes have left many questioning the true purpose of rewarding loyalty. With approximately 85% of households in the UK owning at least one loyalty card (TNS Market Research) yet over half forgetting to redeem our rewards, perhaps one factor fuelling the debate is a disconnection between customers’ expectation of how their loyalty should be recognised and the reality of what they receive.