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.

The easily noticeable presence of products and services based on new wireless and internet-based technologies signalled the importance of mobile solutions for the retail industry.

For us, it was all about taking it one step further in highlighting the benefits of the mobile wallet. The mobile wallet is a game changer, but it only scratches the surface of what mobile can offer. The focus is all too often around the benefits as a payments mechanism. We were able to demonstrate that for the true value of the wallet to be recognised, retailers needed to understand the customer interaction opportunities it creates through loyalty and real-time discounting.

Our partnership with Proxama creates a complete NFC-based services offering for our retail clients. We are also working with Weve, as one of its first technology providers, to help design and build its loyalty and coupon pilot.

Meanwhile, Jon Worley (our Director of Customer Interactions) and Nick Rudd from Weve secured a lot of interest around the mobile customer journey and the unchartered new world of mobile interactions between retailers and consumers (watch out for the webinar version coming soon). 
 

The bottom line:  Customer relationships built on meaningful and targeted interaction will drive growth in the retail industry.  Mobile will be the cornerstone of omnichannel customer interaction strategies.  When considering mobile wallet services, let’s think beyond payments – loyalty, data, and insights.

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!

VisitBritain estimates that overseas visitors spent as much £4.5bn a year in Britain’s shops, with more than half of the cash going on clothes. The report shows that 25% per cent of all expenditure by overseas visitors is on the UK’s high streets and in department stores.

This research shows that the UK is one of the top shopping destinations to deliver the most rewarding and enjoyable shopping experiences. To take advantage of this, retailers need to maintain this superior experience and make sure it is also felt by UK shoppers, in order to cement the future of the high street.

At RBTE (stand 520), we’ll be showcasing how retailers can achieve the ultimate shopping experience by placing them in their customers’ shoes. By combining payment, loyalty and reward services across multiple integrated channels, participants will take part in an online experience and understand how they can use their buying journey to get customers retuning over and over again. 

To put yourself in the customers’ shoes, register here.

The Promiscuous Consumer

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.

Customer Loyalty Research

Overall, market research has shown that feelings of loyalty have remained fairly stable over the past four years (2009-2012) . Some demographics have, though, been found to be consistently more loyal than others. From supermarkets to cinemas via mobile phone handset manufacturers, women are more likely to say that they feel loyal across the majority of sectors asked about. The only two sectors in which men currently lead the way in loyalty are sports, and bars, pubs and clubs: read into that what you will.

What makes consumers feel loyal?

During the four years that this survey has been running, members of schemes are more likely to be loyal to companies across all sectors; so, certainly, there could be something to be gained by luring in more members to schemes. What our research also shows is that consumers feel loyal for a variety of reasons, of which loyalty scheme membership is only one. Likewise, consumers join schemes for many reasons, of which, again, loyalty is only one, and our promiscuous, opportunistic consumers could be being won over by any one of a number of things. Membership of two flagship schemes in the UK illustrates this perfectly.  2011 data shows that an astonishing 56% of consumers hold both a Tesco Club card and a Nectar card, whilst only 9% have a Tesco Club card alone and 6% a Nectar card alone.  This suggests that membership of these schemes at least is underwritten by something other than pure ‘loyalty.’

Improving satisfaction

This leads us into a conundrum: should winning over these promiscuous consumers be the top priority, or should improving satisfaction with loyalty schemes amongst loyal customers take precedent?  Undoubtedly, if it were possible to leverage the loyalty schemes in order to convince both parties of the benefits of a long-term relationship with just one store, the gains could be massive.  But results from our survey suggest that most schemes still have some way to go before this ideal can be achieved.

In addition, from our survey, it appears as though satisfaction with loyalty schemes is not dependent on whether customers consider themselves to be loyal customers, suggesting that they are not always receiving any additional rewards for their enduring loyalty. Perhaps it is time to be thinking of ways to encourage spending amongst loyal customers, renewing their vows, through more attractive schemes, lest they too become a promiscuous consumer. 

Rewarding loyalty

It could be, therefore, that the only way to put an end to, or at least limit, customer promiscuity is not to directly try to appeal to promiscuous consumers with glitzy new loyalty schemes but rather to reward those who are displaying loyalty and, indirectly, show them that, in the long run, promiscuity does not pay.

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 – although high rents and the changes in consumer behaviour have not helped. Some of this is down to the phenomenon dubbed ‘showrooming’, when people use their phones while out shopping to examine whether their prospective purchases are available cheaper online or elsewhere.

A recent survey found that four out of ten ‘showroomers’ end up making their purchases elsewhere. Indeed, one in five people said they only went into a shop to ‘check out’ something they planned to buy online.  Yet, some consumers still value what the high street can offer – the chance to inspect what they’re thinking of buying.

Various market research studies indicate that on average four of ten ‘showroomers’ end up making their purchases elsewhere – with some consumers even admitting that they only go in-store to ‘check-out’ things they planned to buy online.  There is an argument that consumers still value the high street – even if to inspect goods that they may eventually purchase online.

However, reflecting directly on the high street itself, technology can strengthen retention and sales. Firstly, being able to visualise and feel products is a big tick mark for the consumers. Retailers can capitalise on this and offer real-time discounts and incentives – increasing the likelihood of completing a purchase.  John Lewis, for example, offers free Wi-Fi to customers' in-store, which allows the retailer to match and improve offers as well as provide complimentary products or services using its multichannel infrastructure. John Lewis encourages consumers to do what most of us already do, go into the store, then look online to check if you can get it cheaper or with an offer.

Secondly, data is a key benefit for high street retailers. The more you know about your customers, the better they can be targeted with promotions and offers, giving you better ROI. Take voucher sites for example. Various websites today offer coupons and money back to an anonymous customer, making it difficult to tie that back to the person who redeems it. Alternatively, if this is issued through a mobile, it is unique to that handset, so you know the demographics of who is using the voucher, their location and when they use it. Retailers can instantly know if the unique voucher code has been used or not, and by who. Access to such customer buying behaviour data gives the retailer much better control over its marketing budget. But it’s not simply the data they collect on consumers – it’s also the data they can provide to their customers for future tailored deals.

High streets need to make available the tools consumers desire to interact in-store. This will allow the consumer to not only browse in-store, it will also encourage them to complete their purchase and take their shopping away with them.

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.

The Logic Group’s Loyalty Survey 2012, conducted by Ipsos MORI, found that just over 10% of British consumers were members of a hotel loyalty scheme, and as such feelings of loyalty towards hotels ranked the lowest amongst the 19 sectors polled.

The good news is that the only way is up for the hospitality industry.  Consumers prioritised honesty & integrity and customer service as the top two criteria when judging the reputation of the business.  This represents a great opportunity for hoteliers to grow their business and differentiate themselves in the market by offering tailored benefits to loyal customers. 

Instead of creating a ‘one size fits all’ scheme, for example ‘stay four times and get your fifth stay free’, hoteliers should be looking at offering their customers something they will personally value, based on their behaviours.  If a guest stays once a year they could have a ‘complimentary champagne breakfast on your birthday’ deal, whereas more frequent customers could have a ‘complimentary room upgrade on your third stay’.  This will make customers feel understood and valued, a customer service aspect that is very important in the hotel industry.

The ability to capture, combine and analyse customer interaction data to deliver personalised, value-add engagement to customers will drive and distinguish successful hoteliers.

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 (Loyalty Report 2012) adding value back into your business. So, understanding what makes that happen is crucial to growth.

Is Loyalty important?

Some consider loyalty as being part of a scheme; but just because you are a member of a loyalty scheme doesn’t mean you are satisfied. So what does it take to ‘fall in love’? The Logic Group and Ipsos MORI carry out an annual Loyalty Report, and in 2012 the results showed that the most important areas that affect satisfaction with a loyalty scheme specifically are Points (27%), Rewards (22%), Vouchers (18%), Discounts (16%), Convenience (15%), Freebies (15%), Price (11%), Products (11%), Service (10%) and Offers (9%). Consider these areas and your loyalty scheme members should be more satisfied. But does this also reflect upon those customers that are not members of the scheme?

Is it more about service?

As we see above, service was 9th of the list of reasons for satisfaction with a scheme (10%). However, when asked for reasons for dissatisfaction, consumers cited service far higher on the list, with only a 5% difference from the number one reason; rewards. Furthermore, when looking at this in more detail, addicts of loyalty schemes; those people really in love (top 10% who have the most schemes), put even more emphasis on service as a reason to be dissatisfied than the average respondent; 16% versus 10%. This suggests that service should be considered an important part of your business, especially as it can impact loyal customers the most; the customers you really don’t want to lose!

Do you provide value?

Value, in terms of points and rewards, is considered highly important for members of a scheme when measuring satisfaction, but it’s not just consumers that are members of schemes who are looking for value for money. So, delivering value is subjective. The answer could be in targeting, and that can be achieved through data, and turning that into knowledge that drives your campaigns, offers, and promotions to grow your business, and make your customers feel like they want to return time and time again.

In a nutshell, falling in love isn’t based on one thing, you need to provide value, good service, and remember that your customers are individual.

As a business that provides products and services, we recognise the importance of delivering what our Clients require, and therefore we always welcome your feedback about how that can be improved. To that end we have launched an annual client satisfaction survey to gather your feedback. If you are a client of The Logic Group, and have not received your copy by 20th February, get in touch and we can make sure you can have your say.

In the meantime, find out more in the 2012 Customer Loyalty report.

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.

The jump across the chasm will require a rethink of customer interaction and engagement strategies – and, an in-depth understanding of how consumers think, shop around and buy. 

Blockbuster, Jessops, Morrisons and Comet have taught us that speed and agility are important considerations when adopting a multichannel retail strategy.  For those who’d like to argue that online shopping reduces the lucrative profit margins (that retailers have enjoyed in-store), should be inspired by the 44% y-o-y growth in web sales at John Lewis – a major contribution to the 13% growth in revenues in December 2012.

British high streets will get a face lift in 2013.  An experiential high street will start to emerge – one that caters to niche brands and customers and provides a face to virtual shopping experience.  Brick-and-mortar shops will adopt a lean presence as they rapidly embrace a multichannel environment.  Online only retailers will bring pop-up shops and digital windows to the high street – using tools such as augmented reality, QR codes and mobile apps to bring in customers.  eBay has already put this into practice by testing pop-up shops in 2012.

This experiential high street, with its multichannel infrastructure, will be driven by actionable insights – the ability to capture, combine and analyse customer interaction data to deliver personalised, value-add engagement to customers.

So, if you haven’t already, it’s time to embrace the Great Reinvention.

• Jones, D. The Sun, Price Crackers, p.24, 11 December, 2012
• According to Ofcom’s seventh International Communications Market Report
  
• The Economist Intelligence Unit’s Retail 2022 report
  

• [1] – Payments Technology Conference 2012
• [2] - TFL's bank card plans unconvincing, says London Assembly - 18th November 2012 
  
• [3] - Awareness of contactless mobile payments doubles on last year - 10th December 2012
• [4] - Transport for London - Contactless Payments - 16th November 2012
  

• Easter (April) was the weakest retail month of 2012 with sales down by 3.3% from 2011 – this is thought to be due to the wet weather

• June sales grew by 1.4% from 2011 – a figure much lower than expected for the Queen’s Diamond Jubilee month

• During the Olympics in August sales fell 0.4%

• Sales down 0.1% year-on-year for October 2012
  

• A scheme must provide clear value in terms of both financial incentives and service provision over and above the consumer’s existing, familiar experience with the business.
• A data-driven strategy must be in place; from transactional through to demographic and attitudinal data. Nothing is more powerful than combining this knowledge to understand customer motivations and effect profitable change. This can be built up in stages and over time.
• Not all consumers are created equal. Whilst a more general acquisition strategy is typically widely accepted (e.g. mass discounts for sign-up), customer growth and retention must be based upon data-driven decision making through segmentation and targeted offers and discounts.
  

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.

We also asked people if they are loyalty scheme members for each of the sectors and again, but for a few exceptions, found no significant changes. The exceptions again suggest a move away from non-essential spending, but towards a predilection for experience based “treats” – particularly if they come with loyalty scheme perks: leisure/entertainment and fashion/clothes shops have declining membership; and cinemas/theatres have increasing membership. Essentially though the British consumer feels loyal to, and joins the same loyalty schemes, as a year ago.

What this does not indicate, however, is that the British consumer has escaped unscathed from this period of recession. The new climate of uncertainty is one key pointer. This is underlined in Ipsos research looking at our attitudes to spending: we found that almost eight in ten British consumers claim to be less comfortable making major purchases than six months ago.²

What does this mean for those looking to build consumer loyalty? Where we are seeing a shift is not in where we feel loyal and which loyalty schemes we join (after all, we still need to eat, clothe ourselves, live etc), but in the nature of that loyalty. Loyalty schemes illustrate this perfectly: our qualitative research for The Logic Group finds consumers getting confused between loyalty scheme offers and general sales, discounts and good deals. Some loyalty schemes, at least, have therefore become synonymous with discounts and freebies.

Take the example of loyalty scheme “addicts”³ – ie the ten per cent of us who are most likely to sign up for schemes. They are twice as likely as consumers who do not belong to any loyalty schemes to prefer schemes where they can earn better offers and services for being more loyal (ie give me something extra that I don’t have to pay for). Addicts are also more likely to want to receive offers while they are shopping than non-scheme members (give me my offers now, I want immediate gratification) and to prefer receiving general offers than tailored ones (don’t limit my scope: I want a bargain, any bargain! Don’t presume to tell me what I want either).

Is this “mercenary” attitude of the loyalty scheme addict emblematic of today’s consumers’ new relationship with the British High Street as a whole: are they out for all they can get, as cheaply as they can get it? Certainly we find that over six-in-ten British consumers agree that with rising food prices, they are more concerned about the cost of their shopping than social and environmental issues – significantly more than when the same question was asked in 2008. Those of us researching loyalty often grapple with concepts to do with transactional and emotional aspects of the relationship. Are we starting to see the transactional get the upper hand? And if so, what does this mean for the loyalty schemes we have all got so used to?

One thing emerges from this loud and clear: the British consumer can and will be bought by the highest bidder. The real question for today’s retailers then is not who can bid the highest (in terms of rewards, freebies etc) in order to win consumers’ custom, but who can do it most sustainably? After all, we all want repeat business, but ultimately only if it makes us money.

1. The sectors surveyed were: supermarkets, petrol stations, restaurants/cafes/coffee shops, online voucher discount organisations, department stores, mobile phone network operators, banks/building societies, garden centres/DIY stores, hotels, travel/transport/car hire/airlines, cinemas/theatres, fashion/clothes shops, leisure/entertainment, sport, convenience stores, mobile phone handset manufacturers, bars/pubs/clubs, insurance companies and electrical/IT retailers.

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.

The mobile wallet enables the collection of valuable data to create customer interaction opportunities for retailers, marketers and advertisers. These interactions can include in-store customer loyalty programmes, vouchers, or location based services for customers.

For retailers data is one of the key benefits behind customer mobile use. The more you know about your customers, the better they can be targeted with promotions and offers, resulting in a better ROI.

For example, if retailers issue coupons and money back offers via mobile, it is unique to that handset, so the demographics of the user are known, as well as their location and when they use it. Retailers can instantly know if the unique voucher code has worked or not, and by who. By accessing this sort of data it gives the retailer much better control over the marketing budget. Retailers will be able to use this technology to tailor offers to the individual and build a personal loyalty package and shopping experience for the customer.

Mobile phones remain a key pain point for the market as there are only 12 or so NFC compatible phone models currently available. Apple often bides its time before diving in to developing tech markets. However, it unveiled a service called Passbook that pulls together loyalty cards, tickets and coupons. But Passbook drew coverage for what it doesn't do: it can't link directly to credit or debit cards, so consumers can't use it to replace their wallets. Once the next Apple iPhone is available, which is expected to have some sort of NFC capability, an integrated mobile wallet is expected to help drive adoption.

Adoption is really all about consumer education and that needs to start by addressing the underlying security concerns. Once users understand and have the confidence that a mobile is safer than a plastic card, due to all the security measures built into today’s mobile devices, we will start to see better traction. Consumers will also need the reassurance that they will be not liable if they fall victim to fraud, it’s down to the banks. The industry can then begin to reinforce the value proposition by introducing vouchers, loyalty services and targeted media.

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?

Offering money off your next shop is certainly one way in which Sainsbury’s has maintained and built custom in these difficult economic times.  After Sainsbury’s hit a nine-year market high back in May of this year Justin King, Sainsbury’s Chief Executive, put this down to not only matching competitors on price, but also handing out a record number of money-off vouchers, encouraging repeat purchase.

In a time when the battle for the wallet is tougher than ever, it is undoubtedly intelligent instant money-off rewards that are the smart way to go in 2012. The Logic Group’s annual consumer loyalty survey found that consumers relate frequency of visit as a key measure of loyalty. Therefore, a targeted offer for a repeat visit is ideal for securing that visit over the competition.  You need to ensure you can analyse your customer’s shopping basket (and habits over time) and apply that insight as part of a data-driven discounting strategy to ensure rewards are targeted, timely, and reward values are distributed wisely for maximum return on investment. Irrelevant offers will put the customer off.  It is loyalty in its simplest form; customers can instantly see the rewards for their custom.

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.

Somewhat surprisingly, Mobile operators now rank in the top three with banks and supermarkets when it comes to customer loyalty in the UK – well clear of the remaining industries.

And perhaps even more of a surprise, in an industry where we all clamour for the latest iPhone or Android handset, the mobile operators experienced 20% more customer loyalty than the handset manufacturers. Some consumers said, “I change my handset every 12-18 months, so it is hard to keep loyal”, but in an era of Apple fanboys and Samsung dominance, it is a comparatively low figure.

The research also shows the changing habits of the UK consumer, with personal incomes under pressure and footfall across the High Streets on a decline, retail shopping behaviour is undergoing a rapid change as British consumers start to use mobile handsets for more than just voice calls:

- 39 percent of population uses their mobile phone to access the Internet.

- A quarter (24%) of Brits quite openly use their mobile phone to check product details, prices and reviews while shopping in-store.

- There is also a gradual consumer acceptance to interacting with brands and stores through mobile technology – 20 percent request loyalty schemes and offers on their mobile.

It is clear from the initial findings that mobile and technology innovation has a role to play in the future of loyalty in Britain, and as the high-street continues to struggle, an effective use of new technologies could help drive resurgence.

More information on the research can be found here. The full report will be released next month, stay tuned for more.

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.

However, the downside of consumers being able to share and talk openly with friends about your brand is that they are only too happy, and often more likely, to share the bad experiences with each other. Organisations need to keep on top of these too and respond to the criticisms so they are seen to be doing the right thing. Many hotel chains are doing this by monitoring holiday review sites and responding immediately with an apology if a customer leaves a bad review. Taking this further and rewarding those who have had a bad experience could help to retain these customers and encourage them to talk positively about the brand through the social media channels. However, to ensure this works, organisations need to invest significant resource to monitor social media feeds and respond to the consumers before the damage is done.

As more organisations build out their marketing presence in social networks, the importance of developing a clear social media strategy becomes evident. Organisations need to establish what role they want a social media platform to play, how this can be achieved and how success will be measured. Is it to be used as an advertising tool, to direct targeted offers to the right customer at the right time, or to provide a customer service function? What resource is required to make it work in this way, and how will we know it is working?
Each area of the business should define their own objectives and be committed to making the social media strategy work for them. Marketing will want to use social networking to find new ways to reach consumers, operations can use it to reduce the time spent answering queries as consumers seek advice from social network friends, product development can use it to generate new product ideas from the consumers themselves. If each area has its own clear objectives, forming the basis of the overall social strategy, everyone will be focused on making it a success.

As organisations attempt to get this right, ultimately it is the users of these networks who hold the key to its success. If organisations listen to what their consumers have to say, respond and reward, they will create an engaging online experience, which will turn even the biggest brand critic into a brand advocate. The organisation that can make this a success, and have social networks in their marketing toolbox, will have a distinct advantage from the competition.

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.

I watched the video of this exchange in amazement. Initially I thought it was great, but then I began to doubt whether I would be so happy that an organisation was able to find out so much about me in the space of a few hours. It’s great to get a free gift every now and again but am I comfortable that an organisation can find out so much about me in order for me to get it?

Privacy on social networking sites has garnered a lot of media attention in terms of the sharing of user’s personal data. This has resulted in sites improving privacy options, allowing users to choose what other users can see and restricting access to certain aspects of their personal profile. However, the process isn’t straightforward and can be extremely lengthy, as a user goes through every feature of the site setting permissions against them. Many users probably don’t bother. You could then argue that if they haven’t set their privacy options they are consenting to the data being used. And does it really matter if as a result they are receiving more relevant ads when they access the social network pages, and, in the case of KLM, free gifts based on their interests and hobbies? Also if users are engaging with social networks - posting about brands, liking products - it stands to reason that they would be happy to, and may even expect to receive something from the organisation to reward this behaviour.

I am sceptical. I consider myself to be a passive social network user. I use it to fill the spare minutes I have in the day when I am bored and feel I have to be doing something. So, walking to town at lunch time, sitting on a train, having a coffee, I get out my mobile phone, browse the internet and log-in to facebook. I probably log in several times a day, but all I do is read what my friends are doing. I don’t update my own status and I don’t comment on theirs. I just read how my friends are eating their breakfast, feeling tired, looking forward to the weekend, and I think how bored they must be to be writing about it. But then I’m reading it. And that’s where I can recognise the power of social networks.

Even if you are a low engager, as I consider myself to be, you can still be influenced by the content on there. If any of my friends comment on music they are listening to, what they are eating, things they ‘like’, these things will be in my mind. I might search for the track to see if it’s something I would also enjoy, I might be tempted to buy the bar of chocolate they mentioned, and I might watch the TV show they “liked” if there is nothing on when I get home. So, for organisations social networks are valuable tools for getting their brands talked about, getting in the front of mind of the consumer. A recent report claimed social networking accounted for nearly 1 in every 5 minutes spent online globally, ranking as the most engaging online activity worldwide. These networks could be the most important consumer database at an organisation’s disposal, providing valuable consumer insight to enable refined targeting and strengthen the relationship with their consumers to build brand loyalty. It is therefore important that organisations get it right. If the users of these networks accept its intrusive nature, and feel their experience is enhanced through the use of social networks as a promotional tool, it can work in an organisation’s favour. But there is a fine balance to be struck between engaging and offending, and any business entering into this space should do so with care.

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?

The research shows that points, discounts, rewards, vouchers and freebies are the top five reasons for satisfaction with schemes – clearly scheme satisfaction is all about getting a bargain. This is not, then, fuzzy warm consumer loyalty that we are witnessing, nor indeed are consumers even maintaining the pretence of such emotional ties – consumers are members of schemes and repeat shop with their brands for one primary reason: to get money off.

But this is where consumers start to be contrary. If getting money off is the reason for scheme satisfaction, it is also the reason for dissatisfaction: offers and rewards also top the “reasons to be dissatisfied” table.

So what is it that is right sometimes and wrong at other times? In a word, relevance. What the good schemes have got right is that their offers are useful: consumers can readily use them, and they use them for purchases that resonate with their life-styles. In more concrete terms consumers expect financial reward for purchases that they would normally be making – or rewards for ‘near enough’ to normal purchases. And this is exactly where the less successful schemes fall down: offers are not relevant (cat food for a person with no cat); or rewards are perceived as too slow to gather (no reward at all if it never comes).

But here consumers get even more contrary. In a world where consumers are open about their somewhat mercenary motives for joining loyalty schemes, they remain markedly reluctant to accept that organisations proffer loyalty schemes for equally mercenary reasons. In other words, while consumers will happily criticise the scheme that gives vouchers for nappies to a childless singleton, they are not always so willing to embrace the fact that the same technology that ensures this does not happen also gathers information about them.

To this end the same research found that two-in-five (38%) consumers agreed that they prefer to receive general offers, rather than rewards tailored to their shopping habits (while only one-in-five (21%) disagreed). When we probed the apparent contradiction between this and the reasons consumers gave for being satisfied with their schemes in focus groups, the same rationale came up time and time again: they do not like ‘big brother’ watching them, and they certainly do not like the feeling that the brand is in any way intruding into their everyday worlds. Schemes that do this too brazenly therefore can become vilified for making use of the very mechanism that previously ensured their popularity.

So what remains for loyalty schemes is the fine line between overt intrusions into consumers’ lives, and providing rewards that – through lack of ‘intelligence’ – never really quite hit the mark. Ultimately then, loyalty schemes, however dependent they are on complex and sophisticated technology, and however closely they monitor their customers, need to remain light-handed and discreet – the perfect counterfoil to the more brazen, bargain-hunting consumer.

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?

Perhaps for a large retailer to fully realise the benefit of NFC technology at point of sale it really is an all or nothing situation. This means aligning a number of diverse business objectives that have traditionally been managed by different parts of the organisation and have until now had unclear potential in a combined proposition.

Chances are the customer loyalty programme is driven by the marketing function. It may or may not be at a stage in its lifecycle that supports in-depth review and realignment around an integrated mobile strategy. A similar challenge could also exist with the payment process. Managed by the IT department or the Operations team the platform might be at the end or part way through a PCI DSS led update or other major refresh project.

Tackling the complex integration of NFC reader or combined PED with the existing point of sale solution piece meal without a clear strategy to meet all these emerging opportunities just doesn’t make sense. What retailers need is a single technical approach that can support the efficient introduction of these services as the business realigns its customer engagement strategy to maximise the new opportunities that mobile interactions present.

So there are challenges. But these will be solved because the stakes are high. I have no doubt that a well designed point of sale experience built around an engaging mobile proposition has the potential to drive incremental revenue more effectively and efficiently than we have been able to achieve before. This will be achieved by optimising the use of behavioural data in a real time solution that delivers what the customer wants at the right time.

It will be interesting to watch the adoption of this technology over the next year or so. None of us would deny that Smart phone take-up is accelerating as the devices become more and more central to the daily lives of a lot of people. As this penetration increases we get closer and closer to that tipping point where using a mobile device at point of sale becomes routine. Maybe then Apple will choose to offer NFC functionality to its growing customer base.

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.

Yes, tablets and modern phone devices with their large capacitive screens are indeed enabling content consumption on a scale not seen before. And electronic paper eBook readers are enabling people to hold room's full of dead tree-style books in something that would fit in one's back pocket. Both of these points have to be worth something! Plus I don't remember reading about anyone selling their kidney for a desktop PC to browse the internet on.

But with schools and libraries still very much reliant on traditional printed matter, this baby (and her children and grand children no doubt) will grow up knowing how to read and use physical books just fine.

On the other hand, I can see that with the further development of these technologies, one day books will indeed be relegated to niche areas. Remember records, tapes and CDs anybody?

And before some of you start protesting violently or getting melancholy over the demise of paper as a form of an information transmission medium, just remember that it wasn't the first (see cavemen or for the believers amongst you Moses) nor were tablets the first to challenge the written paper's dominance. Do you recall the time when dictionaries were printed and we used to send letters to each other? The internet and email took care of both.

Just another step-change
And this is precisely why I have to disagree with the iPad evangelists hailing its ”magical and revolutionary” properties. We have to look at this as just another step change in the way we consume information and interact with technology around us. The bottom line is - consumers expect things to be easy. And following the ethos of taking complexity out of technology/online shopping Apple this year briefly captured the title of world's biggest company based on market valuation (before falling back to a still respectable second place) and Amazon has become arguably the biggest etailer in the world.

The power of 3
So what does this mean for all of us in the Loyalty, Fraud and Payment fields? Well, some could be confused into thinking that the answer is apps or cool chrome buttons, but for me the key in the success of modern smartphones and tablets is as much in under the skin integration as is with the resulting ease of use.

Combining payment, loyalty and fraud functions together into a single customer interaction management solution can make things easy for customers too in a number of interesting ways.

For example, combining Payment and Fraud data will help drive down card fraud even further than with the current methods of doing fraud checks with each payment over a certain value, which will lead to extra revenue for banks and retailers and lower banking costs for consumers.

Combining Loyalty and Fraud can improve loyalty scheme ROI by reducing losses due to sweethearting and allow retailers to pass greater rewards to their customers.

Combining Payment and Loyalty can mean the end of carrying numerous loyalty cards/key fobs as well as tedious sign up processes. It can even give retailers the ability to start offering all their repeat customers tailored offers at the point of purchase before they have even actively opted-in to a scheme.

The combination of all three services will contain all of the above benefits together with the advantages of storing the information in a single database. And together with other technologies such as tokenisation, this triad will allow retailers to offer their customers a fast, intuitive, safe and rewarding shopping experience whether in-store, online or on their phones.

And once that's all in place, we'll have plenty of time to spend fretting over what gradient to use in the latest iteration of our website's 'BUY' button.

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.

So, over the past few months there have been a number of key phrases and terms floating around the market…multichannel strategy, mobile enablement, contactless payments and social media being just a few. However, the one that has stuck in my head is “customer engagement”. How do we as consumers become engaged with a brand and ultimately become an advocate for their business? I look at the current economic climate and really appreciate that retailers must be having a tough time. There is not a day that goes by without reading in a paper or online news bulletin that retailer x or brand y is issuing profit warnings or looking to restructure debt. It is a tough time out there so how do retailers reach out to their customers and engage them at the right level and ensure that they drive repeat business? It is easier to retain business than to win new from scratch.

So an idea I would float is a strategy to engage each customer on a personal level. Everyone loves to feel valued and to get something special and unique to them. The other thought is to provide any purchasing incentive at the appropriate time with the correct level of focus. So where is appropriate? Every touch point of your business whether face to face or virtual allows engagement with a customer. It is at this point that accurate and relevant data is required to influence the future buying behaviour. Some say this is an impossible task and some say that the cost of such a programme would dwarf the annual 1% of sales IT budget……but is that true? Customer engagement is hard to track so most turn to a loyalty programme. Penetration of a good scheme may barely exceed 30% of your customer base so what happens to the other 70%? How do you reach out and engage?

Imagine me paying for my goods with a debit card. Nothing unusual there then… however when I do, the retailer is able to measure and define my engagement with their brand. Uniquely identifying my card linked to my basket of goods, the retailer I use is able to build and define a customer profile just about me; what I bought last month, last week and today. What I am actually buying, when, where and how much. More importantly are they at that point able to influence me on what I might buy next week by an instant reward or coupon especially for me, targeted at what I actually buy?

The final part of this chain is how does the retailer know who I am? I have yet to talk about key fobs or fancy loyalty cards that join the other 5 in my wallet. Well actually all they need is for me to use my debit card…it is unique to me!

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.

Over the past two years as the recession has impacted the retail environment hard we have witnessed a relentless shift towards heavy discounting in most sectors but especially grocery. The end result is that customers now almost universally expect low price alongside good experience, good range and good service. The best customer loyalty programmes have the flexibility to adapt to such changing market conditions and provide the data to make timely decisions that keep the business on track.

So, as times change do we adjust the core mechanic and increase the base offer from 1 point per £ spent to 3 points per £? Such adjustments certainly make it easy for customers to see increasing value but I wonder how such fundamental changes can be accommodated by the return on investment model. They will in the end benefit all customers regardless of the need to incentivise behaviour change.

Getting the core value proposition right in the first place can be very difficult. In our experience simple is best. Ideally the core mechanic should be affordable and appealing whilst allowing the loyalty marketer the flexibility to promote alongside it, introducing short term tactical offers that speak to specific customer segments, retaining the best and growing the middle ground. Tweaking the core base points offer can create confusion amongst customers and lead to an unsustainable investment that limits the businesses future flexibility to broaden the customer proposition.

Unfortunately a single core loyalty mechanic rarely meets the needs of all customers. Frequently they will provide the best customers with a strong reward but can often leave other perfectly loyal segments with little to show for their faithful spend. Of course in an economic downturn it’s dangerous to leave any customer segments unfulfilled so do we strengthen the base offer to reach more people or do we look for other strategies? The answer of course lies in the data which provides us with a clear understanding of customer engagement across the entire base.

Sometimes it’s best to broaden the proposition, supplementing the core base offer with targeted price promotions, affiliate partnerships or other benefits that help the fringe groups feel recognised and rewarded. This is usually the safest and most effective strategy because it addresses the needs of customer’s best and ensures that the customer loyalty programme remains affordable and effective in generating a good long term return on investment.

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.

There are many flavours there; however one of the elements I enjoy about making this dish is getting the balance right, between heat, sourness, citrus and sweetness. It’s almost like a set of levers that have to be pulled in the right direction, to make the dish work. Too salty from the fish sauce, add some cane sugar, too sweet, try a little lime juice to get the balance right.

And so to the relationship between Thai Green Curry and Customer Loyalty Programmes.

Successful Customer Loyalty Programmes need the correct preparation and planning to work well. With experience, the best ‘recipe’ for a Customer Loyalty Programme is to understand the client engagement strategy. This includes mapping a lifecycle assessment, which is a “virtuous circle” that must be re-examined time and time again, reviewing data, process, people and systems.

If this “recipe” is the optimum process to run the programme, information can be gathered on the member’s transactions which can be turned in actionable intelligence; this helps to better understand customers’ behaviour and motivations. By grouping or segmenting members using data analytics, we can start to learn which “ingredients” will produce the best results for the organisation, for example how to keep customers engaged and active through targeted offers. This is the one of the core elements of an effective Customer Loyalty Programme, as it one of the drivers to yield exceptional ROI.

It is imperative to keep the member communication across all channels, relevant to them and simple. If you have the right “balance”, customer behaviour may be incentivised, so they will shop more frequently and spend more money.

So just like making the curry dish, the characteristics of a Customer Loyalty Programme involve understanding the components and processes, and how to strike a perfect balance.

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?

New recruits will often represent a wide range of customer segments. Many are typically long term customers with established behaviour and this group will usually engage nicely with the programme and look like devoted members straight away. They’ll start redeeming quickly and hopefully the programme will help to create the stickiness we’re all striving for. Unfortunately, reconciling the real benefit the customer loyalty programme generates in this segment can be quite a challenge. The improved level of engagement with these people naturally creates new opportunity to communicate in a relevant way which enables us to protect this valuable segment by investing appropriately. Without the programme these people would be at risk in this competitive market, but how do we monetise that upside because it certainly doesn’t come cheap?

There is usually a large percentage of new membership that provides a great opportunity to influence and drive incremental behaviour. This is the exciting prospect that new loyalty programmes always bring and it takes a little while to tell if the core customer proposition is influential enough to change behaviour in this middle ground. If it isn’t then at least the behavioural data enables the understanding to communicate and promote to stimulate and nurture these individuals towards a more profitable segment.

Then they’ll be the people for whom the customer proposition really doesn’t provide any value either because their potential spend in this sector isn’t significant enough or they are torn between competing programmes. It’s this group that I struggle with the most. Should we market our programmes so that customers fully evaluate the benefits before they sign up and put another piece of plastic in their wallet? Surely if they don’t look before they leap our programmes potential ROI is being diluted by unnecessary costs. Perhaps we should be telling our front line staff to ask customers to think twice before they take a card! Maybe charging a small fee or requiring a certain level of spend before receiving plastic is a neat solution but won’t that reduce the reach of the customer loyalty programme unnecessarily and impact our acquisition targets?

This recruitment challenge is often exacerbated by the customer who takes a card but never see’s the value in registering their personal details. This can sometimes be the cold truth behind high recruitment figures. However a strong customer loyalty strategy will take these situations in its stride to develop a profitable customer loyalty programme that is maximising investment where it’s needed, rewarding those customers that should be protected, encouraging those with the potential to perform better, reactivating those that are at risk and divesting those that really have nothing to gain.

So the published statistic leaves us with more questions than answers when evaluating the success of this new programme. We really need to know a bit more about the performance of these new recruits and their long term value to the business.

Thinking ahead a bit I wonder how these cost dynamics will change when we’re using our mobile phones to access customer loyalty programmes. Will someone else step in to take the revenue currently being earned by the card manufacturers or will the cost constraint be removed entirely and we’ll be able to build even larger customer databases?

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.

For most initiatives we undertake in business a good ROI relies on low costs. It’s easy to think therefore that rewards must be bad because they drive up costs and make it even harder to return a good number. In the past customer loyalty marketers used to benefit from the fact that the perceived value of the reward was much greater than the actual cost to the business and this helped to argue a good ROI. We might have parked the actual cost of rewards under marketing expenditure and ignored the mounting point’s liability. Introduction of the accounting standard IFRIC 13 changed this somewhat, shifting our thoughts to the liability of the points as they are issued and how we unload this efficiently to release deferred revenue. So, cost management is now more complicated than it was but the good news is, if we think about it up front IFRIC 13 actually helps us make some sensible decisions about the programme, its characteristics and the KPI’s we put in place to manage it.

So we get the costs identified, feel comfortable with good customer engagement driving high redemption rates and increased customer loyalty. We organise with finance how to account for the fair value of points issued but we still need to worry about the benefit. How do we isolate the incremental revenue that only exists because of the programme and how do we convince everyone else in the business?

It’s a well publicised fact that engaged members of good customer loyalty programmes increase their spend to attain rewards they actually want. This might manifest itself in an extra visit, choosing our business over a competitor, or an increased basket from time to time. We call this the ‘Loyalty Uplift’, the incremental revenue attributed to the member’s engagement in the programme and the change in behaviour motivated by the desire to attain a reward.

Those programmes that automatically reward members with discount vouchers at routine intervals can’t really expect to benefit from this opportunity. In this scenario why should we expect a change in behaviour? It’s certainly difficult to argue that we aren’t just rewarding the best customers for purchases they would have made anyway. However, the programmes that effectively communicate the member’s current balance and offer attractive attainable rewards have a much better chance of achieving Loyalty Uplift. An experienced customer loyalty analyst will be able to isolate and report this benefit, if of course it has been encouraged and optimised by good programme design and member communications.

Incremental revenue is clearly also achieved in other ways. The biggest opportunity is presented by the ‘Promotional Uplift’, the benefit achieved by promoting the right offer to the right customer at the right time. This highly targeted promotional activity underpinned by deep insight into member behaviour drives incremental revenue that is easily measured and optimized. We have found that well constructed promotional offers that take account of customer preference, their behaviour and their engagement with the customer loyalty programme drive the biggest benefit and are most appreciated by members.

Adding to the ‘Loyalty Uplift’ and the ‘Promotional Uplift’ we can include the intrinsic value of the rich data collected by a well designed and implemented customer loyalty programme. Realising this value is difficult for all but the biggest retailers who boast significant market share. Finally we shouldn’t forget the real value of increased brand awareness that the loyalty programme creates. Monetising the benefit from both the Data Asset and the gains in Brand Awareness is difficult, but shouldn’t be over looked in creating a complete ROI model.

Good programmes are designed from the outset to measure and maximise the potential from all revenue earning opportunities, balancing this with affordable rewards that motivate and incentivise members to change their behaviour. Like all initiatives, strong ROI is achieved by optimising all contributing factors on both sides of the equation.

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?

Social networking is very much a hot topic in 2011; however, real fundamental questions such as “how do we do it?” are still being raised by businesses up and down the country. If you mention social networking even in a business context these days, there’s one common response on everyone’s lips…Facebook. It is, after all, being used by nearly 30 million UK users. However, Facebook really isn’t being used consistently by big brands for customer loyalty positioning. So the question is “Why not?” One answer might come from a quick Facebook site search on the UK’s “big 3” loyalty programmes (Tesco Clubcard, Nectar Card, and Boots Advantage Card). I can tell you that there is an absolute mass of user generated content (UGC) on customer loyalty experiences but, for a lot of it, it’s virtually impossible to distinguish what is official brand-posted content (if any) and what is general public UGC (although the more negative - and clearly general public feedback – is very easy to spot). However, anyone can form a group, create a profile or a page and get a good quality picture of a loyalty card to make it look official.

This raises a wealth of questions. Are brands already too late then? Has mass UGC on sites like this already devalued some brands and thus diminished the potential for genuine customer loyalty networking development? How can a brand prove that their page (or similar) is the genuine article? Are people really willing to openly share their – much sought after - personal details? And if not, then “What instead?!”

The answer isn’t immediately obvious; however it is clear that brands must carefully consider their objectives for building customer loyalty through social networking before setting off on the journey. Otherwise, negative publicity could very easily wipe out any benefits brought. The following must therefore be considered.

• Trust; it must be clear to users that the interaction is genuine and that their details will be safe. The savvier consumer may think twice before using (something like) Facebook connect to port their data to new sites (depending on what they currently share on their Facebook profile).
• Content; a brand must carefully find a way to collect UGC, display it publically, sift out damaging feedback yet not stifle freedom of speech, and, not generate hours and hours of administrative overheads to achieve all of this.
• Value; there needs to be a way of monetising the social networking strategy and the brand benefits that a successful approach can realise.

The launch of Walkabout’s new customer loyalty programme – the Boomerang Card - heralded a first in customer loyalty and social networking for the UK. Here, members can engage with the Walkabout social network - much as one would do on Facebook in terms of adding friends, following groups and favourite bars, and sharing photos and videos, - whilst actively managing their Boomerang loyalty account details and balance. The approach taken here is unique, innovative and currently a success.

"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.

As time goes by and costs increase the naysayer’s argument keeps returning like a bad penny. So how do we isolate the benefit of the customer loyalty programme without simply comparing performance of members and non-members? We feel that the programme is a positive force in the business. The data we are collecting is clearly improving our customer communications, email open rates are up and the customer insight gained is willingly consumed across the business and in the Board room. We know more about our business than we ever did before so surely the costs are more than justified? But aren’t we just rewarding our best customers for the purchases they would have made anyway? In any case isn’t this a good thing, everyone says retention is key in a shrinking market?

What’s usually missing is a clear approach to express and measure the incremental revenue that the customer loyalty programme generates. If we could construct a number of KPI’s that quantify the value based on parameters that we can measure then we would have a methodology that not only enables us to forecast and review the incremental revenue but also to identify problems and make adjustments to optimise the return on investment. Once and for all we could convince the organisation that the programme brings real value, building customer loyalty and driving incremental business that we wouldn’t have otherwise.

There are lots of good programmes out there. Some have been around for a long time now, surviving in successful businesses that are undoubtedly reviewing the value of their investment on an ongoing basis. These will have their KPI’s identified, monitored and optimised. Some are getting it right.

There’s no doubt about it, in the current economic climate all retailers should at least review whether or not a customer loyalty initiative is right for them and lot’s of new programmes are popping up as a result. However, many of those I’ve recently seen are making the same old mistakes usually in the interests of keeping costs down. If we keep it cheap, who needs a good Return on Investment model? After all we’ve got lots of members and we’ve given away lots of cards. Surely that’s a good thing?

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!

Over 3 years ago, I signed up to their “loyalty” scheme. To this day, I still have not qualified for a reward or offer through their programme! It is getting to the point where I am almost resentfully handing over my loyalty card, as it has done nothing more for me than waste space in my wallet!

There are many well-run and targeted loyalty schemes. They make me feel part of something, and when I get offers, they are relevant, attractive, and meet both my needs, and I am sure the needs of the business by encouraging return visits and increased spend.

I am now at the point where I will travel that little bit further to fill up my car purely because of the loyalty points! I know the benefits of a loyalty scheme, and now I am waking up to the brand damage a poorly run scheme can cause.

You are a retail business. You have spent a small fortune in time and money to upgrade your systems and have now achieved that holy grail – PCI DSS compliance. 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.

PCI DSS compliance has its limits

The issue is that PCI DSS compliance by its very nature can’t be all-encompassing. It deals with payment data (credit, debit, payment, pre-pay etc.) data and the flows of this information through your business. Anything not directly related to credit and debit card data is considered out-of-scope. After all, the PCI DSS standard was created by the likes of VISA, MasterCard, Amex, DiSCOver and JCB, so naturally their key priority is in keeping payment data safe and secure.

But recent technology developments demonstrate that fraud (like water) always seeks the least path of resistance and does not differentiate between in-scope and out-of-scope areas of a business. A recent story beautifully combines payment, loyalty and fraud with a dash of new technology and a pinch of sub-standard implementation to show us the limits of achieving PCI DSS compliance.

Starbucks Rewards

Starbucks have recently introduced iPhone and Blackberry Apps for their Starbucks Card Rewards loyalty program. All you do is launch the App in your smartphone, get the phone screen (showing a barcode) scanned by the StarBucks employee and enjoy your tall skinny extrawhip half-caf double caramel macchiato. The App does the rest, as it is matched to your account, which in turn is matched to your credit/debit card details. Thus money is taken out and loyalty points are added in automatically. Simples!!

The issue arises from the fact that the barcode in question is not of the dynamically generated variety, but is static and valid for the life of your Starbucks Card Rewards loyalty membership. This means that if someone else got hold of this barcode, they too could get free coffee on your account. But how is this done?

The Scam

The scam is technically reasonably simple to pull off. All the miscreant needs is you have access to an unsecured (i.e. not pin or pattern protected) smartphone of a mark for at least 90 seconds. All the fraudster then needs to do is:

• Launch the app
• Hit the mobile equivalent of “print screen”
• Send themselves the resulting screen grab via email or mms
• Delete the sent MMS or email from the sent folder to erase any trace of the subterfuge
• Replace the handset to where it was found

From then on, all the criminal needs to do is load the image onto their phone and get that image scanned at the till, so that they too get to enjoy watery coffee, cakes and whatever else Starbucks sells on the bill of the unaware victim.

Much a do about nothing

But wait I hear you cry, there are a lot of caveats to pulling off this ruse. The smartphone needs to be unprotected (e.g. no password), it needs to be left alone in a public place for at least 90 seconds, the ne’er-do-well needs to have a phone with an identical resolution screen….and all of this for some free coffee. Many of you will correctly point out that most fraudsters probably won’t bother to go to all of this effort for such a small reward.

And you may well be right. Yes the scam does have severe limitations, but it does demonstrate that companies do need to take care in introducing new technologies in order to minimise the chances of fraud. After all, as the above app does not store or disclose any payment information it does not contravene the PCI DSS compliance status of the company. But that does not make it fraud-proof.

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 …

The vast majority of these are not relevant to me as a consumer and rarely do I find vouchers that allow me to buy the specific product I need at a better price. If they are not relevant and timely, they will not secure my business when I next head out to the shops.

As a marketer I find them hugely frustrating. So many brands are now using them that customers expect to find vouchers everywhere meaning that the no-doubt small percentage that do redeem them are impossible to measure. Is this the right approach to offering customers a better deal; if you cannot measure who takes the offer, if it changes behaviour, or if it drives more sales?

Vouchers are rewards for customers – they need to act as a ‘thank you’ message to customers that are of high-value to your brand. Alternatively, vouchers are an incentive device to encourage customers to visit again. But for them to really work and cement feelings of loyalty towards your business, products or services they need to play by the same rules laid out in any good loyalty programme: they should be instant rewards that customers can equate with the sale that actually triggered the offer, they need to be linked to the customer’s level of spend so that the marketer can measure and understand behavioural trends, and they need to be personal and surprise the customer.

Vouchers then, should not be seen as an alternative to loyalty but if done in the right way, they can work perfectly alongside your customer management programmes to build long-term loyalty. That way, vouchers may yet have a chance of redeeming themselves.

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. Similarly it’s important for retailers to realise that loyalty schemes are a long term platform on which to grow a customer base and repay loyalty by providing rewards, redeemable both in and out of store, that will be valued by the individual.

Many businesses have forgotten the ultimate reason for implementing reward programmes. Equally, for consumers, the initial draw of joining a loyalty scheme may quickly become a distant memory. If used correctly, it’s very easy for customers to make savings and reap rewards. However, many retailers have jumped on the loyalty programme band wagon and issued loyalty cards without considering how the scheme will be used to its full advantage. As a result today’s consumers feel overwhelmed by loyalty cards and the idiosyncrasies of the points systems of each.

One by-product of the saturated loyalty market is that many of us now feel happier when simply winning rewards, as opposed to the satisfaction to be gained by earning them (‘We will get fooled again by loyalty cards’, The Times, 8th January 2010). Nonetheless, loyalty rewards can have the same affect if they are made relevant and personalised to the individual consumer. To achieve this most loyalty schemes need to be re-vamped, as some businesses have simply launched loyalty cards with a ‘that will do the job’ mentality. A loyalty programme is not just a tactical solution, rather a long term strategy with building frequency and driving customer loyalty and satisfaction at its heart. Loyalty programmes aren’t just about quick wins such as sales and discounts; they enable retailers to manage customers and their profitability, while rewarding them with incentivised offers that will ultimately grow the customer base.

As a result of the recent economic lapse and consumers subsequently becoming more cautious about spending, many retailers, specifically grocery stores, entered into an aggressive price war. More recently, reports of bumper Christmas sales for those retailers that didn’t have loyalty schemes, are potentially indicative of the appeal of low prices and special deals. Conversely, stores that did implement loyalty schemes also saw sales rise while simultaneously benefitting from the information supplied by specific purchase behaviour (i.e. who likes cranberry sauce and would appreciate an extra jar). Loyalty schemes are successful in improving and maintaining customer satisfaction, on the other hand, sales are about attracting customers on a short term basis; once items of particular preference are no longer under offer, customers are likely to shop elsewhere as they have no feeling of loyalty towards the store. A downside to the sales-focussed approach that retailers will undoubtedly feel the impact of long-term.

Retailers without loyalty schemes in place have to rely upon what amounts to a straw poll before going with the majority vote, as was the approach evidenced in a recent advertising campaign by Asda. This tactic is unreliable and only benefits the customer if they belong to that majority group. If retailers dependent on sales believe this is the best way to drive profitability, they will lose customers neglected by the process and in turn find it difficult to attract new ones as many are members of loyalty schemes (although some schemes require a re-vamp, loyalty does still exist for many consumers).

The other end of the loyalty card debate focuses on the following question: why loyalty members benefit while other customers do not? Retailers with successful loyalty programmes are a result of access to customer data. Many customers may be loyal to a brand but prefer not to share their personal details, and as a result they are ostensibly never rewarded. Others may argue that we are held to ransom, having to supply all of our data and shopping habits in order to receive a reward. However, without this data, there is no way of knowing who the most loyal customers are, and how many visits a customer will make. Leading supermarkets which did report good sales figures over the Christmas period are economy brands, such as Asda and Morrisons, who benefitted from the downturn and it’s impact on shopping habits, the larger supermarkets with loyalty schemes, such as Tesco and Sainsbury’s, in place have sustained growth over many years and some levelling of the playing field has to be expected. Surveys to determine which products to discount only represent the majority view. Therefore when there are discounted products, it is only useful to you if you were part of the majority. Although recent economic pressures have led to price dominating over ensuring customers feel valued, customers will feel no loyalty and continue their search for new places to get more for their money elsewhere.

The customer experience is key. So too therefore are the relevancy of rewards and the most successful loyalty programmes are those that combine relevancy with immediacy. What really matters to customers, in the context of loyalty programmes, are the actual rewards: they need to have high-perceived value, for example a personalised treat or something that can be redeemed. It’s ultimately down to the retailer to decide upon an award redemption strategy, whether it’s something to use in or out of store (theme park passes, theatre tickets). By ensuring the rewards are achievable and relevant, however the customer experience will be enhanced and the loyalty scheme will seem both relevant and useful to the customer.

Creating a loyal customer base is critical to any organisation that relies upon repeat business – and it’s hard to think of many that don’t. Indeed there are two main areas of focus that all marketing activities are based on, one is in attracting new customers and the second is ensuring that existing customers become a source of recurring revenue. Retailers need to adopt a smarter approach to loyalty and ensure that rewards are relevant and immediate (and not unobtainable) – it is not about handing out loyalty points that take too long to transform into rewards and whose value customers don’t clearly understand. However the opportunity is there for retailers to ensure a carefully thought out and implemented loyalty scheme reaps the benefits in building a loyal customer base. Not only will this allow the retailer to boost sales figures, but will also create a more targeted and personalised service, something which all customers appreciate.