TLC Marketing on Loyalty: 'You need your customers more than they need you'

“Our independent research has shown that almost 65 per cent of UK consumers have used up to three loyalty schemes in the last 12 months. Customers are more demanding and, at the same time, it’s easier than ever for a customer to get information about your competitors with a single click. The dynamic of the brand/consumer loyalty relationship has shifted significantly in favour of the customer: basically, you need your customers more than they need you,” says Brinn.

Until recently, argues Brinn, the loyalty industry was focused too much on what the brand wanted to achieve rather than giving customers what they wanted. “The hype surrounding ‘big data’ led many brands to focus too narrowly on the numbers. Many loyalty schemes lost their way and forgot that they were about building brand engagement. Loyalty programmes are now being viewed as part of the wider relationship between the brand and individual consumers and companies are really starting to focus on using their schemes to provide a competitive advantage.”

All the evidence suggests that loyalty programmes still have a significant role to play for brands: recent Gartner Group research suggested that 80 per cent of a company’s revenue is generated by 20 per cent of its existing customers and that a simple five per cent increase in customer retention can increase profits by between 25 and 125 per cent. In addition, it costs at least six times as much to acquire a new customer than retain an existing one and repeat customers on average spend more and convert more easily.

“You need to start with the principle that a loyalty scheme is a mechanism to learn about, understand and change member behaviour, rather than simply being a points collection scheme. Many companies originally established their loyalty programmes as a knee-jerk reaction to their competitors doing something similar and expected it to be a silver bullet to increase sales.

“In many cases these schemes were instigated at the request of the marketing department, but delivered by the IT department. Consequently, they did not invest time into understanding their customers’ needs first and establishing what they wanted from a scheme. The problem with ‘silver bullet’ thinking is that the loyalty schemes created were not part of the brand’s culture, leading consumers to quickly lose interest.

“Companies now have to stop conditioning their customers to expect a discount. We tell our clients not to create a discount scheme dressed up as loyalty scheme but, rather, to deliver schemes that are personalised, emotionally-driven loyalty strategies aimed at building deeper relationship with consumers at an individual level. This can often be best achieved by offering lifestyle rewards.”

Brinn believes that brands are beginning to truly understand how to use customer data to understand and then influence behaviour, by linking it to their personalised communication strategies.

“At TLC Marketing, we measure customer data for our clients using a technique we call ELVIS – benchmarking Engagement, Loyalty, Value, Influence and Sentiment. This helps us to personalise rewards and focus on building brand advocates. Our experts are as interested in human behaviour as they are the traditional loyalty sciences. We’ve worked hard to create a ‘one agency’ approach to loyalty for our clients, so we can deliver the creative concept, access amazing rewards, create targeted and personalised communications, and provide the technology that brings it all together.”

Brands struggling to come to terms with the new view of customer loyalty need to start by thinking of their loyalty programmes as ‘clubs’ rather than ‘schemes’: “A loyalty platform, after all, is also a club for like-minded individuals – sharing the same tastes. The goal is to make it a club that people want to join not simply due to monetary value but in order to derive a greater value from it as being a part of something bigger. This can require a strong creative proposition to bring it to life.

“If brands can incorporate this new curve of member benefits into their loyalty programmes they will not only stand out from their competitors but also build a relationship with their customers based on more than discount. Instead, they can prove that they’ve really tried to get to know their customers, to understand what they want and to offer them real value. At the end of the day, it’s simple: the more you understand your customers, the more they’re worth to you. For those who get it right, the financial gains can be huge.”

With customer loyalty firmly back on the business agenda, it looks like it’s time to make a bit of space in your wallet.