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Customer loyalty programs: essential for effective data marketing projects
March 15, 2021
In the 1990s UK travel and retail giants BA (1994), Tesco (1995), and Boots (1997) launched the first modern-day customer loyalty programmes. In 2002, the Nectar scheme was launched which was the first UK multi-brand loyalty programme - beginning with Sainsbury's, BP, Barclaycard, Debenhams. Today, the loyalty industry in the UK is one of the most sophisticated and diverse in the world, with schemes available across travel, retail, hospitality, entertainment, finance, coffee shops, and mobile phone networks.
Why are loyalty programmes so big?
Loyalty programmes enable brands to collect first-party data directly from customers which is used to tailor offers and promotions that increase loyalty and basket value and increase the efficiency and effectiveness of marketing. Another benefit is the ability of loyalty programmes to capture both online and offline data on how shoppers interact with and purchase from a brand giving an omni-channel view from a single point of reference.
However, loyalty programmes present challenges both commercially and from a technology perspective. Delivering enough value to retain participants while maintaining margins is a tricky balancing act and getting it right requires investment in the right technology that is capable of delivering actionable insights from multiple sources of data (e.g. point of sale and marketing engagement). Setting up this technology stack can be costly and time consuming which can be off putting.
Despite the challenges, the sheer volume of loyalty programmes available prove that the benefits outweigh the challenges and cost.
How are loyalty programmes best deployed?
There are three main types of loyalty programmes each with their own benefits and challenges. The majority (73%) of loyalty programmes are point-based reward programmes that enable customers to accumulate points that they can redeem for rewards or free products/services. This model works well retail due to its simplicity and the speed at which consumers can redeem points. Always on rewards schemes give customers access to exclusive discounts or benefits that can be redeemed at any time simply by being a customer. Notable success stories include O2 Priority Moments and Barclays Rewards. This model works well for telco and finance brands as the breadth and value of rewards that can be offered reduces churn, increases customer satisfaction, generates new business, all at a fraction of the cost of points-based programmes.
These two models can also be combined, for example, Shell have recently announced that they are launching a new rewards programme that will reward customers for all spend, not just for fuel. Additionally, Shell will be rewarding customers for each visit, making it worthwhile for them to pop in for their lunchtime sandwich or milk on the way home. In between visits, surprise rewards will be offered based on customer behaviour alongside always on offers with partners, e.g. Jamie Oliver’s Deli. This type of reward programme is costly to set up, but Shell have publicly said that the pilot showed that this is justified by the increase in business the programme generates.
Loyalty programmes and marketing
Typically, loyalty programmes leverage deterministic identifiers (e.g. email addresses) that are linked to individual consumer accounts. This gives brands the power to understand individual consumers’ offline and online purchase behaviour and how they engage with the brand (e.g. reacting to email offers vs. mobile offers and their favourite products).
Armed with this data marketers can plan and buy highly effective digital marketing campaigns that operate in harmony with content marketing efforts such as email marketing creating a truly omni-channel marketing strategy. CRM-based campaigns benefit from running on individual, unique customer data that gives marketers a 360-degree view of each person’s purchase behaviour and habits thus making them as effective as possible!
Additionally, e-commerce websites can increase revenue through loyalty programme data insights. For example, if you know that a given consumer purchases Oral-B toothpaste every two weeks, display bids (onsite) can be bolstered in the window immediately before a purchase is coming up, thus increasing revenue.
This data and the use of a deterministic ID also enables brands to effectively ring fence multi-channel customer acquisition campaigns by excluding existing customers which will increase return on investment.
Loyalty programmes also present brands with the opportunity to measure the impact of TV ads on offline sales by partnering with broadcasters that distribute content via a set top box and have the capability to match a common identifier that is tied to an individual consumer in the loyalty programme.
A walled garden to compete with the GAFA?
Effectively, loyalty programmes give brands the power to create their own walled garden that contains both online and offline data. For retailers with ad inventory this creates an opportunity to compete with the likes of Google and Facebook by offering partner brands the ability to target audiences that buy online and or in-store, target competitor audiences, leverage look-alike audiences on multiple channels and by giving advertisers this level of insight into consumers’ purchase habits, e.g. the brands they typically purchase they will be willing to pay more for impressions driving more revenue.
Partnering also opens the potential to offer a new commercial model whereby the seller provides partners with rich first-party data from the loyalty programme in return for lower costs on their products.
Regardless of the type of loyalty programme a brand uses, in order to succeed brands need to ensure three criteria are met: The user experience must be seamless; The value of the rewards must be high enough to retain and entice participants; and the data needs to be portable in order to be used for marketing from a single customer view - making technology a core component. When selecting a technology partner, brands should look for companies that can offer a stable and scalable tech infrastructure, which can onboard online and offline loyalty data with ease — in turn, providing a 360-degree customer view. The technology selected needs to provide the brand with the flexibility of deploying multiple use cases which leverage loyalty data, including retail media, CRM, personalisation and upsell in a timely manner.
Luckily, mediarithmics can help brands on all these points — as we work with some of the most advanced European retailers, handling both online and offline data, including Fnac Darty, Groupe Casino and The Mulliez Group! Please get in touch with email@example.com to discuss how we could help you deploy sophisticated data marketing use cases by leveraging loyalty data in 2021.