Driving customer centricity with a modern loyalty programme

by Richard Mullins. Traditional loyalty programmes drive retention and revenue by rewarding customers for purchases with points schemes, miles or even stamps to get that tenth coffee free. A modern loyalty model takes a wider view of the customer relationship by recognising engagement and shared values, as well as purchases, offering convenience, exclusivity and financial reward in exchange. When one of the UK’s largest fuel retailers responded to customer frustrations with long-term points collection programmes, it pivoted from merely offering fuel rewards, to providing tangible member benefits that incentivised more frequent non-fuel retail visits.

The above example demonstrates that while business goals such as retention and increased lifetime value remain, today’s most interesting loyalty programmes are fostering exclusive communities of customers, built on shared interests and lifestyles. This trend reflects the long-term pivot towards customer centricity happening across all industries, driven by a desire to build customer relationships that go beyond transactions. A good example is Prada’s exclusive private club, Private Mode (New York Times, 2020).

How has the pandemic changed customer behaviour?

A pandemic-driven switch to online shopping saw digital transactions climb to a 61% share of retail spend at the peak of lockdown restrictions (The Future Shopper Report, 2021). This shift allowed consumers to explore new brands at a much higher rate than pre-pandemic, which made them more likely to change or switch brands. It’s easier for consumers to compare brands and deals online, and companies that have found engaging ways to attract consumers through content, gamification and partnerships have seen good results.

In October 2020, Vodafone’s VeryMe Rewards demonstrated the use of engagement feedback from their programme to incorporate customer requirements into product development. During the pandemic, the VeryMe Rewards offered new features, like allowing members to gift a digital movie rental to a friend or family member. It’s an innovative example of using customer partnerships to good effect. Securing customer loyalty is more important than ever, but how does a company build a modern loyalty programme?

Leveraging consumer trends to build a modern loyalty programme

Of the many consumer trends that have gained momentum during the pandemic, three stand out as fundamental to future loyalty programmes:

1. Environment concerns and healthier lifestyles: With climate change top of mind, consumers are increasingly taking the environmental impact of purchases into consideration. At the same time, Generation Z is leading the way in embracing healthier lifestyle choices manifested as reduced alcohol consumption, veganism and, particularly during recent lockdowns, a renewed interest in nature and outdoor activities. Consumerism hasn’t disappeared but it’s certainly more qualified, and a brand’s commitment to sustainability matters. Companies can demonstrate their commitment to these values by rewarding consumer behaviour. Recycling schemes like Recycle at Boots, which offers new loyalty members ‘Boots advantage points’ when they bring products back to the store for recycling, demonstrate this commitment and aligns the brand more closely with the community. Another great example is Vitality, a health insurance business, which rewards its members based on evidenced examples of healthier behaviour.

2. Experiential retail: The pandemic accelerated the longstanding growth of ecommerce – growth which became near exponential in 2020 (Forbes May 2020, Glaeconomics 2021) as brick and mortar retail was shutdown. For brands and retailers with physical retail presence, it is worth considering whether retail space can be repurposed for more experiential activities to better cater to the reduced customer volume and stock holding. Integrating these with a community focused loyalty programme will create talking points and is a fantastic way to increase engagement. The North Face XPLR Pass, for example, used clever engagement tactics to make the interactions between brand and customer more experiential. Their strategy included encouraging its members to share photos via various Instagram groups, providing access to exclusive outdoor events and providing training videos based on outdoor activities (Vogue Business 2021).

3. Paid memberships and subscriptions: Subscription business models evolved from print media (newspapers, magazines and encyclopaedias) to digital music and content, but have now spread into almost every sector. Brands may be wary of shifting their entire revenue stream to subscription, but paid membership for a higher tier of service is a way to test the water and an interesting inversion of the loyalty relationship. Both Amazon and Deliveroo offer membership subscriptions in exchange for convenience – faster delivery, exclusive access to products and services, and effortless payment – and these schemes have increased in popularity during the pandemic. This type of programme positions subscription as a requirement rather than a reward and demands a greater commitment from the consumer. The value exchange needs to be very clear, but the company benefits from a financially invested set of customers.

What about data privacy?

Loyalty programmes aim to deepen a company’s relationship with its customers and their successful operation lies in the collection of customer data and using that data to recognise the interests and preferences of those customers. Concerns about data privacy and who controls that data is growing as consumers begin to better understand how their data is used by marketers and the value companies place on it.

Companies are being put under increasing pressure to demonstrate the value they will deliver in exchange for data – and loyalty programmes offer a neat solution. They offer easily understood value and, because sign up is explicit, the value exchange is clear. Moreover, the data collected through loyalty programmes would be valuable first-party data, which is critical as we near the demise of third-party cookies and face more stringent government policies. This data can provide deep insight into customer interests, lifestyles and values, and this knowledge can be put to work across the business, aiding business development as well as marketing.

A multinational hospitality company evolved its rewards programme to reach its members in a personal way by leveraging what motivates them. This involved analysing existing data on how many times rewards club members had stayed at a client property and their stay preferences. By leveraging deep data insights and matching this member data to our Identity Management Network the company could drive more personalised campaigns.

The end goal of loyalty programmes

Loyal customers are as critical as ever, but great loyalty programmes aren’t focused on their transactions. They rather reward engagement and demonstrate shared values, offer convenience and exclusive experiences, and build a community that exists beyond discounts. The best loyalty programmes express a brand’s values and deepen the relationship with customers. Loyalty programmes are a single, critical piece of any customer engagement and retention strategy that intends to lay a foundation for post-pandemic growth.

Main image credit: Wunderman Thompson Data.

Richard Mullins is managing director EMEA, Marketing Transformation, and Chinasa Uyanna Business Consultant at Wunderman Thompson. At Wunderman Thompson Data, we help brands to grow faster by using data to be more personally inspiring to their customers. We are experts in marketing transformation, marketing science, and marketing automation and personalisation.

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