Rewards and points cards are common place for retail, leisure and travel companies. Whether it’s a simple points for pounds scheme, a Quidco powered cash-back mechanism or some other form of reward, the principle is the same – reward customer’s for their business. In this post I’ll examine the application of loyalty in the multichannel age.
Why establish a loyalty programme
Before focussing on the omnichannel implementation of rewards I’d like to examine the key principles behind loyalty programmes.
Crucially for businesses transacting across channels, the loyalty card or central loyalty account provides a method for linking customer activity across channels. Particularly the loyalty card that identifies the typically anonymous cash customer. The 16 digit code on each loyalty card provide you with a unique identifier that links your current purchase with a record of all your other activities with that retailer.
Like many of you I have a wallet packed full of these types cards; Tesco Clubcard, Nectar, Marriott (Gold of course) and now even the barber I use has given me one. Alongside this I have Quidco and my bank has recently started offering me rewards too.
Reviewing Harvard Business Review research and articles on the loyalty topic shows that many of these programmes are breaking the cardinal rules of loyalty schemes. These rules include:
- Time delays reduce perceived value – provide rewards instantly where possible. Time lag creates reduces the perceived value of the reward
- Maximise motivation to buy again – use the scheme to encourage the next purchase
- Don’t create another commodity – probably the most broken rule of all of them as most schemes I’m aware of create a new points based commodity. Points are prescribed a monetary value regardless of whether or not this is convertible directly to cash or product
- Don’t give-away the store – provide benefits that don’t require you to hand over free or heavily discounted goods or services. Instead focus on using what you already have to treat the customer. A good example is express check in for gold loyalty card holders
- Don’t reward volume over profit – this is highly connected with financial and business modelling. Be aware of rewarding those who do a large volume of business with you at low margin. Incentivise the behaviour you want to see
- Don’t reward the disloyal – similar to the above point, reward those who demonstrate real brand loyalty. This may include rewarding frequency of business rather than size of each order
- Don’t promise what can’t be delivered – if you promise fast check-in times and free upgrades; deliver them
I think the whole concept is relatively simple, a loyalty programme should give extra value to the customer for their loyal behaviour. This doesn’t have to include points or discounts but it should certainly enhance your existing brand proposition.
Defining a strategy for omnichannel loyalty
Loyalty strategy for multichannel brands needs to include the following elements:
Create a multichannel communications loop
Engage your loyal customers with interaction rich communications. These should allow them to interact with the brand in ways that transcend a transaction. For example why not use your loyalty base as a casual market research group? A simple email or message could ask their opinions on new products. Each interaction provides you with an opportunity to learn more about their tastes and improves your ability to send the best messages.
Use the data to personalise
Unwittingly – and perhaps even unethically – customers give away a huge amount of data about themselves. All of it can be valuable in improving the customer experience if it is applied well. Personalisation throughout the customer experience provide you with a way to leverage the data and show each customer that you care about them. It includes personalising marketing comms to the individual (both the message, time and channel) and also serving them as a known individual.
Calculate customer profitability
I’ve never understood why this is considered off limits, but I believe a good well built loyalty database should be able to calculate customer profitability. Real-time calculations like this may prove difficult as a number of data sources will need to be brought together. I’d suggest that you remember that it needn’t be accurate but it should reflect how much marketing is spent on the individual, what channels they transact in and what products they purchase.
This profitability calculation can then be used to find your most profitable and unprofitable customers. With them identified you can alter your approach to rewards.
Rewards in real-time
If customers ascribe greater value to rewards that are delivered in a timely fashion then surely this needs to be put in place. On the spot, personalised rewards matter. This could be an upgrade or even just recognising the customer by name.
Find ways to lose the loyalty card
My wallet’s thickness is sadly the result of too many loyalty cards rather than too much cash. Seven of them in total.
There are options to dump the loyalty card. Mobile apps, key fob style miniature cards, and online booking systems linked to your account are all methods in use. Other methods worth considering are the use of other identifiers that a customer can easily provide such as postal/zip code, mobile number or email address. Social sign-on and the monitoring of bank card use in store is another route forward.
Staff can be trained and empowered to give special rewards to customers they’ve dealt with before. The ladies at the make up and fragrance concessions in department stores are very good at this. It’s not uncommon to walk away with a bag full of little freebies when making a purchase.
Marriott and IHG have both jumped on this area of loyalty rewards with me. Both schemes operate a grading scheme to qualify my loyalty. Being a gold, silver or platinum member unlocks additional rewards at the hotel such as free wifi and drinks in the room.
Similarly both brands have sent me marketing around special gamified rewards opportunities. In these promotions I can gain additional points for altering my buying behaviour. For instance I can get major bonuses for booking a room at different IHG brands within a 6 month period. I’m not sure of the economics of such schemes but they have worked on me.
I won’t go into every element and best practice relating to gamification as there are far better papers on the topic. I will state though that it’s a critical element of creating an engaging and potentially fun loyalty programme.
Consider the omnichannel element
Finally, create your loyalty strategy around the use of all channels.
Whether its social, mobile, store, web, app or call centre the same loyalty mechanisms should be applied. There’s nothing worse than trying to use points online when you hit a problem and call the service desk to be told that you can’t use your loyalty points on a call.
I’ve recently put together the multichannel planning framework that can be a vital tool in planning your loyalty strategy.
Creating a successful loyalty programme requires a blend of brand proposition with an understanding behavioural economics. The nature of the scheme should be tightly coupled with the promises that your brand makes to the customer. This same promise and value proposition should also be at the heart of your communications. Behavioural economics is the study of what incentives lead to certain behaviours and relies upon an understanding of psychology, sociology, finance and economics.
Making this programme work across all of your channels requires a centralisation of the scheme’s database and rules engine. They should not be tightly coupled with one channel as this will affect the ability of other channels to connect with the programme.
Gamification engines such as Badgeville and Gigya can provide a great starting point for a rewards programme. Their simple interfaces will make it easy for customers and rewards teams to update rules and monitor what is happening.
Perhaps its the geek in me but personally if I were asked to build my own loyalty programme, I’d opt to start with a cloud based marketing orchestration platform linked to a scalable data warehouse. The marketing orchestration platform would collect data from customer channels, store this to the data warehouse and then apply rules. Being a marketing orchestration platform, it would be important to design the solution to allow real-time messaging back to the customer end-point to create personalised experiences.