The biggest barriers and enablers to effective loyalty programmes
Brands need to deliver distinctive and diverse personalised offers, research shows, and that means having integrated systems that offer a 360-degree view of the customer.
Loyalty programmes are often considered the preserve of big-name brands with even bigger marketing budgets. But commissioned research from Comarch, conducted by Forrester Consulting, suggests there are opportunities for companies of all sizes, with 53% of UK businesses currently planning to deliver extra value for customers through a loyalty offer. It suggests the area remains ripe for new brand entrants.
In consumer retail, for example, despite being one of the most highly developed sectors in the loyalty market, 16% of programmes are less than a year old and 58% are between one and two years old. That means nearly three quarters of them were set up during or just after the era of pandemic restrictions. The same applies to just over half of B2B schemes.
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For the researchers, the takeaway is clear. Covid lockdowns changed established behaviour, pushing more customers to online channels where they were exposed to new offers. To win and retain customers, businesses understood they had to offer rewards to encourage loyalty.
There is therefore a pressing need for brands to turn loyalty ambitions into action. Nielsen research suggests 84% of customers are more willing to buy from companies if they have a loyalty programme and, according to Accenture, a member of a loyalty programme will normally spend 57% more with a business than a non-member. Additionally, previous research at Comarch found the average member of a loyalty scheme will typically carry out 3.5 more transactions per year than a non-member.
The researchers believe these strong performance figures account for why the Forrester study found three quarters of loyalty schemes go beyond their limited initial rollout, to embrace either multiple brands in a portfolio (56%) or an entire company (16%). Researchers cite the opportunity for cross-vertical selling and the accompanying lift in share of wallet as strong additional reasons for multibrand schemes. Allowing rewards and points to be collected and used across different brands also allows marketers to build up a more thorough picture of each customer.
Personalised rewards
Yet the data that accompanies more frequent purchases from trusting customers across multiple brands could be put to better use by businesses, to show users they understand their individual needs. Just over a quarter of respondents (28%) reveal they are either working on or already provide personalised offers. It’s the third most common priority in developing a loyalty programme, more popular than what was once considered the standard loyalty offering of points or miles that can be redeemed against future purchases.
The main two features businesses are incorporating into schemes are cashback (49%) and exclusive membership perks (32%), long-established tactics which could be enhanced if more brands adopted personalised offers.
To boost these offerings, one in five consumer retailers are using gamification to add a fun element to surveys and polls, in an effort to collect actionable data about individual customers. This chimes with the research predicting a fourfold increase over the next five years in UK companies using gamification, as well as charitable donations as part of their loyalty strategy.
Commenting on the findings, Comarch’s director of growth and strategy for the Americas, Christopher Sandstrom, says: “What really blew our minds was seeing how little customer data is actually being used to tailor promotions and offers across not only new programs but mature ones. This is why it’s super important to really do your due diligence when selecting a loyalty vendor. You want to project what you’ll need from the platform in terms of functionality, features, integrations, not only right now but in a year and two years from now.”
People and IT challenges
Understanding customers better so offers can be personalised is a bold move that is accompanied by many challenges. Prime among these, for one in five respondents to the research, is getting the right staff to run an effective loyalty programme. Consistently delivering great experiences across multiple touchpoints and understanding multichannel interactions are also identified as major challenges.
Drilling down a little further, consumer retailers stand out from their B2B counterparts as being particularly focussed on getting teams to co-ordinate to deliver effective loyalty programmes, as well as ensuring the final scheme is clearly differentiated from rivals. B2B brands share these concerns but are for more likely to feel worried about whether a loyalty programme will be well supported by customers.
These issues – around addressing skills gaps and ensuring people in different teams pull together to offer consistently great customer experiences – are reflected in organisations’ IT considerations. Integration is by far the biggest requirement – and not just with CRM systems, which are the biggest concern for nearly one in three respondents, but with all relevant technological systems.
What really blew our minds was seeing how little customer data is actually being used to tailor promotions and offers, across not only new programs but mature ones.
Christopher Sandstrom, Comarch
Given that loyalty will go hand in glove with purchasing online, one in four see also integrating ecommerce systems as a major priority. This is going to be a huge trend, particularly for British companies who are slightly behind their US counterparts, according to Magda Pudełko, loyalty and omnichannel solutions manager at Comarch UK.
“Both the UK and US are very mature loyalty markets, but surprisingly, loyalty programmes [in the UK] are not integrated with the business ecosystems in strategic areas,” she says.
“The differences in the levels of ecommerce integrations are the most striking. In the UK, 15% fewer businesses have their loyalty programs integrated into their online retail marketplace. US-based enterprises understand how important loyalty is for ecommerce, with almost a quarter of retailers planning to implement it into their online stores.”
Choosing a vendor
Integration is such an important issue because companies realise they are missing out on a 360-degree view of their customers, with only 25% of those running loyalty programmes currently adopting omnichannel strategies, according to Forrester’s research.
The need to integrate multiple channels is leading companies to prioritise IT vendor selection towards partners who have experience and capabilities beyond loyalty schemes alone. Companies are seeking software specialists with in-depth knowledge to integrate systems rather than offer standalone projects.
This support needs go beyond IT alone. A top requirement – cited by 29% of respondents – is to work with a partner that can take on the role of project lead on a programme, as well being able to provide support in scoping out the loyalty programme and then to give day-to-day help with both running the scheme and analysing the data it collects.
Sandstrom comments: “I feel a lot of programmes are locked into contracts with technology that simply can’t give them the data they’re looking for, and this won’t only stunt the growth of your programme but will kill any growth before it gets started.”
