What Price Loyalty?

As we continue to emerge from the pandemic, many businesses are seeking to repair their battered relationships with consumers. Everyone from airlines, holiday resorts and utilities companies are at it, making high profile attempts at ‘sincere’ apologies, and promises to do better.?

These are not just cynical PR exercises to stave off further damage to their brands, but an attempt to win back shoppers’ cash and previously hard-earned trust.?The first rule of any business is to?retain?customers and build a loyal relationship with them, and thereby avoid?customer acquisition costs.??While the old rule of thumb that it cost 5x more to get a new customer than it does to keep an existing customer may no longer be wholly relevant in today’s world, decisions around approaches to loyalty can still have a significant impact on the future value of your customers. Through engaged and loyal brand advocates,?businesses can get to know their customers better, target products and services more effectively, and in ways that make it easy and ‘painless’ for them to buy.?

Whether offering preference, points or prizes, the underlying objectives are the same for any brand attempting to ‘buy’ customer loyalty. Simply to re-engage and renew an existing relationship with, and to seek to hold onto them for as long as possible.?

With economies re-opening once more, loyalty will have a valuable new currency.

Retailers have long known about and used this tactic, using vouchers and loyalty cards that offer savings on their own store goods, or maybe extending to complementary partner brands. Here, brands inventively try to tempt you to buy more, and more often. The newly launched Waitrose supermarket voucher scheme is an example of doing just that. With an account and the app, shoppers will now be given money off selective groceries each week, allowed to pick two regularly bought items to receive money off. The making of an attractive incentive to visit the store.

Airlines have long prospered, and profited from securing customer loyalty, whether the ability to collect and spend points on upgrades, flights, car hire or other travel goodies, securing travellers into the schemes is big business. And tempting the most regular travellers or those with bigger travel budgets to ever higher points tiers — lucrative. Here, the terms of how the schemes operate – with annually accruing and expiring benefits – sees travellers booking trips to maximise their account balance, hold onto precious benefits for another year, and often spurs last minute bookings point chasing ahead of annual points reset and renewal. In short: it works.

The pandemic, however, upended many of these things. Without the ability to fly for many months, loyalty schemes became a point of anxiety with travellers wondering whether they would lose their built up status.?Without the ability to visit hotels, resorts, and attractions, previous ways that brands had encouraged loyalty soon became irrelevant.?

With economies re-opening once more, loyalty will have a valuable new currency. Or it least it should. Partly through self-inflicted missteps (where shopper patience and faith were tested beyond elastic) and partly due to events outside of their control (the pandemic screwing up their best efforts), there is a need for some brands to rebuild relationships and embark on a loyalty reset. Doing so is an immediate business imperative, especially with consumers now facing new emerging challenges in other ways – namely, the rising cost of living that will likely curb spending power.?

...this behaviour is not in the spirit meant, and consumers will see it for what it is.?

Commercially, loyalty makes perfect sense and good business.?So why is obtaining loyalty not more widely recognised and prized in business??

For years, insurance companies and financial institutions ‘rewarded’ long-term or lifelong customers (those who don’t churn), with ever increasing premiums or interest rates which were worse than for new customers. Hardly a recognition or thanks for loyalty. Why is it that many of the retailer points schemes are gradually eroded and downgraded over time? And with the value of some retailer scheme points diminishing year on year in a kind of ‘loyalty inflation’ that sees shoppers ultimately with less, and not more in their hands, and feeling a little less favour to the brands in their heart — this behaviour is not in the spirit meant, and consumers will see it for what it is.?

Moving forward, I for one am hoping to see loyalty being taken much more seriously by UK business, and the emergence of new, more enlightened, imaginative, and meaningful approaches. I’d like to see loyalty innovation being taken up in many more sectors where consumers are both physically and financially active: gyms and leisure, mortgage providers, travel providers (not just airlines), shopping centres and not just the individual brands within them… even local authorities. The places where we live, stay, work and shop should encourage people to stay local and enjoy additional benefits in return. For councils, instead of just collecting resident taxes, to start incentivising people to transact within their area, offering schemes that also ‘give back’ to businesses and the wider community.

Of course, there will be also cost to businesses in developing schemes to build and maintain loyalty. But there will be a greater cost for those who choose not. At a time when companies, brands and other corporate entities are trying to encourage people back into the world and places again, building in loyalty, and for the long term, offering customers more will be a key strategy for those businesses who want to do more and growth more.