Loyalty conference preview: Clear objectives and planning improve success of loyalty programmes
Loyalty programmes can generate strong returns on investment (ROI) for retailers but only if they are carefully planned and their objectives are clearly understood from the start. By Glynn Davis
Ahead of taking part in a panel discussion at the 4th Retail Bulletin Customer Loyalty Conference 2013 on June 12 Mike Brinn, customer loyalty director at Swiss Post Solutions, argues for the need to plan meticulously in order to achieve the best ROI.
Ahead of this he says everybody in the organisation needs to be “engaged” and for ‘store champions’ to be selected who can spread the message during the early stages of the programme. Defining the scheme and clearly stating its objectives at the start helps this because it ensures that there is little questioning from employees about why a programme has been introduced.
In the planning stage he says retailers need to include a financial plan that incorporates their expectations from the programme, the projected take-up, the average spend, the frequency of shop, the expected percentage of rewards redeemed, and the total cost of running the programme.
Never Miss a Retail Update!Brinn acknowledges that it can be tough creating a P&L [Profit and Loss] from these parameters because the programme will have various softer benefits such as customer engagement and the propensity of customers to recommend the retailer to their friends.
These also make it hard to measure the success of a loyalty programme but he says it is imperative merchants do so. The most important yardstick to determine a scheme’s success, according to Brinn, is the increase in the number of customer visits as this is more valuable than looking to increase the spend per transaction.
Thankfully he believes retailers are using a more structured methodology for their loyalty programmes as they now regard it as a strategic decision. Whereas it was only previously of interest to the marketing departments it has increasingly entered the realms of the finance teams.
There are now considerations such as switching marketing budget from above-the-line advertising and instead using a loyalty programme to focus attention more on the retention of existing customers.
But where there is still an area of failing is in retailers not committing the necessary resources to mining the data that has been created by their loyalty programmes: “If you just put in a flat discount then you’ll only get a hit for a few months. Without mining data you’ll not get the ROI. Analytics takes resources but data without insight is an over-head.”
One of the results of a lack of data analysis aligned with a loyalty programme is that retailers will see likely the effects of the scheme but will not specifically be able to tell why it is happening.
Although the greatest levels of insight on customers comes from having them frequently visit a retailers’ business – which makes loyalty programmes most suited to the big grocers – Brinn says this should not put off merchants in other categories from having a programme.
“There is always the 80:20 rule so they can structure the scheme to focus on the most engaged [regular visiting, highest spending] customers. They can also influence other people. To not know them is a crime. The programme can have rewards based on certain targets involving levels of spending,” he suggests.
Helping retailers operate loyalty programmes is the march of technology that can reduce operational costs. He cites the opportunity of introducing an app rather than having physical loyalty cards thereby enabling customers to register via their phone and to receive offers directly onto their personal devices.
“This new technology can improve the ROI. Customers are going this way but retailers are being slow to follow them,” believes Brinn. Make sure of your place at this low-cost, one-day event by clicking here.
