Loyalty schemes prove to be recession busters and position retailers for upturn
GI Insight survey shows database marketing key for retailers but poor integration of marketing activities could leave some behind.
The latest report from GI Insight reveals that loyalty schemes have become more important to retailers over the course of the recession. Overall 74% of marketing decision makers in the retail sector felt that loyalty schemes have become more vital to successful business over the last two years.
When broken down within the retail industry, the figures revealed that only 50% of respondents from firms in the retail grocery sector saw loyalty schemes as key to weathering the recession compared to 88% of those representing fashion retailers.
While a number of grocery retailers, such as Tesco and Sainsbury, have been trailblazers in developing loyalty programmes, there are others, such as Asda, that have completely rejected the idea that loyalty schemes are important for customer retention. In general, when making any alterations to their marketing strategies, many organisations in the grocery retail sector chose to concentrate energy and resources on price promotions, which, when combined with an already sophisticated approach to customer communications, could prove to be a more striking point of differentiation in the sector during the recession – even for those that rely heavily on loyalty programmes to keep customers coming back.
Fashion retailers, on the other hand, had previously been slow to introduce loyalty schemes other than those based on store credit cards, but retailers like mywardrobe.com, which introduced a points-based scheme last year, have obviously started to see their value when it comes to customer retention.
This also explains why the research found that fashion retailers claimed to have become much more reliant on database marketing in the last two years (47%) compared to the grocery sector (14%) and all other retail sectors (22%).
However, despite the grocery sector’s natural affinity for loyalty programmes and the retail sector’s increased support for them, fewer than 50% of respondents felt that these programmes were fully integrated with other marketing activities. In the grocery sector, 43% of respondents felt this was the case while 35% said this was the situation in fashion.
Andy Wood, Managing Director, GI Insight, notes: “As far as the supermarkets are concerned, it is possible that the loyalty detractors, such as Asda, are bringing the overall percentage down. What’s more, those marketing decision makers in the retail grocery sector that had strong loyalty programmes in place going into the downturn are likely to see the sophisticated and highly effective reward-based schemes in their sector as fundamental tools – an essential requirement to succeed in any economic climate – rather than extraordinary recession-busting measures.”
“Lack of commitment to marketing integration could be dangerous for retailers as the economy recovers. With fashion retailers relatively new to offering loyalty programmes, it is likely that they are using them for promotional purposes rather than using them to create effective customer management strategies.
“If marketing activities are not integrated, then a retailer is less able to ensure consistency of message and could waste money on redundant communications – both of which might hurt ROI and cost them competitive advantage over a rival firm.
“Retailers that have survived the recession without seeing the need to invest in loyalty or database marketing will be put to the test when the UK exits the recession as they are going to have a tough time catching up with those that are better prepared, especially if they haven’t bothered to integrate their marketing activities.“
