No points for brand loyalty: the data-driven future for Australian retailers
As the demands of modern consumers continue to surge, Australian retailers are under increasing pressure to be more customer-centric and provide better shopping experiences.
While research from Mastercard shows loyalty programs are popular in Australia, shoppers are becoming impatient with irrelevant offers. Simple points programs based on the ‘earning and redeeming’ model are losing ground in today’s dynamic and competitive environment, as highlighted in Aldi’s recent television advertisement.
This shift in behaviour means it’s critical for brands to focus on the activities surrounding the buying experience, as much as the buying itself. Products can be seen as commodities; a retailer’s ability to form a relationship with its customers is what maintains its relevance and loyalty.
Retailers need to look at their data and make customer-first decisions in all areas of their business, including their loyalty programs. This means revisiting old notions of rewards and increasing service offerings to enhance the shopping experience – they cannot rely on points alone any more.
Retailers who understand how to properly capture data-driven insights and form actionable plans that put their customers first will be rewarded with long-term, loyal behaviour that generates positive financial gains.
Meeting the evolving expectations of in-control consumers
Shoppers today have higher expectations of retailers than ever before and rarely share their loyalty without expecting something in return. The fact that every customer has the ability to broadcast their feelings about any brand via social media means they’re also in control – so retailers must meet their shifting demands.
Loyalty programs and schemes are still popular – Forrester report in to US retail spending, The State Of The US Retail Shopper In 2018, found 51 per cent of online shoppers say loyalty programs influence where they shop – but have evolved over the years. The most successful programs are no longer just points-based systems but offer sophisticated experiences and rewards, with customers often willing to pay for these rewards and give out their personal data as long as they feel they are getting value in return. These subscriptions create a stickiness that differentiates a retailer from its competitors.
The same report by Forrester revealed that among online shoppers in the US, 55 per cent who belong to a customer loyalty program say it’s important to them to get special offers and treatment that aren’t available to other customers.
To work harder for customers, loyalty programs need to better reflect their customers’ needs and wants at all points of the increasingly fragmented shopping journey; from help building shopping lists and inspiration on meal planning, to time guaranteed delivery, money savings and access to additional partner benefits.
Understanding loyal customers with data science
dunnhumby research reveals that 73 per cent of retail sales growth comes from loyal shoppers – so retailers must seek to better understand their devoted customers by forensically investigating the importance of their functional and emotional needs. Harnessing this group will enable customer-first decisions at every level of the business, which is crucial for success.
Customer data science can help retailers identify who to speak to, how to speak with them and what to offer, which in turn demonstrates their commitment to their customers’ individual needs. Building a loyalty program that creates a tailored conversation at every touchpoint is vital to create hyper-personalised, hyper-relevant experiences and drive emotional loyalty.
For retailers who acknowledge rather than demand customer loyalty while realising the value of customer data and the importance of a fair exchange, the rewards are significant. Brands that use customer data effectively gain more than 2 per cent in loyalty retention, and research shows increasing customer retention rates by just 5 per cent increases profits by 25 per cent or more.
Communicating to customers en masse, but as individuals
Retailers must be able to talk to their shoppers the same way the local grocery store owner spoke familiarly to his regular customers 50 years ago. Doing this effectively to a whole customer base requires data science and a variety of channels.
Retailers should focus on four main customer needs when designing a loyalty program:
Sharing: Create a two-way conversation between brand and consumer. Customers prefer programs that listen more than talk to them, and messaging that speaks with them, not at them.
Channel balance: While bricks and mortar stores will not be replaced altogether, the world we live in is always on and always connected – so achieving the right balance of channels is critical. The dunnhumby 2018 RPI found that some retailers deliver an excellent digital customer experience that fails to benefit their financial performance, while others with a focus on digital manage to thrive. Retailers that ramp up investment in digital must be cautious not to take their eye off the retail basics and risk a slip in their operations.
Experiential: Customers expect rewards that enhance their shopping experience. This could be a gift of money, time or an offer that brings them joy. The global Starbucks app is one of the most effective loyalty schemes, with customers able to order their coffee in advance through the app and avoid the queue in-store. Retailers should be exploring experiences like these that are instantly gratifying, personalised and can be redeemed as part of the daily routine.
Transparency: In-control customers also expect transparency. From the offer to the privileges, customers want experiences that are easier to enjoy and quicker to redeem – and a transparent approach will build valued trust, in turn driving brand and emotional loyalty.
Loyalty is a lucrative outcome for a business that makes customer-first decisions, and a successful loyalty program is well worth the investment for both customer and retailer.
Kylie Gleeson-Long, ANZ managing director for dunnhumby.