CD spindle

With Big Data and omni-channel customer engagement firing the imaginations of marketers the world over, it’s little wonder that many are increasingly looking to the loyalty scheme to provide a platform for actionable consumer insight.

Unfortunately, too many companies fail to understand that loyalty schemes are far more than simply a mechanism for providing points, discounts and freebies. Some insiders even argue that the company doesn’t get enough out of the deal because too few consumers demonstrate unswerving loyalty to their business.

While consumers should rightfully feel that the aim of loyalty schemes is to reward them for continually coming back and buying from a business, companies get more than just a vehicle for running promotions to keep regular buyers coming. Data on customer preferences, needs, personal circumstances and spending patterns is the company’s real reward.

The analysis of loyalty scheme data is essential to gaining the insight necessary to not just keep members engaged but expand their ties to the brand. The insight better arms companies to send out targeted offers and communications that build longstanding ties that lead to deeper bonds with the brand. In short, the data gives businesses the power to influence customer attitudes and behaviour.

Why are loyalty schemes so important?

Recent research from GI Insight confirms that well-managed schemes really do foster loyalty, nurturing valuable customer relationships while eliciting greater spend. What’s more the vast majority of consumers see real value in these types of programmes too.

The research shows consumers are happy for companies to capture personal details and data indicating their buying habits via loyalty schemes, as long as it will benefit them in the long run – i.e. provide value through useful points and relevant offers. In fact, the survey of more than 1,000 UK consumers reveals that 76% do not want to hand over their data to a business unless it has a “proper loyalty scheme” and the same percentage expects “any credible retail chain” to have this type of programme in place.

The study also indicates that, in today’s digitally driven marketplace, the consumer is much more aware of the use of personal data by organisations and its value to them, with 64% of survey respondents saying they are happy for a company to hold and use a considerable amount of detail on their personal preferences and circumstances as long as it uses this information to send them “relevant and timely offers and communications”.

How a loyalty scheme affects customer behaviour

The research shows that loyalty schemes have a significant impact on customers’ purchasing behaviour. The consumers surveyed said they have stuck with brands that have established loyalty schemes through tough economic conditions and will continue to do so as the economy strengthens.

The research reveals that 87% of consumers have kept purchasing from a brand over the past few years because it had a good loyalty scheme in place and 82% confirm that “now that things are picking up” they will continue buying from companies whose loyalty programmes have delivered value. And, in fact 33% of consumers have actually switched their purchasing from one brand to another due to the appeal of the loyalty scheme.

Loyalty schemes in the digital era

Consumers quickly clock when companies fail to acknowledge them as existing customers – particularly when they are shopping online. Our research indicates that close to 40% of consumers have not been recognised by a brand when purchasing online, because it did not have a loyalty scheme and consequently had no way of identifying them as regular customers. Nearly two-thirds of the digitally-savvy 18-24-year-olds and nearly half of those aged 25-34 noted this lack of recognition.

It is these younger consumers, with their significant digital footprint, who are also the most likely to demand a loyalty programme in exchange for their data, with a hefty 89% of the 18-24s saying they want a scheme in place if a business is capturing their data, compared to 69% of 55-64-year-olds.

A platform for meeting consumer expectations

A loyalty scheme not only provides a comprehensive platform for capturing customer data, but it provides a means of applying the resulting insight in an extremely targeted manner. In the age of Big Data, the consumer is not only much more aware of the use of personal data by organisations of all stripes, but of its value. It therefore becomes increasingly important for companies to understand and address customer expectations.

Giving consumers what they want in a loyalty scheme is achieved not just by providing them with rewards, but with incentives and offers that both address their immediate needs and match their long-term spending behaviour. It is in this way that companies can lock in customer loyalty based on the fair exchange of value: highly targeted, well timed benefits for usable personal data. This is the basis for a mutually beneficial relationship through which a brand can then encourage loyal customers to spend more and more often.

By Andy Wood, Managing Director, GI Insight