By Ian Horsham, divisional director for Promotions and Incentives at The Grass Roots Group.
Waitrose’s introduction of the innovative ‘Pick Your Own Offers’ programme has been viewed by many as a game-changer in the loyalty industry. The element of hyper-personalisation the programme offers brings another level to consumer interaction, yet, by including every-day products the consumer is already set to purchase, the perceived value of the reward will never exceed the value of the discount.
Looking at the overabundance of discounts available online and in stores, it is apparent that we have reached an age where UK consumers now expect a bargain. However the question on every UK retailer’s lips should be whether discounting is really the way forward. Should retailers be deterring shoppers away from discounts? Can the expectation of receiving a discount with every trip to a premium retail outlet be damaging to perceived brand values?
In order to stay ahead of the game, brands need to think ahead as to how they can develop programmes further to keep the air of innovation. With focus on existing loyal customer bases a top priority, the consideration of just how relevant programmes are for customers’ needs to be determined from the very beginning. Do your customers need or want something for less? Are they reliant on personalised rewards?
The attraction of the programme doesn’t necessarily always have to be contingent on the financial gain for the customer. When developing a customer loyalty programme, retailers shouldn’t solely revert to discounting the value of their products, as by their nature, reductions should only be used as a short-term approach for selling time sensitive merchandise. Fundamentally, discounts should occur when the original product reduces in value. Dropping prices can also plant a seed of doubt and accrue distrust over time as customers may start to suspect they have overpaid previously. Cutting prices to induce consumers is not a good tactic for businesses that pride themselves on the value of their products. Being viewed as being cheaper will hurt the long-term brand value and reel in fickle customers who won’t return if they spot a better bargain in the future.
Alternatively, retailers should look to focus their time on improving their promotions and incentive programmes ahead of reductions. Loyalty programmes will give businesses a more grounded and consistent customer base and will add value to the company as opposed to reducing the value of its products. Essentially, retailers should also be considering what more they can offer their customers, and give rewards which the customer might not even think of themselves. Brands need to remember that a reward should be viewed as something more than what consumers are already buying, which is more exciting for consumers than discounting the value of everyday products. For example, giving experience vouchers to share with loved ones or days out with the kids can be a powerful tool, providing memories which will not be forgotten.
Take Netto Marken-Discount in Germany, for example. Netto is the first German discount supermarket to join a loyalty scheme after signing up to Deutschland-Card. Users of the scheme collect points with every purchase from partners, such as petrol station Esso, which can then be used to pay for purchases or saved to obtain special deals on holidays and entertainment.
However, it is also important to ensure that existing programmes and promotions do not become too familiar for customers. Customers can, over time, begin to view loyalty rewards as an entitlement rather than a gift. By regularly refreshing or enhancing a programme there is always something new to please and engage the customer. This is vital for prolonged success and ultimately retaining loyal customers. It demonstrates an understanding of your customers which is more effective in the long-term than enticing one-off purchasers with reduced prices.
Ultimately, the uniqueness offered by this new programme is sure to set Waitrose ahead of the rest, and the ability for a consumer to pick and choose what they want to save money on will no doubt enhance customer loyalty. However, in order for the programme to advance and develop, Waitrose will need to consider what more they can offer their customers, taking into account Netto’s example of discounts and loyalty, without discounting their merchandise further. This will enable the retailer to continue to stay one step ahead of the competition.