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Those of us in retail have all heard this statistic: it’s five times more expensive to gain a new customer than it is to retain one.
At the breakfast event on Tuesday (19 September), payments expert and loyalty specialist Carolina Castillo said one of the best examples of the importance of customer loyalty comes from Coca-Cola.
In the 1980s, Coca-Cola decided to ditch its original flavour and introduce a new formula to “re-energise” the brand and combat the threat of Pepsi.
Such was the love for the original flavour that an immediate backlash from consumers followed, who demanded its immediate return. “New coke” was promptly ditched and sales of Coca-Cola’s reinstated original flavour went through the roof.
To this day, nobody is really sure whether this was actually a very clever ploy from Coca Cola’s marketing whizzes.
What it did highlight was the consumer’s willingness to act when access to a much-loved product was interrupted. In the days before social media, consumers picked up the phone or wrote letters to have a brand that they’d tried, tested and loved back on the shelves.
More than 30 years later, there are few brands in this rather more crowded retail world whose products would raise such an emotional response amongst their customers – making the need for a robust loyalty strategy even greater.
According to Castillo, building customer loyalty today comes down to three strategies – monetary rewards, convenience or, ideally, a combination of the two.
One of today’s most recognisable loyalty schemes are air mile campaigns. They work well, according to Castillo, because the rewards are substantial, desirable and emotional.
“From a monetary point of view, customers can save 50% on their flights, which means they are more likely to want to fly more often. With the way air mile schemes are tiered, they also create competition amongst consumers. ‘I’m a bronze member, but my neighbour is silver. How did he manage that?’”
But air mile campaigns also build on the convenience factor. A consumer has spent time building up points in a particular scheme. The inconvenience of starting all over again with another scheme will often be too great.
Apple is another brand that has tapped into the convenience factor, says Castillo. Existing customers have all their personal data, be it contacts, music, videos, photos etc, on iTunes or the iCloud.
How many of us have considered leaving Apple to give Samsung a go, only to be put off by the inconvenience of transferring everything over.
The value of this convenience means Apple knows it can charge those eye-watering prices. “Apple may be pushing it now, but consumers still seem ready to pay that premium”, added Castillo.
“Also, think of those restaurants that make it convenient for parents with pushchairs to come and dine”, she added. “Or those apps that provide advanced queue-jumping payment options. These brands do well because lifestyle adaptation and convenience are at the core of their customer retention strategy.”
Half the battle has been won when it comes to loyalty in the UK, said Castillo. After all, nearly 90% of us say we’re in some sort of loyalty programme.
Savvy retailers can differentiate themselves by ensuring that convenience around product use and delivery is central to their loyalty strategy, according to Castillo.
This could include ensuring instant gratification. Customers don’t want to wait anymore – they want their rewards now. Can your loyalty scheme offer rewards at the point of sale or at the next purchase?
Also, think about partnering with other brand loyalty schemes. As a frequent flyer, Castillo finds being able to build up air miles through supermarket loyalty schemes a brilliant way to benefit both airlines and high street grocery chains.
In summing up, Carolina asked the audience to consider the relationship between cost and convenience. “If you offer more rewards, the customer is more likely to remain with your brand. If you offer more convenience, there is potential for your customers to consider paying a premium.”
“Essentially, the more loyalty you create, the more your competition has to spend to persuade your customers to go elsewhere.
“What’s more, once your customers start telling their friends and family about just how great and pain-free their experience was, they soon become your biggest sales team.”
“Which brands have a loyalty scheme? It’s a question that doesn’t have to be asked, says Castillo. “They all have them. Loyalty is a saturated market. “If you have a loyalty scheme and it’s not gaining traction, then you have to do something different.”
Michael Rolph took on this challenge at Tuesday’s Yoyo event to offer his thoughts on what this “something different” might be.
Retailers need to introduce a robust and personalised loyalty platform that will not only reward customers, but also drive behaviour, he said. “And this is where mobile comes into play.”
“However, simply combining mobile technology with an existing loyalty programme isn’t going to provide a winning strategy. Before administering that tech injection, a retailer has to have a strong foundation in place.”
These are the five elements that come together to create a customer’s brand experience. If a retailer is not getting these right it won’t matter how you try to build loyalty amongst your customer-base.
Once these are in place, you’re in a strong position to begin work on a long-term customer retention strategy. It begins through a loyalty programme seamlessly driven through the highest converting channel – a mobile app.
According to Rolph, there are four levels to a mobile-led customer retention strategy:
There’s still some confusion on what “know your customer” actually means. For many, it could go as far as having customers who have signed up to your loyalty programme.
But by bringing technology into the fold, retailers can get to know who their customers actually are. By matching them to their individual basket data, retailers can learn buying preferences, habits and behaviours, which is only possible through a loyalty platform that is seamlessly integrated with the retailer’s point of sale.
The retail world works! There is no payment problem and loyalty schemes exist in abundance.
But customers are now looking beyond what “works”. Without thinking, a customer can pay for goods, join a loyalty scheme, positively engage with retailers and be rewarded at the most convenient times – all in a single moment through mobile.
Once mobile has been established as a core part of a customer retention strategy, retailers need to go beyond just payment and loyalty.
Think about a full end-to-end transaction experience. Provide fully-itemised digital receipts, in-store details, location and time information etc – all of these aspects go towards giving the customer a fully immersed in-store experience.
By this point, through basket data analysis, a retailer knows who their customer is, what they’re buying and when. This means certain loyalty conditions can be set to drive customer behaviour.
If you find out that business is slow on a certain day or a new product line isn’t gaining enough attention, set up a mobile-based campaign that will instantly tell customers that they’ll receive extra rewards if they shop on that slow day or buy that new product line.
We’re in the very early stages of how AI and retail will work together – but that doesn’t mean we should just wait and see what happens. There’s going to be big movements here in things like the on-site experience and pre-ordering.
Knowing what your customer wants five minutes before they do is no longer in the realms of fiction. We already have the data to make intelligent predictions about how a customer will behave. AI is going to take this to the next level.
Yoyo would like to thank Newland’s UK product manager, David Craggs for partnering with Yoyo on its first breakfast briefing.
David rounded off proceedings by taking the audience through the practicalities of how mobile devices can be used to combine loyalty and payment at the point-of-sale – especially in self-service scanning environments.
“Customer behaviour should be the driving force to how mobile payments work. Nobody likes handing their phone over to another person – especially a stranger at the till. So the customer is going to be scanning their mobile device themselves when paying for items.
“The differences in phones size, display brightness, distance or how a phone is tilted can all be reasons why and how a scanner can hesitate to produce a good read at the critical time of payment – all of which hinders the customer experience.
“It’s important to put convenience at the centre of your mobile payment strategy. Customers need to feel totally comfortable using their phones at the point of sale – both ergonomically and psychologically.
“Cut out as many variables in self-scanning as possible – distance, angle brightness, codes size and screen orientation. Achieve this, and you’ll provide a mobile payment solution that compliments your mobile-led loyalty strategy.”