Loyalty Marketing- Every Little Help

I was getting so many requests to write a log post on loyalty marketing, though I read the Tesco Club Card book I didn’t have sufficient time to write something about how loyalty pays.  “Loyalty”, in day to day life, implies an unselfish belief in institutions or emotional commitment to friends.

A loyalty scheme doesn’t come cheap.  Based on a report into loyalty in year 2000, 16 major European retailers had a total sum of $ 1.2 billion tied up in annual discounts, and the situation is about the same in US. It is important set-up and running cost of a loyalty scheme has to deliver an acceptable return on investment. Even I can remember when I had a chat with one of a brand manager who works for an Airline Sri Lanka, he expressed that their loyalty programme is a loss. An implementation of a loyalty programme requires a high huge investment of time, IT and talent.  Even with all that I have seen several company struggles with this problem.

As I have realized if you want to run an effective loyalty programme you should invest in people. I have seen especially in Nolimit  and Arpico Sri Lanka the staff who are in the counter always encourage customers to use the loyalty card. Even Tesco believe that the staff have been an important ingredient in encouraging customers to take up, and then to use the Club Card. If a loyalty scheme is to be integrated with a business, it has to be the part of working lives of people who run the business.

If you are really doing loyalty marketing, well it will change the company structure and culture, because it encourages customers to contact the company as an implicit cause in the loyalty contracts it creates.  In my practical experience I have noticed the marketing department is suddenly challenged by the availability of a flood of new customer information. New knowledge means new skills, new ways of planning and working.

In Sri Lanka most of the leading companies are implemented loyalty marketing schemes. Still people might wonder whether it will work.  I would say it will work if firms adapt new ways of thinking. Tesco is the best example. Loyalty is defined into four currencies.

1 – Points –led

2 – Discount-led

3- Information led

4- Privilege –led

Point led is a generic description for scheme that encourages members to collect and spend their units of value, either at fixed or variable issuing rate, or at a fixed or variable redemption rate. Generally customers view these points very much as an operating currency. Travel agencies and Airlines use this scheme.

Discount led is a tiered or preferential pricing which is based on the simple proposition that retailers make it worth to be loyal.

Information led scheme is the interesting one. Loyal customers may value help and advice as much as cash.  A very good example for this is Tesco Baby club, which provides information at a time when potential parents really needs it.

Privilege-led underlying principle is that customers’ proxy access to services or facilities that have a rarity or that might be difficult to attain without the negotiating muscle of the programme or club they belong to.  But Mintel had found out that this method is increasingly under strain.

The biggest question someone can ask, does a loyalty programme pay? A mass membership programme is a long-term, expensive undertaking. But when it works, it repays the investment many times over and in many ways. Investment can be set-up not as additional spending; it can be much of replacements of traditional spend.  Using poor information about customers for loyalty marketing will put you in danger. Firms need to ensure the customer’s data is more accurate. Risk in loyalty marketing can be reduced if there is large amount of clear and reliable data. I strongly believe a well designed loyalty programme gives a brand a way to talk to individual customers on an adult-to-adult basis, rather than the old style of “WE know what you want” base.

Keeping old data, wrong data, lack of support from database team to manage the marketing and poor management in loyalty communication will not work anymore. So loyalty programmes create relevance for the customer, which may create an emotional bond, but will certainly crate a measurable outcome. Finally I would further say loyalty programmes are the starting point for deepening the customer relationship and turning them hardcore loyal.

Visual Buzz and Interactive Marketing

I read articles regularly whenever I find time. While reading an article on promomagazine I came across some interesting insights which I thought of sharing them with you all.

1 – I’m not sure in Sri Lanka how many firms measure the word of mouth for their brand. Measuring the online buzz is easy but identifying and measuring offline buzz is not an easy job. But remember 90% of the buzz goes offline.I observed that the trend now prevails is not about mouth to mouth conversation but  it is all about visual. Emanuel Rosen, author of The Anatomy of Buzz says Word of Mouth isn’t always Spoken, but sometimes its Visual. The objects and visual can create visual buzz.. It is not just the word…Because buzz is not just telling others but more and more it move towards showing.

The simple idea behind this is, by making the brand more observant and visible to the people, the brands can increase the likelihood of people conveying the message about it and enhance the sale.

The above example actually happened to me as well. I usually visit my friend’s place, who has a Dell Laptop. I saw a small poster hanged on his wall regarding this brand.   But we never spoke about this laptop. Whenever I go there I always noticed that poster and Dell became one of my well observed brands. This created an interest in me and I purchased a Dell Laptop for my usage.

So what Sri Lankan brands should do with these? Marketing communication, product quality , good relationship management will create a positive buzz. But according to Emanuel Rosen, he says the brands should make sure where ever the customers go the brand should be visual to them. It can be a calendar, desk diary, well framed brand photo, pens, stationeries, wall clocks, and other observable stuffs.

2 – Make the business crystal clear. In an article written by Rob BonDurant, he says brands need to be transparent the way they do the business. All the business activities should be well communicated. The best example for this is Patagonia, where their production is totally environmentally sustainable business. In the web site they clearly mention what they do to sustain the environment in production. Still most of the organization in Sri Lanka practice CSR and Environmental business practices. I have not come across any organization like Patagonia in Sri Lanka.

If you want to create a sustainable word of mouth recommendation then BonDurant recommends that business practice is storytelling than marketing.

I have noticed a similar sort of strategy used by Brandix.  A well dedicated page which shows this sort of activities and their commitment towards environment and the business practice storytelling.

In  the end it is all about interactive marketing

In this year and coming decade two way communications with the targeted and existing customers going to be replaced by one way marketing methods.  It is going to be all about interactive marketing. Businesses need to closely interact with the customers to know their exact need and wants. It is not about doing a marketing research but closely building a relationship with people, even though they are not your customers.

Given below are some methods, but some of these may not be suitable for Sri Lanka but some might. The mobile and internet have already created platforms for firms to interact with the customers.

According to emarketer, in the year 2009, there was a growth of 18.1% and 9.2%  in mobile and internet respectively. On the other hand, advertising through TV declined by -10.1%, newspapers by -18.7% and radio by -11.7%.

Hence the firms have to concentrate on the following:

Social Media Marketing, mobile marketing and loyalty marketing are known concept for everyone. But it is time for firms to further focus on Neuromarketing. Because for every business it is important to know what their target audience and customers really perceive about their business. Doing research will not make any sense in genuine opinion of the customers. But using neuro marketing firms can study the customers/ consumers sensorimotor, cognitive, and affective response to marketing stimuli. Anyway this is related with research but the research use more advanced technologies such as functional magnetic resonance imaging (fMRI) and electroencephalograph.

The other important one is behavioral marketing. Firms should stop bombarding the customers with irrelevant advertisements. Even in Sri Lanka we come across many advertisements which make no sense. But it time for Sri Lankan marketers to think about the relevancy in the marketing campaign they do. Now customers are modernized and they seek for new things, new experiences, new things to try etc…Firms need to be more creative in their communication. Bombarding them with the same ads repeatedly is not worth. Creative approach stimulating the customer sensitive is a must these days. The ads and other communications should be relevant to their life style choices. This will be more effective to do….

Loyalty Marketing – New trends

Maintaining customer loyalty is a hard task for marketers during these days. Because of recession people are more price sensitive. They expect better deals from their brand, at the same time if they tend to find best deals in competitors they adopt for that. Now it’s time for marketers to question about their loyalty strategies. Now whenever they go, whatever they purchase, they can see loyalty points. Increased competition in the loyalty marketing is also threatening the firms. Loyalty marketers now understand how to use the data driven insights to change the customer behavior profitable.  While going through the loyalty.com (the sole owner of Airmiles Canada) I came across a new trend and very interesting as well. Since the loyalty market is messed up with high competition now it is important for firms to combine the loyalty and their emotional bond. Combining the CSR, Green activities with the loyalty marketing is going to be the sustainable strategy in the future.

The best example for this strategy is America Express. They had a partnership with Statue of Liberty restoration project. The strategy was each time when Amex cardholders used the card, Amex donated a penny to the project. Similar to that the issue gave one dollar for new credit card application. They got an amazing result, $ 1.7 million in 3 months and their credit card usage increased by another 27% and new card application rate by 45%.

So it is clear that socially responsible initiatives are going to be a better brand tool in future, but it is difficult for companies to drive sales with just cause related marketing. In my company we do have a loyalty program, but sometimes high redemption leads us for loss also. Many brands truly desire to do business in most ethical way and the customers also expect the same. So that’s where the loyalty marketing comes to play a major role. Now loyalty marketers have the full data about their customers. Now they are turning these insights to more ethical purchasing behavior.

Now the organization and consumer have reached the level maximum about the corporate social responsible concept. According to the Edelmean good purpose study , 63% of the customers think that marketers spend too much on advertising and other marketing communication, and they said  that they should set more for “good cause”. Still global customers think that the companies set money for social purpose as well. Particularly increasing awareness of climate change is closely positioned in the customer’s mindset. Not in Sri Lanka but in other countries buying green products remains a priority and customers are willing to pay additional 5% for green products.

Though environmental issues are getting concern among the customers, other social issues are also worrying them. That’s why cause marketing getting prominent in organizational strategies.

So what the companies should do now? Running a separate loyalty program and a cause marketing might danger them. But combining the emotional bond of the customers with loyalty program and cause program is going to be the suitable strategy. Cause marketing is largely about pushing the brand and additional bond and empathy it. Having just a loyalty program may not work hereafter or might struggle in the middle.

So how they can do this?

Based on the loyalty theorem following are possible according to my knowledge

1 – Walk in walk

The very essential part of cause marketing program, are planning, design and following it up. But the validity is important always. The company should ask the questions like does this cause marketing program ring true as part of the company’s value? Will consumers see it as sake or fake? The company should be careful when they do this.  It can backfire the firm if it is not done properly.

An important question that arises here is “How to build the validity of the campaign”.  Not only the top level management but the organization must build cause related value within it.  Consumer expect that brands those incorporate cause related marketing with loyalty effort will walk the walk.

Then  the organization should make sure the cause is closely related to the brand values and resonated with the stakeholders (both customers and stakeholders)

If there is no actual relationship with the cause and the brand value then it will become a doubtful in the consumer’s mindset.

Eg- Breast cancer cause are related to female products, but if masculine products decides to support the cause one party might say, wow they support woman, but on the other hand men might say “what is this”, there can be a conflict with the targetted customers.

2. Focus on Behavior Change

When an organization thinks about supporting a cause they should also consider the behavior of customers. Instead of  buying the products customers may think of supporting the cause directly. Here it is important to connect the loyalty bond and the cause. So the customers will feel good that they are supporting for a cause while purchasing.

Another way to change the behavior is to focus more on millennial consumers such as teens with less income and some one who have limited resources to take part directly to the favorite cause.  According to the research insights I went through, 88% of Millennial would switch brands to help cause.

3. Don’t forget the ROI

I have attended many talking points of CIM, Sri Lanka and while speaking to others I got a common opinion that companies jump to cause marketing and expect sales quickly. But organizations need to market it properly with a goal of boosting a loyal behavior from the customers or getting return on investment.

Cause marketing without measurable ROI is simply like desert strategy.

I’m not sure to what extent companies in Sri Lanka can practice this, because most of the firms do not have proper loyalty marketing strategy. But strong cause marketing is being practiced by Sri Lankan firms. So it’s time for them to rethink their marketing strategy and combine both loyalty marketing and cause marketing as an emotional strategy.

Those who need more outside and insides about loyalty marketing click here. It’s worth visiting.