February 3, 2016

Can loyalty schemes provide a ROI of £20 for every £1 spent?

 

Loyalty Schemes currently abound in the retail sector, so much so that you would think they might have had their day and should have long since disappeared. However, for those organisations who are not yet competing in the space, the question “Why not?” actually carries more force now than ever it did.

Loyalty remains at the heart of the battle to win competitive advantage but that battle is now being fought on a much-changed landscape, re-shaped by the advent of new channels, new technologies and by fundamental changes to the nature of the shoppers over whom the battle is being fought.

Shoppers now nearly always research and compare before buying; they will consistently buy from the same retailer only if shopping is an easy, efficient and enjoyable experience; and only if they have a strong sense of receiving value for the money they spend. What is more, prospective new customers will be influenced strongly by the recommendations of others, who form their judgements using the very same criteria.

Loyalty schemes are the key weapons of this modern warfare. If your competitors have a potent one, and you don’t, you can be sure that you will be at a significant disadvantage. Make no mistake, an aloof stance against introducing a loyalty scheme will certainly affect the security of your business.

If scoped, designed and managed well, there are a number of compelling, transformational benefits that accrue to a business launching a Loyalty Scheme, providing it with the ability to:

  • understand for the first time, customer-level behaviour & worth rather than simply basket composition & value
  • communicate directly with customers through all customer touch-points (at the till, elsewhere in-store, online, via an App, in the call-centre) in order to increase shopping frequency, grow value & increase retention
  • tailor communications to an individual’s shopping mission, demographics, lifestyle, transactional behaviour, potential value, interests & preferences, so as to increase relevance & improve the customer experience
  • make timely offers using an individual’s loyalty data to spot & exploit real-time trigger opportunities
  • continually refine the Scheme’s benefits and match them to changing customer behaviour and preferences
  • use matched Control groups to directly measure the impact of communications & strategies and track the Return on Marketing Investment (ROMI)
  • target communications more powerfully to reduce costs and increase tactical ROIs. (How can you possibly target effectively without a customer-level view?)
  • test new marketing ideas & initiatives and learn quickly & robustly what works & what doesn’t before investing in large-scale roll-outs
  • use information stored on the customer base to transform marketing planning into an insight-led process
  • develop a more coherent channel strategy and exploit new technologies based on customer preferences & channel cost-efficiencies

For those businesses who are daunted by the amount of investment, effort and time required to launch a Loyalty Scheme, Berry-Thompson working with our partners, Coniak Ltd., can help.

Our methodology for creating a Loyalty Scheme:

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Our affordable real time SCV database solution from Berry Thompson called UniFida:

If your organisation already has two or more of the following, you will probably already be looking for a single customer view (SCV) solution to tie together all your customer information;

– an on-line and/or off-line EPOS system
– website browsers (who do or don’t purchase)
– an email system
– CRM campaigns contact history
– social media feeds

When you add to this the customer data collected by a loyalty scheme, an SCV becomes an essential.

We have built UniFida to provide the SCV at the heart of a loyalty programme.

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Our Loyalty Analytics Expertise:

Coniak & Berry-Thompson have provided best practice CRM analytics services to its clients for over twenty years. We have deep expertise in all the techniques essential to support the successful and profitable operation of a Loyalty Scheme – right across the member lifecycle: from Welcome, Nursery, the Value Growth phase, Lapse & Attrition Prevention, through to Reactivation. These techniques include:

  • targeting using propensity models
  • customer segmentation
  • associative analysis
  • the development of robust trigger rules
  • rigorous test design & evaluation methodologies
  • campaign tracking & measurement
  • campaign reporting based on statistical significance & confidence metrics
  • kpi reporting to track performance against the business’ objectives and targets for the scheme

We provide these within an out-sourced service if appropriate, and we are equally happy to transfer skills to in-house insight teams using carefully designed 1-2-1 or formal training sessions.
A Short Case Study:
In 2013 Coniak and its Agency partner, working with a Garden Centre Group, won two major Marketing Society of Great Britain awards:

  • Best CRM initiative
  • Best Use of Marketing Expenditure by a Finance Director

The client is a family-owned business with 18 Garden Centres nationwide.
Starting with a completely blank sheet of paper, and in an increasingly competitive landscape, working intensively with our client, within four months we had designed their ground-breaking Loyalty Club. A highly successful Pilot was run in the next four months and the scheme was rolled out to the whole estate where it has been running for over six years.
The Club provides customers with a compelling reason to shop more, by tapping into their love of gardening, by building a relationship with them based on who they are, by focusing on privilege & status, and providing a set of carefully designed benefits and offers.
We quickly established a Single Customer View database ready for day one of the Pilot, and started an ever-evolving strategy to nurture members throughout their lifecycle, covering:

  • a multi-channel acquisition programme to convert customers to membership & capture their contact & demographic details
  • RFM & shopping mission segmentations to support the creation of segment-specific communication strategies
  • a continuous, targeted, and individualized value growth strategy to run throughout the year
  • pre-renewal triggers to influence the renewal decision
  • a comprehensive Lapse Prevention & Win-back strategy

We worked with internal staff to create a new Test, Measure & Learn culture to ensure that the effectiveness of communications continually improves, enabling them to experiment at low risk and make informed roll-out decisions based on sound Return on Marketing Investment estimates.
The Club’s kpis can be carefully monitored and reported through a suite of dashboards which can if desired be tailored to the specific needs of the different stakeholders and decision-makers. The SCV database itself has now become a potential asset across all parts of the business, available to support Buying & Merchandising decisions, ranging, the formulation of local marketing plans, etc. and to service ad hoc information and analysis queries.
The results of the initiative were immediately impressive and have continued to impress:

  • The original 1st year membership target was achieved in just 6 months
  • £2.5m in membership fees were collected in first 3 years
  • Approximately 1 in 4 of all shoppers are now active members
  • ~70% of members renew their membership each year
  • Increased average visit frequency by ~1 per year
  • The scheme’s ROI is estimated to be ~£20 incremental sales for every £1 spent
  • A business that is now truly customer-focused