There's never been a less loyal customer than today. And there never has been a time when loyalty was more deeply equated with a "money-off" reward mechanism than now. It's time to introduce a game changer. Retailers must ask themselves the question, "Can loyalty schemes that translate into discounts be transformed into meaningful schemes that offer customers greater value?"
Customers crave value. Today's customer is well-travelled, well-informed, expects more and, is vastly more intelligent, thanks to pervasive technology. Customer demands have grown – and go well beyond a few pennies off the next time they go to pick up groceries. What should a retailer do to ensure that customers remain loyal?
I have seen uninformed retailers view 'loyalty' schemes as just a money-off reward mechanism to encourage customers to shop with them. They believe this because they don't value the customer insight that a good loyalty scheme can provide. McDonald's hot drinks have a sticker that can be redeemed for a free hot drink after six purchases. This is a money-off reward mechanism to encourage repeat business. It does nothing to help McDonald's understand their customers any better.
In contrast, Club Cards, albeit having a reward element, is solely designed to collect customer insight. This allows retailers to tailor offers more accurately and effectively to their customers, thereby driving sales, promotions and new product development catered to their 'loyal' customers' needs. In other words, Tesco understands its customers before making them an offer.
How do you "understand" your customer? Most retailers use their CRM systems to "predict" what their customers want based on historical data, without considering recent changes. If you, as a retailer, are using CRM to mine customer intent, it is the symptom you are dealing with, not the cause. What you need is to create a value proposition that uses data to build customer intimacy.
Customers are willing to give information about themselves to their retailers, provided the retailer uses it intelligently. This, when combined with data that the retailer already has access to (credit card history, preferred shopping time, volume and value, top selling items by store, geography, season, etc), can be a very potent tool to launch a meaningful loyalty system. I recommend that retailers work hard on analytics and hinge loyalty programs irrevocably to the idea of customer intimacy.
Be intimate – but be careful. As a retailer, you must:
- Get systems and processes in place to extract the right customer insights.
- Get customer information across channels: in-store history, credit card, online usage, mobile interaction, CRM, social, surveys, promotional contests, etc.
- Use the collected customer data to position products and services towards your customers
Treat your customer as your new best friend. Set up the platform for creating loyalty using data and analytics. So, the next time a customer comes by, translate loyalty into an intimate transaction and watch the customer's smile grow