Customer loyalty program: how to hook and retain customers?

In the recent edition of AllRetail magazine, an article came out discussing whether customer loyalty systems are a panacea for retailers.

Retail experts say that the market has been divided into 2 parts: some believe that the customer loyalty system in its economic sense should be mandatory. While others believe that this is not relevant, since less than half of consumers use such programs and that loyalty should be manifested in personification, special offers.

However, experts agree that the main task of the customer loyalty systems is not to force the clients to buy more, but to make a purchase in a particular store more valuable. A purchase will become valuable when the store possesses individual information about its customers and uses this information properly.

— Who needs to implement loyalty systems and why should they do it? What stage of business development should it be implemented at?

For any business and the size of the company, it is important to build long-term relationships with customers:  this is the most reliable weapon in the competition. It means that it is important to understand your client and build a dynamic strategy of relationship with him, using various tools to achieve maximum personalization and speed of response in case a customer encounters difficulties. We recommend using the metaphor «we build a business around the client and his needs». When forming a strategy, it is necessary to choose a development vector, tools for achieving it and make managerial decisions based on these tools, working with real data, and use qualitative in-depth analysis and communication tools. It is vital to understand that a successful business is client-oriented and client-centered.

What global loyalty indicators are used by consumers?

All of us visit shops, cafes, petrol stations and so on, and, we naturally participate in a variety of loyalty programs. According to the IFAK agency Institute research in last year, market competition leads to transformation of loyalty indicators into ultimate commitment to the consumer (customer) and absolute focus on user-friendliness of such programs:

• Simplicity of loyalty program conditions.
• Bonuses + additional rewards.
• Alternative customer identification (in mLoyalty it is a phone number, mobile applications).
• More personalized communication with the client through various channels, that is socialization.

We can see changes in the world market and introduce trends to our target retail audience. In 2017-2018 the market will continue to digitalize. Digitalization implies interactive, maximally oriented communication with the client:

• shift away from plastic cards as the main customer identifier to alternative methods of identification: a mobile phone number, a mobile application, using chat bots for cards call or registration (Facebook Messenger, Viber);
• Gamification: the implementation of game mechanics, which assume the formation of consumer status as a multi-stage reward scheme based on achieving particular ranks by participants;
• responding as quickly as possible regardless of channel of complaints or purchase, that is the customer`s omni-channel ID.

The development of such a trend allows us to obtain broader information about the customer, his purchases, actions and habits, which in turn contributes to the development and implementation of new tools for analyzing the clients` Big Data databases:

• understanding the need for qualitative databases analysis, working with Big Data;
  • allocation of various customer segments , clustering, which allow to predict the preferences of certain groups of consumers, their behavior with the aim of developing targeted / personalized offers;
• development, based on the results of the Big Data analysis, personalized offers in general for LP participants, as well as exclusive offers for the most loyal customers (most frequently this option implies non-monetary compensation);
  • Personalized communication with the client, taking into account the peculiarities of his consumer behavior and habits.

What benefits does retail receive from the customer loyalty system?

A customer loyalty system implies a whole set of tools. The key is the CRM system, which is necessary not just to automate the processes of work with client experience and relationships. The main objective of the CRM methodology is the formation of long-term relationships with customers based on their needs, in order to increase the aggregate value of the client base.

How can we measure the program?

1. Emotional loyalty is the commitment to the brand, the willingness to recommend it, positive emotional perception (readiness to recommend NPS, satisfaction with CSI).
2. Behavioral loyalty includes customer`s repeat purchases, average check increase, customers retention, improving resilience to the competitors price offers.
3. The effect from rising the customer`s longevity in the network (CLV growth).
4. Income from additional offers (increase in turnover, direct compensation of suppliers).
5. Revenues from the implementation of analytical information.

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What can be achieved through a well-developed methodology and implementation of the customer loyalty system?

The implementation of the customer loyalty system allows to influence consumer behavior by collecting detailed information through all channels and further analysis of the findings, drawing up individualized proposals. Customer loyalty system can be implemented with the purpose:

• To increase brand loyalty, encourage shopping, engage customers emotionally.
• To boost outlets attendance.
• To increase the revenue of the retail network, the frequency of purchases, and the average check.
• To maximize the customer base.
• To enable retail to launch affiliate programs.

I would like to note that the implementation of the customer loyalty system will not allow you to get immediate results. The loyalty system affects the value of a product or a service, but does not create it.

— Why don`t many large companies, such as the international «Auchan», use the loyalty system?

This question should be addressed directly to the top managers of Auchan. I would also like to give an example of a number of companies which use loyalty systems successfully. These are the companies like Arber, Intertop (Kazakhstan), LotOK, Med-service.