Customer loyalty schemes are currently under a hyper-critical lens. Cost-crunched customers are seeing brands significantly altering their loyalty mechanics, writes Caroline Parkes, Chief Strategy Officer at RAPP.
The long-term points building systems that were once a cornerstone of these schemes are shifting to a ‘member pricing’ model, with the recent investigation launched by The Competition and Markets Authority (CMA) looking at whether the programmes are simply a way to charge customers more in the first place. If loyalty programmes were a Taylor Swift era, they have moved on from their roots as a guitar-toting stamps book to the mega-tour ubiquity era; and people are whispering… is it time to move on? Much like the Eras Tour tickets, do they offer good value for money, and how can we learn from Ms Swift when it comes to lessons from the past?
The Country Era – simple and catchy
The early days of loyalty programmes were simple. In post-war Britain, Green Shield turned the public’s association with stamps from the negativity of rationing into something more positive. Shoppers could collect stamps from purchases with retailers, and redeem them for gifts. Soon retailers recognised the value of creating these lasting connections with customers, and the much-replicated collection and redemption mechanic hit the market. A Love Story with loyalty programmes was born.
The Red era – giving programmes more pop
The 1990s saw my own professional introduction to loyalty programmes working with Boots No7 on a mailing and voucher-based programme. Highly successful – I won my first ever DMA award – it’s what we now refer to as a ‘covert’ programme. It didn’t have a name, and customers didn’t put their hands up to join it. This invisible programme approach is still hugely successful, though living in the inbox these days, rather than gracing the doormat.
1989 (more like 1995) – Tesco Clubcard changes everything
As the loyalty landscape evolved, the industry began to embrace data and technology, allowing loyalty programmes to scale and cement themselves into our everyday lives.
In 1995, the UK saw the first major loyalty programme launch with Tesco Clubcard, closely followed by Boots Advantage Card. While airline points programmes had been established since the early 1980s, their appeal was much more JR Ewing – focusing on ‘executives’ whereas Clubcard and ‘Every Little Helps’ was instantly more EastEnders.
Dunnhumby created a business from monetising the data that Clubcard collected. Instantly, this data became a valuable commodity to businesses like Diageo and Unilever, allowing them to add more precision and effectiveness to their ‘invisible’ loyalty programmes. This is precisely the challenge that Which? is calling out nearly 30 years later: how much of this value is being passed back to the customer?
The Reputation era – collaborations and subscriptions
Taylor Swift had her musical collaborations and loyalty programmes had their partnerships. O2 Priority was at the forefront of this movement, providing consumers with early access to concerts and soon expanding into other passion areas like sports and gaming, and then… the ubiquitous free coffee, and now Greggs sausage rolls. Programmes like Priority and Virgin Red need to go back to creating more distinctiveness, otherwise they risk End Game in their success.
Paid subscriptions such as ASOS Premier and Amazon Prime were becoming the norm in the mid-2000s. Countless retailers have adopted subscription models to encourage repeat custom, with elevated member perks. A personal favourite is Liberty’s Beauty Drop, where a subscription delivers members a ‘beauty bank’ to get ‘that red lip classic thing that they like’, plus the chance to get a regular discoveries box.
Lover – deeper connections
Loyalty programmes flourished in the Covid era. As people shifted purchases online, brands began to prioritise personalised experiences to create deeper customer connections. The sheer volume of customer data, and the power to connect it, meant retailers could adapt their communications and brand experiences to the nuances of every individual.
The purchase-focused targeting used in early loyalty programmes now feels simplistic, as marketers can connect different types of data. Such as personality data: RAPP’s analysis of offer-preference shows that extroverts respond better to FOMO time-related offers, whereas introverts prefer extra value ‘spend X and get Y’ offers. Or the data derived from a brand’s content and a customer’s browsing. Connecting data creates better experiences for the customer. For example, a high- street chemist’s customer is browsing its web content around trying new looks, so receives a ‘happy birthday’ makeover invite.
Connected data, bringing a multi-dimensional approach, can increase more of an emotional connection and fuel growth, but it’s not just the use of data, it’s what’s promised in the loyalty proposition. Research has identified a shift in more emotional loyalty programmes, with 52% of marketers who plan to launch a loyalty programme in the next two years envisioning their proposition as more emotional than transactional. A far cry from Green Shield stamps.
Instant Karma – rewards in the here and now
We now see brands focused on instant gratification, rather than the slow-burn point collections of programmes past. When we worked with KFC to reinvent its loyalty programme, our insights identified consumers’ desire for instantaneous rewards.
In a cost-of-living crisis, consumers are more concerned with saving money now than collecting points for the future. It’s why we have seen supermarkets provide ‘member-only prices’ and Boots reduce the generosity of its points programme in favour of an always-on discount for its own-label ranges.
The Tortured Poets or Customer Marketing Department
Gartner predicts that a third of businesses without a loyalty programme will establish one by 2027, and with nine out of 10 marketers citing a positive ROI for their programmes – with an average of 4.8x return – it’s no surprise. But the current investigation by the CMA into what has been criticised as ‘potentially dodgy tactics’ signals that change is needed for loyalty programmes.
It’s time for a new era which favours trust, emotion and transparency (like the feeling that Taylor Swift engenders in her Swifties) rather than creating Bad Blood.
