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PROMOTIONAL FEATURE: Content is king for loyalty schemes

Brands don't have to part with cash in order to reward consumers and generate loyalty, says Black Sun's Richard Dixon.

Loyalty programmes have been an abiding feature of consumer marketing for the past decade and beyond, but there is a growing dissatisfaction about traditional notions of such schemes. With budgets under pressure, brands are considering if they need a new approach.

It is easy to see why. For one thing, loyalty programmes can be a huge expense for businesses. Tesco is estimated to spend upwards of £50m a year on its Clubcard scheme, but even less ambitious programmes can quickly see costs spiralling.

Not only is the cost of incentivising consumers high, it is also of dubious benefit. Around 50% of storecard holders use their cards only once.

Loyalty should not come at any cost. Any brand looking at implementing a loyalty approach should have a robust financial basis for it – and it needn’t cost the earth. Such programmes need to align their budgets with the value of the customer.

How you spend that money is up to you, but there are other more cost-effective ways of engaging with customers that foster both an emotional and a rational connection with your brand.

1. One of the simplest techniques is to leverage your brand partnerships for reward elements of the programme. Drawing on partners helps you get more bang for your buck. It is amazing how few sponsors really exploit their sponsorship activity beyond corporate hospitality, yet it can be a source of desirable competition prizes and is exclusive content in its own right.

O2’s Priority Club uses the brand’s existing relationship with music sponsorship to deliver early access to gig tickets at the venues and events it sponsors. This reward in itself costs the brand nothing, but the perceived value of being front of the queue when tickets go on sale is huge for music-loving customers.

Similarly, Barclays delivers a lot of benefits, offers, incentives and competitions to its clients through partners (see box), including its sponsorship of the Premier League, which provides experiences that can’t be had easily elsewhere.

But these rewards don’t have to be built on the back of expensive sponsorship deals. You can source offers and benefits from other companies who view your  customer base as an attractive source of new prospects.

Leisure brand Everyone Active wants to be first choice for its members and sources activity-centric partners to provide offers for its customer base. Brands such as Thomas Cook and Red Letter Days are provided at discount rates to its members.

These relevant offers add value and give Everyone Active a reason to continue a  dialogue with members, allowing it to widen the scope of the relationship with customers. Customer datasets become richer as customers respond to offers, allowing even more targeted benefits and offers to be delivered in future.

2. Loyalty from your customers can be earned through compelling content which has a high perceived value, with digital media distribution costs much lower than offline.

The Nike Running website is a great example. Featuring content such as  training activities, running events, news and innovations, as well as a personalised area where consumers can set goals, map runs and join discussions, this site encourages active participation  and, of course, persuades members to buy Nike products. It moves the concept of the brand from being simply one product among many to being part of a sustained relationship.

Loyalty schemes need to work on both emotional and rational levels. By finding the right emotional trigger, it is amazing the amount of data you can glean from customers. Sainsbury’s pet clubs and children’s clubs are a great example of this as they focus on areas of the consumer’s life where there is a great willingness to engage in return for relevant content and offers. Data capture levels of 60% are possible while attrition rates have been halved.
    
3. Identifying communities of interest and providing a forum for that interest also aligns the needs of a brand with those of its consumers. Bang & Olufsen (B&O) has an online area called BEO Lounge where hi-fi buffs can view products in situ. Users register and supply data on their interests and are sent e-newsletters focused on the design credentials  of the brand. These help build a closer  affinity with customers.

Crucially, B&O also helps online communities to sell on products and ask questions about the best way to set up their systems. It provides an element that you cannot get in-store and builds an emotional engagement with the brand.

This emotional dimension is something you can’t deliver with points, where the transaction is quite cold. Customers want to feel valued and part of something, and here content delivers in a way that physical rewards cannot. The NCT uses its members’ magazine to inform parents about what the charity has achieved. In prolonging the relationship, it is more likely that parents will renew membership and makes it easier for more commercial messages to be targeted.

With the development of mobile  phone apps, the customer now has the brand literally in the palm of his hand. Apps have high perceived value as giveaways, but development costs are not prohibitive. They also offer a more direct route to communicating with the customer if they deliver a tangible benefit. Bank of America has used an iPhone app to deliver greater control of personal banking. Meanwhile, car rental company Sixt has teamed up with BMW to create a road-trip app which provides informative driving holiday routes for customers.

Remember that all customers are not equal, so why offer a similar level of reward? Ultimately, as much as the new breed of loyalty programmes allows brands to engage with consumers, the objectives are the same as ever. Brands want to extend the tenure of custom and increase the share of wallet. They also want to use existing customer loyalty as a way of driving acquisition through recommendation. The resulting data is an invaluable management tool to better understand the consumer and plot the business’s course.

What has changed is the speed at which you can do this, through digital media and its plethora of channels. There is now no time lag between launching a campaign and receiving feedback – it is virtually instantaneous.

By returning to the original roots of  loyalty, these advances are available to all brands at a cost that would have been unimaginable a few years ago. And that is why loyalty is still high on any marketer’s wish list.

Richard Dixon is director of customer optimisation at Black Sun



WE TRIED THIS AND IT WORKS...

Barclays wanted to secure and extend its relationship with the affluent clients who use its Barclays Premier Life service. Research found that the clients would only be motivated by a stand-out loyalty programme with aspirational benefits they couldn’t easily find elsewhere. Although the clients were successful, they were time-poor and wanted to enjoy the fruits of their labour.

Black Sun created a programme that recognised there is more to life than money, and that success is about quality of life. Life’s Rewards provides members with once-in-a-lifetime opportunities to attend cultural and leisure events, meet influential business leaders and get access to exclusive experiences. Its two key strands, Life’s Pleasures and Life’s Work, focus on an individual’s leisure and business interests.

From the start the relationship is personal, with clients providing their preferences when they join the programme. Communications are personalised according to this information. Events and experiences have so far included a private viewing of the Tutankhamun exhibition for 50 guests, and an audience with Sir Richard Branson.

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