OPINION6 September 2016

Why loyalty schemes don't drive loyalty

Data analytics Opinion Retail Trends UK

Loyalty schemes focus too much on the functional aspects of points and prizes and not on emotional drivers like trust and likeability, says Ben Pask of Rare. 

Loyalty card crop

Did you know that ‘nice’ used to mean stupid or that ‘naughty’ once indicated being bland? Our understanding of words changes over time because definitions shift to suit a specific purpose.

Nowhere is this truer than in business, especially marketing. The results of Redefining Customer Loyalty, a recent survey into people’s attitudes towards loyalty, showed marketing professionals are regularly misinterpreting the concept.

Rare asked more than 1,000 UK consumers whether they felt the lure of points and potential discounts made them more likely to buy something again. One stark finding stood out: loyalty schemes don’t drive loyalty. The vast majority of respondents agreed that likeability ( 86%) and trust ( 83%) are key drivers of their loyalty to brands, rather than simply the chance to make back pennies on a purchase.

Overall, the research suggested that loyalty is an emotional response, rather than being functional, as some 65% of people claimed they would still buy from a brand if the scheme it was associated with ceased to exist. Furthermore, the research found that loyalty equates to favouritism. Like human relationships, it’s emotional and instinctive. When asked to name any brand to which they were loyal, 90% of people later also picked the same brand as one of their favourites.

Traditional loyalty schemes like Tesco Clubcard and Nectar have become part of everyday life, fashioned around accumulating points against purchases made. Last year, however, it was revealed the UK is sitting on £6bn of unused points from the top 10 retail loyalty programmes alone. Purveyors of food stamps, the root of loyalty schemes, must be turning in their graves.

The survey results necessitate a seismic shift in thinking from brands bidding to build long-term relationships with their customers. Marketers don’t seem to be incentivising the right behaviour or enticing people to come back for more. In truth, if brand trust is low and quality of service doesn’t ring true, schemes are a waste of time, effort and money.

Schemes were found wanting across measures including ease of use, purchase experience, delivery on promise and personalisation. The results were used to create an index of retailer loyalty schemes, with only two – My Starbucks Rewards and Amazon Prime – beating the benchmark, while each of the other 15 brands featured, from M&S to The Co-operative, fell short.

One of the biggest failings according to respondents was the lack of personalisation evident in the schemes. Consumers pay good money to opt for one item over another, so they understandably expect a great experience that is tailored to their individual needs. In return, they will offer their loyalty. The research, however, shows that many brands are not performing in this area.

Loyalty scheme leaders not only need to keep up with the changing nature and definition of loyalty but also require the smart use of data to reassess what behaviours to reward and whether the incentives on offer match consumers’ needs.

According to the Oxford Dictionary, the term loyalty is defined as ‘a strong feeling of support or allegiance’ – ‘feeling’ being the key word. Yet in the marketing community when talking about customer loyalty, emotion is not discussed enough. Often, when aiming to encourage loyalty, there’s a tendency to focus on points and prizes, and the cards, apps and emails through which these are delivered.

Brands can’t go on making the same old assumptions about loyalty, merely trying to put a different twist on points-based schemes. Shoppers clearly want long-term engagements to be based on trust and likeability. Marketers ignore these warnings at their peril, because consumers today will always have the last word.

Ben Pask is founder of Rare