Attractive Loyalty:
Keeping the Brand Loyalist
2014
Foreword
The loyalty program is an extension of understanding your
customer – what they want and how they want it
In 2014, marketers face unprecedented challenges:
shrinking budgets, less resources and reductions
in customer spending coupled with high
expectations from the business about results
and ROI make it an exceptionally tough market
to be operating in. This is further complicated by
the rapid change in consumer behaviour with
new trends encouraging consumers to be more
discerning and expect more in return for their
brand loyalty.
We know returning customers typically account
for nearly half of a company’s revenue1, so brands
are working hard to acquire customers, keep them
engaged and cultivate a long-term relationship with
them. Brands want to create brand loyalists who
not only return but also tell their family and social
followers about their positive experiences and
spread the word organically.
Australian marketers have long understood the
value of loyalty programs to help them engage and
enhance their relationship with customers. This
understanding is reflected in the growing number
of loyalty programs Australians are now part of.
Yet with the increase in loyalty programs flooding
the market consumers are becoming fatigued
by programs that do not provide the value or
experience they expect or desire. At the core,
‘loyalty’ and ‘value’ mean different things to
different people and different brands.
1
Therefore, it is important organisations have a clear
articulation of why customers should be loyal to
them and the value they provide. Once a brand has
gained a customer’s allegiance, they should strive
to understand their customers’ unique needs,
wants and motivations to continually deliver highly
customised experiences and relevant offers – in
the customers’ eyes, value.
Our experience from around the world shows that
successful loyalty programs are underpinned by
data and analytics which capture customer
behaviour at different points of brand engagement.
Brands and marketers should consider their loyalty
program as a reflection of how intimately they
understand their customer.
Brands have an opportunity to develop loyalty
programs which place the customer at the centre
of their brand experience, meaning it is informed
by customer insights as well as demonstrating
and adding value. In the complex world of today’s
loyalty programs, these elements will differentiate
highly effective programs from their less
successful counterparts.
David Chinn
General Manager, Consumer Insights
and Targeting Experian Marketing Services
’Building Brand Loyalty in a Cross-channel World’, Experian Marketing Services, 2013.
Attractive Loyalty: Keeping the Brand Loyalist
2
Executive Summary
As brands invest in more creative ways to gain a customer’s business, loyalty
programs are being used to take them on a journey that will encourage return
business and begin to build the brand-customer relationship. There is a wealth
of online and offline data that can be used to help brands recognise the customer
experiences that will help encourage this shift.
To assess the current health of the Australian customer
loyalty landscape, Experian surveyed 1,000 adult
Australians, 700 of which are currently part of at least
one loyalty program. The purpose of the research was
to understand from a consumer perspective, the factors
they consider when joining and remaining part of a loyalty
program and the impact on their brand engagement.
The disconnect between what a brand is doing and what
a program member expects is amplified when we learn
that almost four in ten consumers feel that brands are
sending irrelevant offers to them and nearly half believe
that most loyalty programs are a waste of time. It shows
that marketers are finding it challenging to turn data
into effective insights to inform their loyalty program.
The research underscored the popularity of loyalty
programs with more than half of survey respondents
being members of up to two and more than a third,
members of between three and five programs (see figure
1). Overall, consumers believe the quality of programs
is improving with 73 per cent believing programs
are getting better compared with two or three years
ago, but there are obvious areas for improvement.
Brands that are able to identify and understand the drivers
behind purchasing decisions will develop the strongest
connections with their customers. Understanding the
factors that impact their decisions and purchasing
path are key to boosting retention and engagement as
brands understand what individual customers value.
Consumers are becoming fatigued by loyalty programs
and are not afraid to cut ties with brands who do not offer
long-term value. Not only are one in five disappointed
by the benefits of programs they are a part of, but one
third have taken the next step to either opt out of a
program or consider opting out after receiving too much
information or found no benefits to being a member.
There is long term benefit behind taking
this customer centric approach which lays
the groundwork for the next interaction
with the customer.
Figure 1: Are you part of any loyalty programs?
I am a member of
more than nine 3%
I am a member of between six
and eight loyalty programs 4%
No, I am not a member of
any loyalty programs 12%
I am a member of
between three and five
loyalty programs 30%
I am a member of up to two
loyalty programs 51%
Attractive Loyalty: Keeping the Brand Loyalist
3
Loyalty Fatigue: Australians Opt
Out of Low Value Loyalty Programs
How to Retain Customers Through Personalised Experiences
“Stay relevant to your customer’s demands – some value quality above everything
else while others prefer to be the first to know about an innovation. Some may
support green initiatives and would like to be made aware of green-friendly
services. The key takeaway is to ensure that the loyal customer is understood,
recognised and receives special treatment that is aligned with their values”
- David Chinn
Experian’s research shows that despite the improving
quality of loyalty programs, Australians are experiencing
loyalty fatigue and will opt out of loyalty programs that do
not offer value. Australians are not hesitant to cut ties with
programs if they feel they have not been given relevant
information or cannot see the benefit of being a member.
Some 31 per cent of Australians have left a loyalty
program because they have received irrelevant or too
much information, found no benefit to being a member
or were part of too many loyalty programs (see figure 2).
It’s important to recognise that customers consider
communication that is not tailored and personalised
to be irrelevant. In fact, 55 per cent of respondents
admitted they will not open brand communication
unless it is personalised. In a saturated market where it
is hard to achieve cut-through, tailored and personalised
communication is critical. It appears that improvements
can still be made, with more than a third of respondents
feeling like brands send them offers that aren’t relevant
to them and don’t understand what they do and don’t
like. Brands should develop relationships with customers
based directly on a customer’s previous behaviour to
provide a positive experience that is unique to them.
The key is connecting with customers on a
meaningful level and analysing their behaviour
by tapping into the insights buried in data. This
deep understanding means brand loyalists can be
provided with the experiences they’ve indicated
they prefer.
Customers have made it clear they look for brands that
recognise and appreciate them as individuals and will
disengage with brands who do not demonstrate this.
Figure 2: Have you ever opted out of a loyalty program?
40%
36.7
30%
20%
20.1
10%
10.6
13.3
12.8
5.2
1.8
0%
No, I like
the benefits
of being a
member
Yes, I found
no benefits
to being a
member
Attractive Loyalty: Keeping the Brand Loyalist
No, because
its too time
consuming
to leave, but I
would like to
Yes, I have
received
irrelevant
information/
too much
information
No, I stopped
engaging with
the brand as I
could not see
the benefits
Yes, I was
part of too
many loyalty
programs
No, the
benefits
outweigh the
negatives
4
Loyalty Fatigue: Australians Opt
Out of Low Value Loyalty Programs
The benefits of personalisation are real and clearly seen in a
campaign undertaken by storage business, Howards Storage World.
Howards segmented its customer database based on
previous purchase history and developed email campaigns
containing offers and vouchers specific to these segments.
Campaign results were outstanding both in terms of
revenue raised and also customer response. The campaign
resulted in over $250,000 in revenue and a voucher
redemption rate of 48 per cent.
This is an example of developing a clear customer
understanding which translates into meaningful
and relevant interactions with brands and
strengthens the brand-customer relationship.
Howards Storage World
Howards Storage World is a specialist storage and
home organisation retail business, which has been
in operation since 1998 and grown to over 60 stores
across the country. Its award winning loyalty program
currently has 320,000 members. Howards Storage
World sought to engage its member base with tailored
and compelling email and SMS communications
to drive foot traffic and in store purchases.
Howards Storage World implemented a marketing
communications campaign that aimed to engage its
Attractive Loyalty: Keeping the Brand Loyalist
member base by drawing on behavioural insights
and customer data. They were able to effectively
engage four different customer segments, through
personalised communications and vouchers based on
each segment’s behaviours and levels of engagement.
These insights were mined from loyalty program data.
The campaign delivered over $250,000 in revenue and
vouchers sent as part of the campaign experienced a
redemption rate of 48 per cent. Howards now plans
to roll this program out across all of its stores.
5
Going Beyond the Card: Creating Brand
Loyalists Through Long-term Benefits
Overall, Australians believe the quality of loyalty programs has improved
over the past two to three years, yet more than half of consumers feel
few programs are worthwhile being part of.
Marketers need to focus on overcoming loyalty program
fatigue and achieving cut-through by having clear
benefits aligned to what program members value.
Experian’s research showed that after joining, one in five
members are disappointed with the benefits of programs,
and many assess whether a program is worth being a
part of based on the member benefits and discounts.
Furthermore, 80 per cent believe if the loyalty program does
not offer a discount, then it is not worth signing up for.
Effective loyalty programs are ones which
incentivise and encourage customers to interact
with your brand more frequently over the longer
term, creating and amplifying the characteristics
of brand loyalists.
In order to achieve this, brands should differentiate
and segment their customers, even creating tiers of
customers based on behaviour and preferences.
The customer understanding and insight that can be gained
from this will allow brands to implement a loyalty program
that is aligned to their behavioural drivers and critical points
on their path to purchase. This engenders a commercially
successful loyalty program that drives business growth
while supporting customer aspiration and retention.
While the majority of customers still join loyalty programs
at the point of sale (55 per cent) only 30 per cent join for
immediate benefits. Experian’s research indicates that
Australians take a long-term view when joining loyalty
programs, with 38 per cent joining to help them work
towards something bigger, usually longer term rewards
or benefits (see figures 3 and 4). This is ahead of joining
for an immediate monetary benefit on the product they are
purchasing (30 per cent).
Brands should be aware it is no longer enough to
simply offer customers a loyalty program that consists
solely of rewards based on transactional points.
Figure 3: When do you usually join a loyalty program?
At the point of sale 55%
In-store promotion 15%
Via an SMS 1%
Through Facebook advertising 1%
Other advertising 1%
On the brand’s website 19%
Through a catalogue 2%
Newsletters/email 6%
Attractive Loyalty: Keeping the Brand Loyalist
6
Going Beyond the Card: Creating Brand
Loyalists Through Long-term Benefits
One method of cultivating brand loyalists is to develop
value-based loyalty programs rather than discountbased models. This helps clarify program benefits and
crystallises, why customers should remain part of the
program. Value-based programs are an opportunity
for brands to demonstrate how well they recognise
their customers by offering program benefits that are
specific to them. A simple way to do this is to create
specific benefits for different tiers of customers for
example, those who spend more than $1,500 a year.
Marketers need to find the balance between short-term
benefits that may encourage customers to join and expand
the member base, and long-term benefits that develop and
cultivate the customer relationship. The research shows
marketers can still improve the way current loyalty program
benefits match customer needs, with two in three
customers dissatisfied with current benefits. Marketers
also need to be aware that unfocused loyalty programs
which do not properly align with marketing and business
goals ultimately will be very costly to the organisation.
For example, if your business strategy is to drive purchases
online, it’s possible to use loyalty program data to identify
customers which have demonstrated a history of online
purchases and target marketing campaigns specifically
to this segment, rather than trying to convert in-store
customers to online customers.
While the focus should always be on the customer, it is
critical for program economics to be established at the
front end and measured throughout the program lifecycle to ensure that program objectives are being met
and that a strong return on investment is achieved.
A key benefit of a cross-channel approach is
the ability to create customer communications
which are triggered by customer behaviour to
help maximise business benefits from the
loyalty program.
For example, personalised marketing content can be
sent to new customers who may require additional
communication in the early months of their program
membership to maximise engagement. This regular
communication has the added benefit of raising the
awareness and profile of loyalty program features such as
special offers and social media discounts and content.
Again, the key is to understand each customer’s individual
emotional drivers along their path to purchase. In
differentiating customers by preferential and behavioural
segments, brands can develop meaningful touch points
and relationships with their customers. These meaningful
connections are what brand loyalists often perceive as
value and encourage them to return or share positive
experience with family and friends. This organic spread of
positivity about your brand is a key benefit of brand loyalty.
Figure 4: Why do you join a loyalty program?
I like the brand and their products and want to know more 29%
I want to hear specifically about discounts and sales they will have 38%
Immediate monetary saving on the product I’m purchasing 1%
To collect loyalty points and build towards something bigger 1%
It makes shopping online easier as they remember my previous purchases 4%
Access to other brands through their partnerships 12%
Advance notice of sales and discounts and surprise gifts,
exclusive offers and discounts 15%
Attractive Loyalty: Keeping the Brand Loyalist
7
Connecting the Dots to Surprise
and Delight Your Customers
We know that effective loyalty programs require a degree of trust and a strong relationship between the brand and the customer.
The research supports this and shows that Australians
are comfortable sharing information with brands
and companies if it will help improve their customer
experience. Fifty-eight per cent of Australians are
comfortable with companies using the information they
collect about them, making it easier for consumers to
shop with them or be provided with more discounts.
A successful loyalty program is built on a
brand’s ability to connect the data dots and
communication channels – online and offline –
and draw on behavioural insight to enable
them to have meaningful interactions with
their customers.
For example, perhaps a member has visited an online
store and purchased a product. At a later time, through
geo-spatial technology, it is possible for a brand to
detect if that same customer is near a particular store.
The right technology can help marketers develop
effective cross-channel programs that are capable of
detecting this in real-time and can capitalise on such
opportunities to convert them to sales. The brand is
able to send an SMS with a special offer based on their
previous behaviour. This cross-channel experience
works to surprise an unsuspecting customer and delight
them with a tailored offer that reflects their behaviour
and demonstrates the brand understands them.
Attractive Loyalty: Keeping the Brand Loyalist
There is an unspoken agreement that brands will use
personal information given by customers appropriately
including providing them with the best possible experience.
This can be as simple as knowing the most effective
channels of engagement with your customer and how
these can deliver long term loyalty. Brands that are able to
gain a single view of their customer will be empowered to
provide consistent and seamless brand experiences across
all touch points. Brands who do not reciprocate this trust
and provide attractive and differentiated loyalty programs
may find their consumers will switch off. Brands that
complete this effectively will be able to surprise and
delight their customers and will experience a competitive
advantage over others.
When a loyalty program is at its most effective, it
constantly assesses each customer’s continually evolving
preferences, behaviours and purchasing patterns. This
enables a brand to deliver a loyalty program that is relevant
to a customer’s life stage and their emotional drivers.
Further, when overlaid with additional consumer
classification tools which further enhance the customer
data, brands are able to clearly identify their most valuable
customers. Armed with information on what their best
customer looks like, brands are then able to go out and find
more of these customers and ultimately drive membership.
8
Seamless Brand Loyalist Experience
Australian marketers who look carefully at the current
market will see opportunities for future growth.
The research shows a high degree of support for mobile
apps associated with loyalty programs – one in four
consumers which are members of loyalty programs
currently use them. Looking to mature markets such as
the US and UK, programs that are supported by dedicated
mobile channels perform strongly and they appear to
be the next step in providing a complete cross-channel
experience for customers. They enable consumers the
flexibility to browse and search through the app and
purchase in-store or in some cases, browse in-store
and complete the purchase through a mobile device.
The true value of data is its ability to inform strategy
and create value for customers by providing brands with
a single view and allowing them to create seamless
customer interactions and experiences. These seamless
interactions demonstrate to the consumer they are
recognised and valued as individuals.
At the core, marketers who adhere to the principles of
cross-channel marketing will be able to develop and
maintain a strong loyalty program that is personalised
and truly offers value to their members – whatever
value and loyalty means specifically to them.
We know marketers are feeling overwhelmed by the data
available to them but they should be encouraged by the
benefits of harnessing data and the insights that
it can provide.
Brands who display this commitment to the
brand-customer relationship will be rewarded
by the creation of brand loyalists.
Top tips for customer loyalty programs
1 Understand your customers
3 Affirm what’s good
Really define who your brand loyalists are – what
they look like and what they want, how they
behave and how they share information about
your brand. Sourced through existing data in your
loyalty program, these insights can help brands
understand how to cultivate more brand loyalists
and how word of mouth works to create consumers
who are engaged and loyal to your brand.
Treat customers with genuine respect and always deliver
on your promises. As the shopping experience evolves
and it becomes easier for consumers to find precisely
what they want, when they want it, it is imperative
that brands facilitate this convenient new reality or
they risk losing customers to the next competitor.
2 Consider customer and
business perspectives
Ensure your strategy responds to customer desires
but also delivers against your business objectives.
Unfocused loyalty programs that do not properly
align with marketing and business goals ultimately
can be very costly to the organisation. While the
focus should be on the customer, it is critical to
establish business viability for the loyalty program
early and ensure it is measured throughout to
ensure strong return on investment is achieved.
Attractive Loyalty: Keeping the Brand Loyalist
4 Connect with core desires
Listen to customers and find out what resonates
with them. Knowing which customers value a
discount over having the latest product leads to
more profitable decisions about how to engage
them. This can be achieved by constantly assessing
behaviours and purchasing patterns, which
allows brands to deliver a program that is relevant
and reflective of their customer’s life stage.
5 Get it right
Reward customers with generous incentives to make
your loyalty program worth joining. Point based
messages, continuous information and of course rewards
are critical to ensuring your customer feels special and
appreciated. Loyalty program welcome emails rank
among the highest in open and click-throughs so use
this opportunity to make your customers feel loved.
9
Experian Australia Pty Ltd.
Level 6, 549 St Kilda Road
Melbourne, VIC 3004, Australia
T:
(61) 3 8699 0100
F:
(61) 3 9923 6280
[email protected]
experian.com.au/marketing-services
Research Methodology
Experian Marketing Services surveyed 1000
Australian adults, 700 of which are currently part
of at least one loyalty program. The findings were
used to develop this industry whitepaper on
loyalty programs in Australia.
Follow us and join the conversation
© 2014 Experian Australia Pty Ltd. All rights reserved.