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Driving customer loyalty through choice – The value of redemption / Dan Martin, Collinson Latitude

by on May 9, 2016 in Latest News, Lead Article, Lead story, News you can use, Nuggets, Retail

Driving customer loyalty through choice – The value of redemption / Dan Martin, Collinson Latitude

Driving long-term loyalty and customer engagement is a key strategy in most businesses’ objectives, and a customer loyalty programme can play a big role in contributing to this success.

This is especially true when other elements of the buying decision, such as price and service levels no longer provide a significant competitive difference. But what helps your loyalty programme achieve a competitive difference?

Dan Martin, Commercial Product Manager at Collinson Latitude explains how increasing choice can lead to a thriving customer loyalty programme that can help your brand differentiate itself from the competition.

The biggest decision a customer has in the buying cycle, is who he or she chooses to purchase a product or service from. Sometimes, that decision is easy – via competitive pricing, an offer of higher service level, or even a more convenient date or method of delivery. But, when there is little difference between two or more providers, the incentive of rewards through a loyalty programme can often help to influence the final decision. That is of course, if the rewards themselves are appealing. But sadly, more often than not the opportunity is missed and the difference is negligible, with brands offering the same ‘earn’ and ‘burn’ (redemption) opportunities, through the same set of partners.

Loyalty programmes are a valuable source of insight into the customer and their needs.  As personalisation of the core customer proposition becomes more prevalent (with brands seeking to use data they have on the customer to make their offer relevant), the role of the loyalty programme in generating that data is key.   But, for this to work, the customer needs to feel that sharing their data with the brand is worth it; and the rewards on offer have to have sufficient appeal to the customer.

Choice in redemption to fuel loyalty

Of course, innovation and understanding from the loyalty programme provider regarding the options of choice presented to the customer are absolutely key. With greater demands for relevance from members, loyalty programmes, often need a loyalty partner with access to a rewards network that has the scale and depth to satisfy all member requirements. Whilst many travel brands already have a broad range of associated partners, a reward programme that offers true relevance and attainability for all of its members often now requires some third party support.

To build on this, the shift towards more customer choice isn’t only restricted to loyalty programmes, the rise in mobile device usage is another area where choice plays an important role. As payments via mobiles rise, services like Apple Pay or Google Wallet are encouraging customers to use their phones in the same way they’ve previously used cash, debit/credit cards and also how they keep track of reward programmes they have signed up for. Again, it is differentiation – this time by payment choice and device – that is helping to keep customers locked into a programme, but more crucially, keep them buying.

A successful example here is the retailer Best Buy, which allows customers to earn points via tapping into its proprietary app whilst in-store and also offering mobile-exclusive deals to encourage downloads of the app. The app is then used to track points and redeem when needed – via mobile payments. The retailer, previously focused on price-comparison, has now turned to mobile to differentiate but also offers in-store incentives. A great example of rewarding everyday spend and integrating a loyalty programme through both the online and offline world.

Going the extra mile for the customer

Loyalty programmes and choice are by no means just restricted to the retail industry. The travel industry has always played a major role in the origins and development of loyalty programmes, with early frequent flyer programmes dating back to the late 70’s and early 80’s with the likes of Texas International  and American Airlines respectively.

Despite the travel industry being such an influencer and early adopter of loyalty and reward programmes, it’s fair to say that many consumers would, from a topline perspective, view a lot of today’s travel programmes as “quite similar” in terms of approach and value. With airlines competing on pricing, schedules and the customer experience, it’s amazing just how alike their frequent flyer programmes are.  Earn and burn (redemption) opportunities are often the same, with the same partners and broadly the same offers. Offering a wider choice of rewards is a key (and relatively simple) way a programme can differentiate itself from others.

Our recent study looking at the ‘Value of Redemption’ echoes this. It revealed that more than 60 per cent of travel loyalty programme members actively look for more choice of reward options when selecting/joining a loyalty programme provider. It also showed that members are more likely to continue spending with a brand, after they have redeemed points/miles on items that are out of the usual core redemption categories of flights, hotel stays and upgrades (77% compared to 71%), something often referred to as non-core inventory.

Specifically looking at the behaviour Collinson Latitude describes as ‘burning drives earning’, members have voiced their preference for more choice and programme providers can clearly see the value add. In short, the selection of an increased (but relevant) choice of rewards in a redemption programme, through the successful interpretation of data, results in happy loyalty members and happy participating brands.

Redemption to build the value proposition

Essentially, any loyalty programme needs to drive up the value proposition in the eyes of the customer – whether that comes through greater choice of rewards, payment via mobile, customer exclusivity or to fulfil a need for convenience and choice. Ultimately, it is differentiation in the offering, fuelled by clever data, which drives this forward. Choice in particular, as we’ve seen from the real-life business examples discussed, is a key driver – empowering the customer to make the most of the loyalty programme – the mantra ‘spend more and thou shall be rewarded’ springs to mind.

The best experiences in life promote advocacy – this halo effect promotes further engagement and results in a thriving programme. Some of the best loyalty programmes implemented have had the advantage of not needing much time to establish themselves – the reward on offer is desirable from the outset – playing into the need state of the customer. From a brand’s perspective, this type of advocacy protects them from the threat of needing to compete in price wars – a sure-fire way to encourage one-off purchase at best.

n the eyes of the customer, a loyalty programme needs to add value to the base expectation and be a part of a positive, attainable user experience. This value proposition is far greater an attraction than anything that can be filtered on price. It’s an approach, that from a long term business perspective, can fuel sustainable growth through loyalty and value generation (or similar).

This value proposition can be strengthened further by giving the customer the choice they crave, to redeem on the rewards they want, enabling an anytime, anywhere shopping experience – that is rooted in customer data and insight at its very core. Graphics by Shutterstock

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