MASTERCLASS:WHEN LOYALTY programmes expert Leanne Papaioannou moved to Ireland nine years ago she was amazed by the commitment of Irish consumers to specific brands and companies.
“I discovered that generations of the same family went to a certain shop or bought a particular service because their parents and grandparents had done so before them. Customer loyalty was very bound up with long standing relationships,” she says.
Not any more. The vice-like grip of the recession has made Irish consumers a lot more savvy. Nowadays if we dislike the way we are being treated or see better value elsewhere we are voting with our wallets.
“Switching really runs against the traditional Irish consumer psyche, but since it has become an acceptable practice spearheaded by national campaigns such as the Bord Gáis Big Switch, the loyalty landscape here has been changed forever. Irish people are switching their allegiances driven mainly by value for money,” says Papaioannou, who heads up loyalty agency Chilli Pepper Marketing.
At their most superficial, loyalty programmes recognise and reward constant customers. Drill deeper and they become a valuable source of information about customers’ lifestyles and buying habits which can be put to good marketing use to influence buying patterns and boost the bottom line. With loyalty programmes it is very much a case of how deep do you want to go.
Loyalty rewards have been around in one form or another since the dawn of trade but American Airlines is credited with kicking off loyalty schemes back in 1981. Loyalty is big business in the US, where there are more than a billion memberships of loyalty programmes.
Loyalty schemes have been in operation in Ireland since 1993 when Superquinn introduced its reward card. Loyalty was a slow burn for a long time. Now businesses are falling over themselves to get involved. But not all programmes endure. In the late 1990s a number of the major petrol retailers here introduced loyalty rewards but subsequently dropped them when margins came under pressure.
There’s the rub. Loyalty schemes may give the customer something for “free” but there is a cost to implement them. One way cash-strapped companies are currently funding them is by redeploying money from traditional advertising/marketing budgets.
A decade ago loyalty programmes were expensive to set up because of IT costs. As a consequence they tended to be the preserve of bigger organisations. Now any business with a reasonably up-to-date point-of-sale system can get involved. Many systems already have built-in capacity to run schemes or can do so if a suitable piece of software is added.
Programmes can be as simple as a card that gets stamped every time you use your local car wash. (However, experts warn that this type of system is open to fraud.) More sophisticated programmes involve a swipe card backed up by e-communications offering special deals on products or services.
Loyalty programmes work for companies of all sizes, but the smarter they are the more they cost. Big organisations spend a lot of money analysing customer data and using it to target specific customer groups. That said they do not always get it right. Vouchers for products such as pet food can still end up in pet-free households.
“Getting loyalty programmes to work well requires a big commitment and while smaller companies may have the will to do it, they may not have the resources and be able to make the time commitment required,” says Connor Cantwell, co-founder of 20:20 Insights, which assists mainly blue-chip companies on the technological and data analysis sides of implementing loyalty programmes.
“To really get a good return from a programme involves making the most of the data being collected to look at how the programme is working in terms of influencing customer behaviour. But it’s not a quick process. It takes years to build up a really good loyalty programme.”
Easons is something of an Irish retailing institution. The company has been in business for 125 years which suggests customer loyalty is not an issue. Its newly introduced “Thank You” loyalty card is designed to ensure it stays that way.
“The card was launched in October and we have been overwhelmed by the response,” says David Field, head of marketing and retail at Easons. “There is certainly a great appetite for such schemes and ours is quite generous at three points per Euro spent. The card was a response to market research. Our customers told us they would like their loyalty to the brand rewarded.”
Easons began designing its programme towards the end of 2010 and implemented it nine months later. “There is a lot involved to get the tills and back office ready,” Field says. “It represents a significant investment but if it means someone visits more frequently or walks by a competitor to spend their money with us then it’s a good business decision.”
There are variations on the theme that are less complex to implement. Irish-owned Dubray Books has not yet launched a full-blown loyalty card but has introduced a card that entitles registered book club members to a 10 per cent discount.
“We are thinking about a loyalty card but need to make changes to our technology to support it,” says marketing manager Susan Walsh. “In the meantime customers just seem happy to be getting something back.”
Loyalty programmes may be flavour of the month but they need to complement other aspects of customer service not substitute for them. There needs to be a good reason for introducing a programme, it needs to be monitored to assess its success and regularly tweaked to reflect changing trends.
