By Scott Logie, MD, Insight at REaD Group
It’s been a turbulent few months for the UK retail sector – Debenhams and House of Fraser both recently announced multi-million pound losses. On the other hand, Tesco revealed a rise in their annual profits to £1.3bn and Sainsbury’s and Asda announced a ground-breaking merger to make a super-supermarket.
The level of competition between retailers is reaching fever-pitch. Amazon’s seemingly never ending reach, the growth of online brands such as ASOS and boohoo, and the general rise of the discount retailer have disrupted a sector that has been slow to respond. It is therefore vital for retailers to demonstrate their value to consumers and develop robust strategies to capture and retain customer attention and loyalty. A strategy that has proven highly effective in both the past and the present? Loyalty schemes.
Is the loyalty scheme on its way out?
While some have criticised loyalty schemes in recent years, they remain a powerful way of connecting and engaging with customers. In our recent Retail Trend Report we found that there is an intrinsic link between how long a loyalty scheme has been running and the level of customer loyalty. The research found that Tesco lead the way in supermarket retailers when it came to customer loyalty – the Tesco Clubcard was the first scheme to be launched (in 1995). Consequently, retailers with less mature loyalty schemes have lower levels of trust – Morrisons was ranked 10th for customer loyalty and only launched its scheme in 2014.
Some critics have insisted that the loyalty scheme is dying out, however, Tesco’s announcement earlier this year that they were going to downgrade their Clubcard programme was met with widespread backlash from customers. The demand is still there it would seem. Loyalty schemes offer a tangible value and benefits to the consumer, and many budget and plan accordingly to make the most of them. They may not necessarily attract new customers but certainly encourage more frequent purchases and customer retention. Loyalty schemes have become expected as part of the offering by consumers – gaining points rather than just lower prices.
Changing consumer landscapes
It has gotten to the stage where many consumers are experiencing ‘’offer fatigue’’; being bombarded with endless 2-for-1-deals, flash sales and coupons to the point where they become desensitised to all of it. Comparable prices are no longer the differentiator, consumers expect retailers to offer them deals that are suited to their individual shopping habits.
With discounting so rife, consumers are no longer prepared to buy full price products unless they absolutely have to, which has meant that supermarkets like Co-op have suffered for a number of years now. In order to break the cycle, retailers must renew their focus on their customer loyalty propositions to make it worth customers investing their time and money in selecting their chosen retailer’s products. But how exactly?
The Digital Shift
Facilitating an easier process for customers to access their rewards is one way of tackling this challenge. Customers are increasingly using contactless technology and phones to make payments, and the prospect of carrying a wallet bulging with loyalty cards is becoming an increasingly unattractive one. It is high time that retailers shift their loyalty card schemes to digital platforms.
Tesco recently set an example by launching a contactless version of their Clubcard last year, followed by a Tesco Clubcard app. Customers who are presented with wads of paper coupons after swiping a loyalty card are, more often than not, unlikely to retain these for a future purchase.
Personalisation is key
Saving money is no longer the only priority for customers – they have come to recognise the value of personalisation and appreciate receiving deals that have been intelligently tailored to their shopping habits. Retailers therefore need to make sure that they are segmenting their customer data and analysing it to ensure that they are building and engendering trust and anticipating customers’ needs.
Building customer trust is a gradual process and not an overnight fix; this makes loyalty schemes more significant than ever before. Retailers must ensure that they are clearly explaining the benefits of a data-value exchange to their customers and remaining as transparent and open as possible.
Brands must demonstrate through these retail loyalty schemes that customers that consent to share their data stand to be rewarded for their loyalty and custom. And for those brands with long standing schemes already in place – now is not the time to abandon them! They’re a key means of understanding customer habits and maintaining valuable patrons.
The recent implementation of GDPR has provided a welcome impetus for brands to take this initiative. All things considered, by introducing loyalty schemes and using segmentation to enrich customer understanding, brands should soon enjoy better communication with an increasing number of data-savvy consumers.
25th September 2017
By Scott Logie, MD, Insight at REaD Group
While online retail services are commonplace and very much taken for granted these days, I remember a time when this was certainly not the case. Christmas 2002 – what feels like a bygone era now – was the first time I used Amazon to buy a few gifts for friends and family. Foremost in my memory being a spectacular Stanley Kubrick DVD box set intended for a friend of mine. Although I ordered in plenty of time, no box set ever materialised and I was obliged to venture out and purchase another to avoid being red-faced on Christmas morn. I duly complained and another set was dispatched without argument. It still has pride of place on my DVD shelf to this day.
I was gobsmacked at the time. No aspersions were cast on my honesty, nor whether the package had actually arrived – no argument at all in fact. Just a replacement product dispatched in a timely fashion. I had to admit that I was more than a little impressed after such a poor first impression. A new standard of customer service had been set in my eyes.
A mere 15 years later and this level of service has become the norm, and most can scarcely remember a time when it wasn’t. It has become clear that this provision of quality service has now become functional and can no longer be thought of as a differentiator. The question of what makes us loyal when it comes to our engagement with brands, spanning a range of sectors, is one without a simple answer.
However, as is indicated in our Retail Trend Report for 2017, one particularly successful method for promoting trust and loyalty appears to be through offering reward schemes and cashback to consumers. There is clear evidence in our research that brands with highly established reward schemes, such as Tesco and Sainsbury’s, have greater customer trust than those with no or only recently introduced reward systems.
Nevertheless, this alone is not enough, brands must strive to be more transparent and be seen to both preach and practice strong values for this loyalty and trust to be truly sustainable.
If we compare our most recent research to our findings from our 2013 Retail Report, we can see that loyalty has undoubtedly increased in those four years. However, while retailers can take encouragement from this there is still plenty of room to improve. Now is certainly not the time to ease up on the pedal. Essentially though, a higher proportion of brands seem to be raising the bar and increasing the pressure for others to follow suit and provide consumers with improved emotional and more rewarding relationships.
One cannot help but be intrigued at how the introduction of new technology may provide brands with a means to enhance their emotional connection with consumers in what is increasingly perceived to be a non-personal world. More advanced technology such as virtual reality seems to be gaining popularity at a steady rate, especially with younger customers. This could certainly present an exciting opportunity for brands to add an unprecedented level of engagement to their customer relationships in the years to come.
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12th April 2016
There isn’t a shopper out there who hasn’t seen the impact of the two great warmongers on our high street: recession and the internet. The empty facings, plethora of charity chops, and low price outlets have led many to believe that the high street isn’t just dying, but is dead, and has no chance of ever being resuscitated. And yet there are many examples of small towns, town edge malls and inner city developments which are bucking the trend and showing signs of fighting back.
So how do the high street retailers bring back the shoppers, and what does the future hold for the high street?
The economic downfall has limited retail sales and provided a strong rationale for shoppers to use the internet instead! In fact, 83% of consumers claim that they have, or would, shop online due to increased options, discounts and a broader selection of goods. People are more inclined to search diligently for a bargain from the comfort of their own home than brave the damp UK high streets – particularly at busy seasonal times.
The impact of online sales varies by retailer and by sector of course, but the most dramatic shift can be seen in music and film retail, where online retail is relentlessly crushing its high street counterpart. Conversely, sole internet players such as Asos and Amazon, with no bricks and mortar shops, are expected to double their share of the total market.
Electricals stores are also under pressure with just over a quarter of their white and brown goods now sold online. US retailer Best Buy pulled out of the UK last year closing all 11 stores while rival Comet was sold for just £2. Dixons Retail, which owns Currys and PC World, have also seen underlying sales in the UK and Ireland fall by 7%
And yet in fashion, just 9% of sales are online but this is still significant enough for several retailers – including Arcadia Group, which includes Topshop, Dorothy Perkins and BHS – to be looking at store closures. So e-commerce can enhance the high street; retailers just have to get smart. As with most things, innovation is probably the key. There are no longer any fixed rules when it comes to consumers, or even businesses, buying anything.
So retailers need to be flexible, explore all viable channels and use innovation. In the future, retailers need to employ a series of engaging techniques to persuade its customers that the best deals can be found on the high street.