Customer Loyalty: A Relationship, Not Just A Scheme
The Deloitte Consumer ReviewCustomer loyalty: A relationship,not just a schemeJuly 2017
About this reportIn this publication, references to Deloitte are references to Deloitte LLP,the UK affiliate of Deloitte NWE LLP, a member firm of Deloitte ToucheTohmatsu Limited.About the researchTo better understand customer loyalty, Deloitte commissioned an onlineconsumer survey carried out by an independent market research agency.The survey was conducted with a UK nationally representative sample of2,164 adults aged 18 and over between 16 June 2017 and 19 June 2017.Please visit www.deloitte.com/consumerreview for additional contentrelated to the Consumer & Industrial Products industry
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeLoyalty is a relationship, not a schemeIn this edition of the Deloitte Consumer Review, we arerevisiting a theme explored in our 15th edition: the challengebusinesses have in delivering a positive customer experience.We focus in particular on customer loyalty.Deloitte believes traditional loyalty schemesneed a rethink not only because of changingconsumer expectations, but also because theyhave become expensive to run and difficultto unwind. Securing customers’ loyalty goesbeyond having a loyalty programme. Loyaltyis the brand’s ability to be ‘top of mind’ in acustomer’s head as well as to secure a senseof allegiance from consumers. Allegianceis much harder to achieve at a time whenevery consumer has different expectationsand responds to different triggers when itcomes to engaging with a brand. Getting thecustomer ‘experience’ right has become thedifferentiating factor for many successfulbusiness models. The right loyalty strategyshould help to deliver that experience.This report will examine a number ofviewpoints: winning and retaining customers in thedigital era requires a mix of personalisation,relevance, exclusivity and engagementacross all the different channels traditional points-based schemes are oftennot agile enough to meet rapidly changingcustomer expectations in the same way that‘connected stores’ and new technologiescan engage with consumers1 traditional financially driven loyaltyschemes can become a financial liabilityfor businesses businesses need to consider a custom-builtsolution for implementing their loyaltystrategy versus an off-the-shelf ‘buy’ version loyalty solutions need to be agile to buildand enhance the offering. the traditional customer loyalty scheme hasbecome a ‘tired’ concept that needs to bereinvented the customer experience is just asimportant as points or financial rewardsto secure customer loyalty1
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeThe traditional customer loyalty schemehas become a ‘tired’ concept that needsto be reinventedLoyalty schemes are no longer thedifferentiator they once were. Although theword ‘loyalty’ is often associated with thepoints and financial incentive schemes thatwere launched over 30 years ago, theseschemes are no longer enough to satisfya more demanding customer, whose loyaltyhas evolved and requires a more personaland relevant approach.According to Deloitte research, the majority ofconsumers consider being rewarded for theirloyalty as the norm but not a differentiator.The research demonstrates that whileparticipation rates to loyalty schemes arerelatively high, the reward offered is not seenas differentiating for the brand, it is expectedrather than prized or valued. The data showsthat one in two consumers is a regular user ofloyalty schemes, making use of a brand loyaltyscheme at least once a month. Moreover while54 per cent of people claim to like points-basedloyalty schemes, a similar share of consumersdo not always redeem all their points (53 percent). When asked about their attitude toloyalty schemes, 42 per cent indicated theyneeded more than points to shop with a brand(see Figures 1 and 2).2Sir Terry Leahy once said: “The true sourceof loyalty is to create benefits for people.”He went on to explain: “That’s really whatbuilds loyalty. Sometimes people concentratetoo much on devices like a loyalty card,such as the Clubcard.”2 This statementdemonstrates the need for schemes toevolve with changing consumer expectations.“The true source of loyalty isto create benefits for people.That’s really what buildsloyalty. Sometimes peopleconcentrate too much ondevices like a loyalty card.”
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeFigure 1. Frequency of usage – Loyalty schemes26%Once a week or more often12%Once every two to three weeks10%Once every monthOnce every two to three months13%7%Once every six monthsOnce a yearLess often than once a year4%7%NeverDon’t know/can’t recall14%6%Source: Deloitte UK, June 2017Base: All GB adults online (n 2,164)3
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeFigure 2. Attitudes to loyalty schemes54%I like point-based loyalty schemes60%47%I always redeem all my points and take advantage of allthe offers I receive through loyalty schemes40%The experience the brand offers in terms of how I usemy loyalty scheme benefits (e.g. vouchers, points, etc.)is important in encouraging me to make use of the scheme45%51%44%I want the option of personalised rewards based on mypurchase history54%42%I need more than points from a loyalty scheme to make mewant to shop with a brand42%Loyalty schemes help brands know what I want and provideme with helpful suggestions and rewards (e.g. receivingvouchers and coupons on products I buy regularly)41%48%I want a loyalty scheme that better reflects my lifestyle,such as offering me 'freebies' for activities I enjoy(e.g. free cooking class)32%Communications I receive from loyalty schemesare relevant to me32%47%27%21%There are some brands that I would stop buyingfrom if they were to end their loyalty schemes19%18%I rarely redeem my points or take advantage of theoffers I receiveI am not currently a member of any loyalty schemesTotal – Agree18-24 – AgreeSource: Deloitte UK, June 2017Base: All GB adults online (n 2,164)428%6%7%
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeThe customer experience is just asimportant as points or financial rewardsto secure customer loyaltyAccording to our research, overall experienceas well as loyalty schemes are importantfactors beyond value for money, trust,quality, convenience and customer service inachieving loyalty. Among the reasons peoplegive for being loyal to a brand, 27 per centclaim it is about the quality of the shoppingexperience and 26 per cent like the brand’sloyalty scheme (see Figure 3). Previousresearch has also shown that over 50 per centof consumers say that the overall enjoymentof their experience is important in theirdecision to buy a product or service.3Loyalty should be about more than justcollecting points. Loyalty programmes losetheir significance when they are surroundedby similar schemes. On average, peopleare enrolled in 14.3 loyalty programmes,according to a recent report from Bond BrandLoyalty.4Many of the current schemes just rewardnormal behaviour or routine, not loyalty.Loyalty is often tied to routine, so anyinnovation that simplifies a routine whileenhancing the customer experience isa reward in itself. Businesses should try toease the burden on customers by makingthe journey frictionless and easier. Whilerewarding customers for their repeatpurchases is important, it is the overallexperience that matters the most.It is very likely that customers will remembertheir experience with a brand long after theyhave forgotten receiving a discount. Loyaltyprogrammes need to focus on the role theycan play in the overall customer experienceto help forge that relationship between thecustomer and the brand for the long term.Case study – Marriott, thepower of tiered loyaltyThere are many travel rewardsprogrammes, but none have embracedthe power of tiered loyalty quite likeMarriott Rewards. Marriott has decided topush this concept one step further withwhat is called “tier-ception”.Marriott Rewards takes gamificationto a different level by giving customersthe opportunity to keep improving theirstatus in the programme.The Lifetime Status tiers recognisecustomers who make a long-termcommitment. Once this status is achieved,it can never be revoked or expire,ensuring the customer receives thebenefits of either Silver, Gold or Platinum.This is a good example of a scheme thatrewards lifetime customer value not justindividual transaction value.55
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeFigure 3. Drivers of loyalty64%If the brand offers good value for money52%If I trust the brandIf the brand offers the best quality products/services50%41%If the brand has great customer serviceIf the brand was convenient to buy from(i.e. it is easily accessible to me)36%27%If the overall shopping experience is great26%If I liked the brand’s loyalty schemeIf the brand offers me recommendations/offers/vouchers/suggestions that are relevant to me19%18%If I identify with the brandIf it were a brand I would recommend to friends or family,or talk about on social media16%If it were a brand that lets me control the level of interactionsI have with it and the content I receive from it(e.g. adverts, emails, etc.)16%If I liked the brand’s website8%If I liked the brand’s appIf I liked following the brand on social mediaBase: All GB adults online (n 2,164)63%Other2%Don’t know2%Not applicable – nothing makes me particularlyloyal to a brandSource: Deloitte UK, June 20176%15%
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeWinning and retaining customersin the digital era requires a mix ofpersonalisation, relevance, exclusivityand engagement across all the differentchannelsConsumers want to be recognised andrewarded as individuals, not as nameless,faceless point collectors. Consumers wantto be rewarded based on their personaltastes and choose how they interact with abrand. Today’s savvy consumer also expectsbrands to be more relevant in the way theycommunicate and engage with them. Whenit comes to consumers’ attitudes to loyaltyschemes, Deloitte research shows thatpersonalisation and relevance are high on thelist of what consumers expect from a loyaltyscheme (see Figure 2): 44 per cent of consumers agree with “I wantthe option of personalised rewards basedon my purchase history” 41 per cent of consumers agree with “Loyaltyschemes help brands know what I wantand provide me with helpful suggestionsand rewards, (e.g. receiving vouchers andcoupons on products I buy regularly)” 32 per cent of consumers agree with “I wanta loyalty scheme that better reflects mylifestyle, such as offering me ‘freebies’ foractivities I enjoy” 32 per cent of consumers agree with“Communications I receive from loyaltyschemes are relevant to me.”According to our research personalisationand relevance are more important to the18 to 24-year-olds compared to the rest of thepopulation. This group wants a different wayto engage with brands. And while this groupis more likely to enjoy a points-based loyaltyscheme they are less likely to redeem thepoints (see Figure 2).This might reflect the fact that the mostpopular loyalty schemes are older than manyof the millennials and were designed forprevious generations. However, in a signthat the early innovators in the loyalty arenaare starting to move in the right direction,Tesco has just relaunched its Clubcard witha brand-new look and contactless technology.Tesco claims it will save customers time at thecheckout and enable them to get more fromthe loyalty scheme such as spending pointswith the like of Uber and Hotels.com.6The power of ‘next-best-action’ analytics andmachine learning have enabled more relevantand personalised one-to-one communicationswith the customer.7 Businesses that haveadopted such tools are the ones who willthrive in this ever changing loyalty landscape.In the digital era it is important that loyaltyschemes give consumers some control overcurating and selecting the rewards and level ofinteractions they have with the brand. Brandsthat build loyalty programmes collaborativelywith their customers can lower the risks andincrease their chances of success.7
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeGiven the importance of consumers’ data forbusinesses to offer more personalised andrelevant experiences, clearly communicatingto consumers what they get in exchangefor their data is key to ensuring consumerswillingly share their personal data. PreviousDeloitte research shows that nearly two-thirdsof consumers would be willing to exchangetheir personal information for benefits, suchas financial rewards, improved products orservices, help with achieving personal goals ormore personalised experiences.8Case study – Amazon, themaster of understandingcustomer needsAmazon Prime’s success can be seenby the fact that people are willing topay 79 a year for it. Not many loyaltyprogrammes have been able to showenough value to make people willing topay to receive their benefits.Amazon Prime has done this by offeringperks such as free access to its streamingservice with free videos and music, andfree next-day delivery. These perks areonly available to Amazon Prime memberswho therefore feel more valued by thecompany compared to the averagecustomer. This has led to an estimatedseven million Amazon Prime memberswho spend twice as much on average asnon-members.98Traditional points-based schemes areoften not agile enough to meet rapidlychanging customer expectations thesame way that ‘connected stores’ andnew technologies can engage withconsumersConsumers in the digital era are fickle andsecuring a share of both their ‘hearts andminds’ is a key challenge for businesses.Technology has encouraged them to shoparound more. The digital revolution hastransformed loyalty from the basic conceptof a customer repeating purchases with thesame brand and being tangibly rewardedto something less tangible. Research showsthat today’s customers will be more loyal to‘experiences’ than to brands, products orcompanies.Technology can provide solutions to theshift in the nature of loyalty by offering morerelevant customer experiences.Deloitte research shows that while 43 percent of people do not know what technologieswould make them more loyal, those whodo (around a quarter) want technologiesthat allow more personalisation, frictionlessexperiences, customisation and curation. Thisis particularly true among 18 to 24-year-oldswho are also more likely to use technologiesto engage with a brand (see Figure 4).
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeTechnology-based solutions that couldenhance the customer experience include: using software like Persado that can writecognitive content and significantly driveconversion rates and increase the return oninvestment10 developing an integrated cross-channelapproach to ensure a more seamlessshopping experience creating an app. Apps are opening upendless possibilities for loyalty programmes.They offer location-based services toreward browsing and create highly targetedoffers, mobile wallet for seamless paymentand accumulation of points, gamificationand social media. In addition, Apps canintegrate the camera for coupon scanningand receipt-based purchase validation.Smartphones are the platform on whichnew loyalty programmes are being built.Card-based systems now also need to offera supplementary smartphone app offering coupon and barcode scanningapps, that can recognise scanned receiptsor QR codes displayed on restaurant tablesoffering instant-win prizes incorporating an ‘OmniCart’ function thatallows shoppers to complete transactionson their smartphones that were started inthe physical store gathering data using sophisticated in-storetechnologies that build comprehensivecustomer profiles in near real time positioning tablets outside store fittingrooms that scan the items shoppers tryon, linking the product and the customer’sonline account details.Businesses need to adapt to the digital ageby adopting agile and flexible solutions thatwill allow them to realign their customerexperience programme to constantlychanging customer expectations and needs.This has become even more important giventhe exponential growth in start-up andtechnology-led competitors eager to fill anygap they spot in the market. With every newbusiness model offering a better experience,consumers’ expectations mount as does thepressure on traditional businesses to adaptand transform their business models.Technology can providesolutions to the shift in thenature of loyalty by offeringmore relevant customerexperiences.9
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeFigure 4. Preferred technologiesIf the brand offered the ability to personalise the contentI receive from them24%If the brand offered a mobile app where I can easily select,order and pay for goods and services24%36%36%22%If the brand offered the ability to edit and save shoppingpreferences or shopping lists (e.g. help with weekly menus)37%If the brand offered a checkout-free high-street store(e.g. a store where you can pay using an app,without the need to go to a till)15%19%12%If the brand allowed me to talk directly to them viasocial media (e.g. Facebook, Instagram, LinkedIn, etc.)22%7%If the brand allowed a sale assistant access to my purchasehistory and profile so they could serve me betterOtherDon’t knowTotal18-24Source: Deloitte UK, June 2017Base: All GB adults online (n 2,164)1011%7%1%43%29%
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeCase study – Virgin boostsengagementVirgin is for the first time combining allits UK businesses under one loyaltyprogramme as it looks to boostengagement with its customers and gaina competitive edge.The loyalty app will reward memberswith offers and discounts for usingVirgin services and engaging with in-appcontent. The experience will also bepersonalised based on what people do inthe app, for example if someone showsan interest in holidays at home theymight be shown content or offered dealsbased on Virgin Trains.The loyalty programme is designed toencourage multiple relationships.13Businesses need to adapt tothe digital age by adoptingagile and flexible solutionsthat will allow them torealign their customerexperience programmeto constantly changingcustomer expectations andneeds. This has becomeeven more important giventhe exponential growth instart-up and technology-ledcompetitors eager to fill anygap they spot in the market.11
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeTraditional loyalty schemes can becomea financial liability for businessesLoyalty programme innovation can be riskyand expensive, whether because of cost, fearof alienating the current membership baseor doing it inefficiently. However investmentin loyalty initiatives is on the increase. Newroles at the executive level are being createdwith chief customer officer (CCO) and chiefdata officer (CDO) positions emerging inmany businesses. Yet most businesses donot realise the true cost of traditional loyaltyschemes.Given these risks and the lower return oninvestment in using a third party scheme,businesses need to build more internal loyaltycapabilities that focus on experiences ratherthan points, giving them greater control andflexibility.However, a newer experience-based schemecan be difficult to operate at a sufficientscale, the payback can be hard to measureand the value exchange between customersand brands opaque. Considering thesechallenges will also be critical in implementinga successful loyalty programme.According to Deloitte research, only about halfof consumers (47 per cent) always redeemall their points and take advantage of all theoffers they receive through loyalty schemes.The figure is even lower among the youngerage group (40 per cent) (see Figure 2). Pointsbased programmes have not only become socommoditised that it is getting harder to driveparticipation, they are also difficult to unwind.Businesses need to consider a custombuilt solution for implementing theirloyalty strategy versus an off-the-shelf‘buy’ versionWith the speed of change accelerating in bothtechnologies and customer expectations, thebest approach businesses can adopt is todesign a flexible loyalty ecosystem.Years ago, loyalty programmes were typicallypartnered with third-party providers. Thismeant that businesses missed what is nowconsidered a strategic asset: access to data andcontrol of much of the loyalty programme. Inaddition, the outstanding redemption costs ona business’s balance sheet can be difficult tomanage.However, one question still remains:should businesses invest in building theirown solutions or in buying off-the-shelftechnologies and system integrators or evena combination of both? Given how importantan asset data has become, businesses areincreasingly wanting to own and control theirloyalty scheme.12
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeMore and more businesses employ datascientists, engineers and product owners tocustomise their loyalty initiatives to reflecttheir customer preferences and align theirprogrammes to their brand proposition. Asa result businesses can enhance their loyaltyschemes exponentially rather than throughmore traditional incremental changes.Loyalty solutions need to be agile to buildand enhance the offeringMany businesses run large CustomerRelationship Management programmes(CRMs), but on costly legacy systems thatare not sufficiently agile to deal with rapidlychanging customer expectations. Businessescan no longer accept that it takes three yearsto develop the IT solution for CRMs and loyaltyprogrammes.Online-first retailers have led the way inproviding customers with experience-based,relevant and personalised rewards but themajority of businesses have not yet developedthe necessary analytical capabilities to do so.While we have examined a number ofviewpoints in this report, it is clear businesseshave an opportunity to redefine theirloyalty strategy and enhance their customerexperience as a result.Given how important anasset data has become,businesses are increasinglywanting to own and controltheir loyalty scheme.Businesses should be developing theirown solutions using open-source softwarelike Python and data scientists to developalgorithms that accelerate releases tocustomers.Businesses that are customising existingtechnologies and building their own solutionsare not only gaining greater control over theirdata, they are also more agile in offering abetter customer experience and can releaseprogramme improvements on a two-to-fourweek basis.13
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeKey priorities when rethinkingthe customer loyalty strategyCreating more relevant and timely experiences across all touchpoints by incorporatingdata science and using technology such as ‘next-best-action’ and ‘real time’ should berealistic ambitions for businessesEasing the burden on customers’ wallets by providing mobile enabled loyaltyidentifiers creating a frictionless checkout experienceDriving engagement through gamification to reward desired behaviours such astransactions, social media engagement, ‘refer a friend’ and product reviewsEnabling customers to have control over their own experience and engagement witha brand through agile deliveryx5Attracting a new customer can cost five times as much as keeping an existing one, socompanies need to pay as much attention to retention as they do to acquisition. Boostingcustomer retention rates by just 5% can increase profits by between 25% to 95%14Remembering that people are still interested in loyalty programmes but that theirexpectations have changed, especially among young people14
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeEndnotes1.https://www.youtube.com/watch?v d-measuringloyalty3.Deloitte Consumer Review, CX marks the spot: Rethinking the customer experience to win, November 2016.See also: ticle?utm source Stores%20(The%20Grocer)&utm medium email&utm campaign 201707-05&c adNDvOq0XULxuncEG9Qk2w%3D%3D7.Next Best Action (NBA) is focused on using sophisticated rules, analytics and algorithms to better predictcustomer needs and in turn offer more relevant actions and offers leading to improved wallet share and -datanation-2014.pdf -prime10. https://persado.com/platform/11. https://blog.smile.io/7-examples-vip-programs12. s/415155/13. sinesses-for-the-first-time/14. http://hbswk.hbs.edu/archive/1590.html15
The Deloitte Consumer Review Customer loyalty: A relationship, not just a schemeContactsLeadership teamNick TurnerPartner,Deloitte Digital 44 (0)20 7007 3591nickturner@deloitte.co.ukGordon MacMillanDirector, Customer & ChannelAnalytics 44 (0)20 7007 6045gmacmillan@deloitte.co.ukAuthorsCeline FenechUK Research Manager,Consumer & Industrial Products 44 (0)20 7303 2064cfenech@deloitte.co.ukBen PerkinsUK Research Director,Consumer & Industrial Products 44 (0)20 7007 2207beperkins@deloitte.co.uk16
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too much on devices like a loyalty card, such as the Clubcard.”2 This statement demonstrates the need for schemes to evolve with changing consumer expectations. “The true source of loyalty is to create benefi ts for people. That’s really what builds loyalty. Sometimes people concentrate too
The expansion of loyalty programs has led to changes in the loyalty of customers: according to Yi and Jeon (2003) there are now two different kind of loyalty: program loyalty and brand loyalty. Similarly, others researchers such as Evanschitzky et al. (2011) differentiate loyalty to the program itself and the loyalty to the company.
customers in the stores, and assisting in the card application process. Keywords: customer relationship management, loyalty, customer loyalty pro- gram . 3 . the loyalty program and to receive an understandable picture about the current situation of customer loyalty
Customer satisfaction has identified as an important influencer on customer loyalty. Further, customer trust impacted by customer satisfaction which proved that customer satisfaction is an antecedent of customer trust. Moreover, an indirect relationship between customer satisfaction and loyalty through customer trust was observed.
Siebel Loyalty Administration Guide Version 8.1/8.2 7 Creating Goals and Assumptions for Loyalty Promotions 336 Adding Expenses and Line Items to Loyalty Promotions 337 Adding Purchase Requests to Loyalty Promotions 338 Adding Market Development Fund Requests to Loyalty Promotions 339 Associating Loyalty Members with Marketing Campaigns 339
variable whereas customer relationship management and customer loyalty were considered as dependent variable. Three s. A survey-based exploratory and independent variables, 6 items for customer relationship management and 5 items for customer loyalty. The data was coefficient alpha was used to determine the reliability of the instrument.
3. Now the card details are entered and payment is verified, the customer is a loyalty member of your cinema! Of course, customers can also sign up to your loyalty program at POS. (page 25) How customers purchase a Loyalty ticket online Now that your customer is a loyalty member, here's how they make
A Modern Approach to Cultivating Customer Loyalty Premium Loyalty: A True Differentiator Providing Real Value to Your Most Loyal Customers A Customer-first Mindset Meeting the Needs of Millennials Loyalty Moments to Remember Methodology 01 04 08 12 16 19 21 TABLE OF CONTENTS. . program while just under two-thirds (65%) of those who belong .
program in the U.S. aimed to increase their customer loyalty base. Due to the complexity behind the benefits to their loyal customers, the program shut down resulting in a 25M write off (Forte Consultancy, 2011). However, customer loyalty does not come with downsides. The extant literature recognizes there are two types of customer loyalty.
