Credit: M&S

Forget discounts - keeping customers is about rewarding them personally

Consumers care about price, but they want more than cheap, random products.

by Jan-Pieter Lips
Last Updated: 07 Jan 2016

Customer loyalty is under strain. Shoppers have never been so promiscuous. All they care about is price.

If you believe that line of reasoning – put forward by many trying to rationalise the rise of ‘hard discounters’ such as Aldi, Lidl and Poundland – it’s pretty surprising to see a sudden influx of new loyalty schemes across multiple sectors.

First, Asos, the online fashion retailer, announced it was rolling out its own loyalty programme, Rewards. Soon after, Sir Richard Branson laid out his plans to put new loyalty programme Virgin Red at the centre of his efforts to expand the Virgin brand.

Then, last week, M&S announced it had signed up 200,000 people to its new Sparks scheme in just three days, taking the total number of Sparks members to over two million. And these all came after perhaps the most surprising of them all: Lidl’s announcement in August that it was trialling a new scheme in Scotland.

But if customers only care about price, why bother with such schemes at all?

While price is undoubtedly important to customers, following a price-oriented strategy has its downfalls. It’s not a sustainable business model for most, nor does it actively build relationships with customers over the long term. And actually, other things do matter to customers.

Over the years, the way we have done business has changed. Local family-owned businesses have evolved into large corporations. Meanwhile, the limited pool of high street stores has exploded into an ocean of almost infinite choice.

That means businesses now have to work hard to get to know their customers. And they have to work even harder to keep them coming back. What we’re seeing with these new loyalty schemes is an evolution in how they’re delivered. Businesses are starting to personalise their offers and move away from purely spending-based schemes. They’re giving customers special treatment and rewarding them for active engagement. Companies are saying to shoppers: ‘We get you.’

Asos’ Rewards includes free next day deliveries and exclusive content. Users will also be rewarded for social media engagement and on their birthdays. Meanwhile, when Selfridges announced record sales and operating profits earlier this month, it said personalisation was a key driver. In other words, shoppers were responding to new items tailored exclusively for them.

If the last few years were about an influx of new entrants offering low prices, the next will be defined by the innovative companies that give customers exactly what they want. And it won’t always be about lower prices. It will be about good products, stock availability at the right times, a seamless website, compelling content on social media channels, an app that adds to the shopping experience, and, yes, even friendly bricks-and-mortar stores and a good old-fashioned ‘thank-you’.

There is no ‘one size fits all’ answer. Different shoppers will find different things important. But turning what we know about our customers into personalised shopping experiences will fast become what separates the winners from the losers.

Jan-Pieter Lips is EMEA president at Aimia, the marketing and analytics company that owns and operates Nectar.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events