Short-term gain wins long-term loyalty from customers

Retail is a tough business. Today’s consumers generally are short of money and they are being increasingly careful where they spend it. This alone would be challenging, but when price comparison via the internet and huge competition in the sector is added to the mix, then retailers need to be imaginative.

A recent trend that is beginning to gain acceptance in the loyalty business is that of short-term reward programmes. Shoppers are given tokens each time they shop, with the target of saving enough to earn them a special gift or product.

The concept is not new, by any means. Tesco was an early adopter of this type of promotion and is currently running one for cutlery. The Co-operative has been using similar schemes for years.

What is new is the understanding that short-term promotions can prove extremely powerful, especially when run in tandem with traditional loyalty schemes, as in the Tesco model. What is more, recent research has found that games and competitions can be an equally powerful incentive to shop with a particular retailer.

TCC Global, a company that specialises in this type of short-term loyalty programme, of which Angry Birds soft toys has been a particular favourite, recently commissioned a qualitative study with research company Firefly Millward Brown. It was tasked with exploring shoppers’ motivations for participation in short-term promotions, and what affect this had on the retailer’s brand and image.

If a company runs a succession of programmes, the emotional transaction builds the foundation of the shopper-retailer relationship

They studied two programmes. The first was a loyalty reward programme where shoppers collect stickers over a 20-week period in order to redeem them for branded rewards, such as cookware or electrical appliances. The second programme studied was the collection of stickers from The Price Is Right board games, with a chance to win major prizes, such as a cruise, car or gift cards.

Millward Brown reported that shoppers liked the “honesty and straightforwardness” of the schemes, and that they felt the store was giving back a reward for their hard-earned money. There was a general feeling among shoppers that the promotions were part of the loyalty offering.

The research stressed that it was fundamentally important the company was trusted by the shoppers and had similar values. “The programme has to be tied to a great company; they can have the best rewards in the world, but if I don’t like them as a company or their customer service, or if their values are not the same as mine, their rewards don’t mean anything,” was one comment.

TCC Global suggests that shoppers feel they are investing “time and effort” over several weeks into a short-term loyalty programme. With a promotion for goods, they are guaranteed a return for their effort if they put in the legwork and spend. With games as rewards, the thrill of potentially winning makes the shopping more fun. This can bring about a real shift in shopping behaviour. “If a company runs a succession of programmes, the emotional transaction builds the foundation of the shopper-retailer relationship, which will lead to long-term shopper investment in the retailer, and ultimately will result in loyalty and growth for the retailer,” the report concludes.

A challenge that has moved right to the front of the crucial list for retailers is to ensure a seamless journey across both online and offline channels.

Research by industry standards group the IGD (Institute of Certified Grocers) underscores the growth of the online channel in the UK. It valued online grocery retailing at £5.9 billion or 3.8 per cent of total grocery spend in 2011 and forecasts it will increase to £11.2 billion or 6 per cent of the market by 2016.

Despite the projected increase, retail analysis by the IGD confirms stores will still be key, but engaging shoppers across all channels will be critical, it says.

Research by BT supports that view. Its vision for British retailing in 2020 – the Retailtopia report - identified ten key themes likely to shape the future of retail in the next eight years. They include a vital role for stores, but also for retailers to offer a seamless, branded multi-channel experience. In addition, retail experiences will become more customised, personal and interactive, BT says.

Chris Gates, director of retail at Hitachi Consulting UK, emphasises the need for retailers to focus on both stores and online for a true multi-channel approach. He points to Tesco’s plan to spend £1 billion in improvements across its online and bricks-and-mortar stores as a case in point.

“This combination is what multi-channel retailing is all about,” says Mr Gates. “Multi-channel is really about giving the customers what they want, where and when they want it.

“Modern retailers increasingly need to refocus their offer around the individual needs of a customer so that contact, offers, logistics and payment terms can all be personalised across multiple channels, and yet maintain one consistent brand message.”

David Ringer, TCC general manager, UK & Ireland, says: “What we haven’t managed to capture until now are the softer benefits of short-term loyalty programmes.  Retailers need to give customers reasons to engage emotionally with brands, to drive brand equity and give them an emotional purpose to return to the shop.”


Big Headz and Smurfs

Continental hypermarket group Carrefour used Big Headz soft toys as a short-term reward programme, with shoppers receiving a scratch card for every €25 spent in store. Each card also included one token which shoppers could collect to receive a free Big Headz toy.

The promotion resulted in increased spend from both new and existing shoppers, with those surveyed saying they had planned their shopping in order to collect points. They also made choices based on bonus-point offers.

A similar promotion with Ahold’s Albert chain in the Czech Republic, which featured the Smurfs and which was totally funded by suppliers, was equally successful.

The programme ran for eight weeks in 280 stores with a different range of participating retailers each week. The campaign and products were flagged up in-store and featured on a special list. Ahold says the campaign had so many family touch points, it significantly drove sales, basket-spend and market share.