Keep your customers by understanding ‘new’ loyalty

Businesses need to keep pace with rapidly changing buyer behaviour to engender customer loyalty, writes Leo King


As buyers purchase and interact with brands in new ways, the opportunities for marketing are immense. But the sheer number of options can paralyse loyalty planning.

Experts warn that businesses need to understand the effect of new sales channels on different demographics, including the growing effect of social media activity. Research by loyalty consultancy Aimia found that 56 per cent of women have “liked” a brand on social networks, compared to 44 per cent of men. Mobile usage is also encouraging longer activity on the sites.

Professor Ram Ramanathan, at the University of Bedfordshire, says that in addition to young people, “those in their 40s and 50s really use social media, and many interact with brands”. He adds: “It’s no longer about multichannel, in store and online, but omnichannel, given all the newer outlets.”

Facebook, Twitter and Pinterest are often cited as among the key social media venues for a loyalty battle. Professor Heiner Evanschitzky, at Aston Business School, says that intention to purchase is increased significantly when “brands provide infrastructures for personal, topic and review content”.

Consumers are drawn in by brands that provide an unusual social media experience, according to Dr Mariann Hardey, of Durham University Business School. “Nike is particularly clever in encouraging consumers to create video content for the brand and users get a lot of hits on YouTube,” she says. “Consumers like to share this content and take up offers their friends have accessed.”

But buyers are also taking to social media to attack brands. Vincent Mak, a lecturer in marketing at the University of Cambridge, recalls a campaign by Chevrolet to launch an SUV (sport utility vehicle), encouraging customers to design commercials. “The problem was that there was a lot of satire in the material, including showing the negative environmental effect of large cars,” he says.

Consumers tend to react most on social media or review sites after extreme positive or negative experiences. Thomas Brown, associate director of research and insight at The Chartered Institute of Marketing (CIM), says reviews are very influential. “While consumers used to be extremely loyal to brands, we now see them closely examining ratings and social media comment,” he says.

Personalisation plays a vital part in all loyalty schemes, from daily deal sites to loyalty cards, but customers have mixed views about giving out their data

Given the worries around how to handle these interactive channels, the more traditional loyalty cards, still used by many consumers, remain a significant option for businesses and a way to garner data.

However, according to statistics from loyalty firm ICLP, only half of consumers receive the type or immediacy of rewards that they expect.

Mark Bergdahl, director at Loyalty Consulting UK, calls for imaginative options. “Consumers are a little tired of some card schemes. They are not having the effect they used to because people are being supplemented with so many extra deals and vouchers,” he says.

Good loyalty cards need to go beyond discounts and help with spending management, according to Professor Evanschitzky, at Aston Business School. This, he says, is because research shows traditional cards “prompt rational, transactional behaviour which does not increase true loyalty”.

Meanwhile, daily deal sites, such as Groupon and LivingSocial, are on the up, as consumers look to find affordable offers near them, from restaurant and hotel discounts, to spa days, entertainment and sports.

Between April and September, nearly one in ten people in the UK purchased at least one offer, according to statistics from website Deal Zippy.

Peter Briffett, UK and Ireland managing director at LivingSocial, explains that consumers often actively seek discounts, rather than waiting for marketing e-mails. “People increasingly come to us directly,” he says. “It’s a real shift in the last few years from the preferred way of us e-mailing them.”

LivingSocial notes that the largest part of its audience is aged 25 to 40, 65 per cent of whom are women. It awards extra discounts to followers on social media who share offers.

Meanwhile, competitor Groupon has launched a search-by-map functionality called Local Hub, which enables consumers to search for deal types on a map of their local area. There have also been more than 50 million downloads of its app.

Personalisation plays a vital part in all loyalty schemes, from daily deal sites to loyalty cards, but customers have mixed views about giving out their data.

According to Aimia’s Digital Loyalty Survey, 70 per cent of consumers are happy to accept voucher offers for products they purchase regularly, but are less content with product recommendations from lifestyle data.

The popularity of Amazon’s personalised product recommendations is evident, with nearly 60 per cent of consumers accepting the data usage, whereas approximately 40 per cent of consumers like Google and Facebook doing the same, and 30 per cent trust cable and energy providers in this area.

One thing is clear – trust around data is crucial. “Customers expect absolute transparency on how their personal information is collected and used,” says CIM’s Mr Brown.

Newer mobile services, such as location-based marketing, where users receive messages from stores nearby, offer an opportunity, but also present concerns. “For the moment, there’s no real killer app that people like,” says Mr Bergdahl at Loyalty Consulting UK. “And consumers may find some of the targeting an irritant.”

Aimia has mapped out what it calls “four futures” of targeted marketing, ranging from positive scenarios, in which trusted relationships are built, to a dire option, in which consumers become angry at the deluge of promotions.

Martin Hayward, vice-president digital strategy at the company, calls for very careful application of data. “Used the right way, all of the new channels can be very important and very useful to consumers, but ‘offer anarchy’ must be avoided,” he says.

Business purchasers are no exception to digital interaction with suppliers and they often take up the volume discounts offered in standard loyalty marketing.

Young staff are the most likely to make large purchases for their company online, according to consultancy Acuity Group. It found that in order to retain loyalty among business buyers, the key factors are strong security, followed by free delivery, live chat and improved online services.

Professor Hakan Hakansson, a founding member of the Industrial Marketing and Purchasing Group, explains that businesses “don’t just want to buy, but to work together”.

“Digital channels don’t take away the need for closeness between businesses and personal relationships will always remain,” he says. Linking systems is a crucial part of co-operation, however, enabling firms to “operate together on costs and calculations, and to improve efficiency”.

Mr Brown adds that LinkedIn is becoming a popular way for business buyers to interact with suppliers. “Buyers like it when brands are offering ideas, and sharing knowledge and experience,” he says.

Dr Mak, at Cambridge University, says that while, typically, “business purchases are less emotionally driven”, when suppliers handle social media well, and also provide good online services and are helpful on the phone, “there can be a positive effect”.

Buyer behaviour is changing apace and businesses must know what their customers like – and not rely on generic data alone. A proper understanding of new and traditional channels, combined with a respect for data, can lead to a real understanding of loyalty and will improve customer retention.