How to create customer loyalty

Hazel Davis has a ten-step loyalty guide for retailers who want to keep customers at the centre of their business

1.  “Crudely bombarding someone who has searched online for garden furniture with pop-up ads for garden furniture for the next three months will do more harm than good. Targeted promotions should be used sparingly,” says James McGregor, director of retail consultancy Retail Remedy.

2. Make sure your loyalty programme and offers are consistent, says Mr McGregor. “Above all they must be seamless across all platforms, both online and in physical stores,” and they should work on all media. “Don’t have loyalty cards that work in-store but not online,” says Matthew Todd of PwC. “Everyone knows that multi-channel shoppers spend more money.”

3. Use your customer loyalty scheme to improve stock, says Mr McGregor. “Used right, the best customer databases, like the vast Tesco Clubcard one, help the retailer not just to promote certain lines, but also make better decisions about what to stock.”

4. Don’t take more information than you need. “Less than 5 per cent of potential data is used by most companies. This sucks up IT budgets and creates a liability,” says Mr Todd.

5. Ensure any loyalty scheme is simple to understand and focused on the customer experience. “The modern customer is time poor and promotions weary,” says Mark Bergdahl, director of Loyalty Consulting.

6. Don’t overpromise and underdeliver. A loyalty scheme must promise attractive rewards that are achievable. And it must be a fair exchange for the customer. “Many businesses make the mistake of rationing the rewards so as to cap their exposure – this is a very common mistake and is very irritating for customers,” says Mr Bergdahl.

7. Ensure your rewards scheme will also bring about a desirable, measurable and profitable change in customer behaviour, otherwise there is no point. In other words, know why you are doing it in the first place.

8. Consider ditching paper. Traditional paper vouchers are very costly from both a fraud and time perspective, they cannot be effectively targeted and no real data is captured. Instead, use multiple media, including e-mail, SMS messaging and loyalty apps.

9. Monitor your data in real-time and respond immediately when something goes wrong. Consumers are operating 24 hours a day and retailers need to respond to this. Be the first to offer a good deal and deal with a bad offer.

10. Make the customer experience conducive to buying things. For example, the Connected Fitting Room is a Windows 8 app targeted at retail customers. The app allows customers to interact with retail products, and provides on-the-spot colour and size choices.