Loyalty beyond the loyalty scheme
How to turbo charge your customer ambitions
Fall in consumer loyalty
One of the features of the past couple of years has been the step change in online shopping. As consumers browse and discover online they have noticeably increased the range of companies they purchase from. At the start of the pandemic for example, 24% of fashion consumers had tried a new brand or retailer in the previous six months. In August 2022 that had risen to 47% of consumers, and we’ve seen similar trends in other categories including home furniture, beauty, consumer electronics and luxury.
Many retailers saw huge gains in new customers during the pandemic but have now been asking themselves how to retain and increase the value of existing consumers through higher frequency purchases and cross shopping, in the face of this fall in loyalty.
Building a holistic customer value strategy
Plans to grow customer value often focus on loyalty schemes including special offers or personalised experiences, fuelled by modelling which identifies segments of consumers based on their interests, behaviour and lifetime value. In our experience, there are four additional areas which have significant impact on growing customer value and which form part of a holistic strategy, helping retailers get more value from customer data modelling.
When customers buy from you online, you can see their data such as email and delivery address, but as third-party cookies are phasing out, retailers are losing visibility of visitors to their website who don’t check out. This means you can’t track, for example, whether your visitors are new or existing customers - and it’s therefore hard to see whether your marketing is working.
However it is possible to plug the gaps of missing data. Google is investing in building durable and privacy-safe measurement solutions such as Consent Mode and Enhanced Conversions which retailers can implement on their websites. Improving data visibility online is often relegated to a “technical” implementation backlog, but it can materially change your understanding of how marketing is working and so guide what levers to pull to grow loyalty.
Customer segmentations and loyalty scheme data can be deployed across the full range of marketing channels including paid marketing. For example, it is possible to re-engage higher value customers using tools like “Customer Match” or avoid the lowest value users (for example those who return a lot of products). You can also enrich digital marketing algorithms with signals on lifetime value, shop purchases and loyalty status etc. Even without sophisticated first party customer data models you can target audience segments such as ‘predicted top spenders’ using your online marketing tools (such as GA360). Marketers that effectively use their first party data to tailor campaigns can generate double the incremental revenue from a single ad placement, and also see 1.5 times the improvement in cost efficiency compared to companies with limited data integration.(2)
3. Give your app the priority it deserves in driving loyalty
Multiple studies show that app customers tend to shop more frequently, buy more items and spend more than non-app customers. Google’s recent behavioural research showed how consumers develop a more personal relationship with an app they choose to give “real estate” to on their phone, apps also being able to bring to life many loyalty scheme benefits. App features that make it easy to browse, and add fun or exclusivity to the shopping experience, grow value even further: customers who especially enjoyed using an app claimed to spend 30% more than a retailer’s other app customers, and had a net promoter score two and half times greater. Further, retailers don’t need to spend as much on reacquiring users who purchase through an app, leading to more efficiency in overall acquisition costs.
While retail leaders acknowledge the importance of apps in growing loyalty, in practice, businesses often struggle to measure how customers are using them, and marketing investment driving app engagement can be low relative to the app’s impact. To successfully build a holistic strategy, break down silos between e-commerce, app development and measurement teams, implement integrated technology to ensure this high value channel is measured effectively (for example Google Analytics for Firebase) and allocate marketing investment to drive growth of your customer base and continued usage of the app.
Modelling and research may reveal that a particular category, lifestage or mission drives higher customer value. For example, for a bed specialist, moving house might be the spur for greater customer value. One baby specialist found customers with the highest future potential were not the ones who had spent thousands of pounds on a cot and pram, but new customers spending under £30 on maternity jeans. How can you make sure customers consider you at the exact right time? Particularly if, like in the case of moving house or having a baby, it isn’t visible in your own sales data.
Beyond big campaign bursts, companies can remain ‘always on’ for these moments by ensuring consumers actively shopping for a particular mission see the right message at the right moment, using the rich data available on channels such as YouTube.
If your own sales data can’t tell which customers will drive the most value, an always-on testing approach can be particularly valuable. ASOS used this approach, leveraging Google data to target audiences actively shopping in apparel categories. The results not only demonstrated a short term uplift in web visits and sales, but also showed a longer term impact on key brand metrics.
Organising for growing customer value
Growing customer value cannot only sit at the door of a loyalty team or within a data model. Instead, taking advantage of these wider opportunities requires leaders to bring several teams together - for example the analytics, loyalty, performance marketing, brand, and development teams - to plan in an aligned way how to use data and a wide range of channels.
References:
(1) Source: Google / Trinity McQueen, March 2022, UK, Q43A. Have you bought from any new retailers or brands in the last 6 months that you weren’t previously using?
(2) Source: BCG, “Responsible Marketing with First-Party Data”, 2020.
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This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.