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03 Sep 2015

Do loyalty schemes actually influence customers?

Posted on September 3, 2015 by

The rational loyalty scheme vs emotional marketing: a battle of using reasoning or sentiment to influence your customers.

The Body Shop recently announced changes to its loyalty programme in order to give ‘Love Your Body Club’ more appeal. This announcement came after Les Binet, of adam&eveDDB (responsible for the hare & hound John Lewis Christmas ad), declared loyalty marketing ‘nonsense’, suggesting emotional marketing is the best way to achieve ROI and long term results.

Love Your Body Club loyalty card

The Body Shop loyalty scheme

So just how effective are loyalty schemes?

Loyalty schemes are used by many retailers as a simple technique. The idea that every time the customer spends they get something back, usually by a points system that allows them to collate ‘free spend’ is, by definition, a rational marketing technique. It aims to prove the brand’s usefulness to the customer by offering a desirable result of spending money.

Loyalty programmes for some sectors, such as supermarkets, have gained a less than favourable reputation. Some customers view the schemes as a little disappointing, due to having to spend such a significant amount before actually getting anything of perceived value back. In this case, a customer may use a loyalty card out of habit, rather than as the result of influence. If they use the service already, they may as well gain from it. This actually means a reduction in profitability from existing customers, instead of creating loyalty, highlighting the difference between loyalty and frequent use. This idea could possibly lend itself to Les Binet’s argument, in that loyalty programmes aren’t attracting any new customers.

Coffee shops often use loyalty cards, and this is where influence can play a part. If there are two coffee shops outside a customer’s work, where one offers a loyalty programme and one does not, the notion of added value influences the customer to choose the first shop. In this instance, the technique seems to have been effective by overcoming the considerable limitations on how emotionally attached to coffee someone can be (although let’s admit, not impossible). However, this particular benefit of loyalty programmes alone also seems to support Mr Binet’s idea that this form of marketing is working towards conversion, a short term goal, even if the loyalty is ongoing. This action is also less of an act of loyalty than convenience. Although it could also be argued that the scheme improves the benefits of long term use, which is obviously a goal. While loyalty schemes may not increase brand loyalty, they do reward the idea of it.

95% of UK customers own loyalty cards, and while this doesn’t mean the loyalty scheme itself is the main reason they buy from one brand in particular, when they do use their card or partake in the scheme, it provides the business with information, personal details and shopping behaviour. While this gives customers a rational reason to shop, as many will know, it also provides marketers with more opportunities to communicate with their audience. For example, a customer always uses their loyalty card to buy green products, so you send them an update on your sustainability news, how you work with suppliers and what a difference your brand makes. Establishing this kind of relationship by effective communication could be considered an emotional, long-term result of a successful loyalty scheme.
This kind of technique can also mean marketing budget can be focused on those who are more likely to spend with them. By refining the market and, theoretically, increasing return on investment, it contradicts the reasoning behind branding loyalty schemes ‘nonsense’ in the first place.

This way of looking at loyalty programmes also means opening the channels of communication with customers, and communicating in a meaningful way.

Paperchase currently offers a ‘treat me’ card to customers. Instead of a points system, each time a customer spends they are closer to earning a treat, which might be a voucher, a free coffee in one of their flagship stores, or £5 off on birthdays. A rational reason for the customer to give information, that also opens up a great channel for emotional marketing and great communication.

Basically, I believe that loyalty schemes open communication opportunities that can be utilised by emotional marketing techniques, as well as rewarding customer loyalty.

The Body Shop is a great example, because the brand values are at the heart of its marketing and key messages. This is something they can communicate with customers through their loyalty scheme, either by using the contact information provided in the loyalty scheme sign-up or offering personalised offers based on their buying behaviour.
I do agree that long term goals shouldn’t be overlooked, but both rational and emotional marketing techniques are a legitimate way to influence your audience in a positive way.

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