ikano white paper - the future of loyalty

Ikano on....

The future of loyalty

One survey

26,000 respondents

Three key trends for the future of loyalty

It’s estimated that around two thirds of retailers operate a form of loyalty programme.(Source: Clark & Clark, The loyalty guide, Volume 5, 2012)

IntroductionLoyalty programmes are proving to be the smart choice for companies looking to overcome the impact of the recession, as they battle to find new ways to make their budgets drive better return on investment. Similarly customers are seeking out loyalty as one way to make their money go further as they become more select about who gets their share of spend.

Loyalty programmes provide the perfect opportunity to foster a win / win

situation for customer and marketer.

Customers are attracted to loyalty by the prospect of rewards, relevant

offers and information, in exchange for sharing a higher proportion of their

wallet with the chosen retailer. To the retailer, a plethora of benefits comes

from re-focusing their strategy towards their existing customers including:

• Increased frequency of customer visit and spend per visit – increased sales

• Reduced advertising costs by focussing on rewarding the customers that drive the most value

• Higher ROI on marketing spend

• Acquired customer insight

• Better customer satisfaction

Companies need to keep up with new technology

Smart phones burst onto the scene around 5 years ago and since then it’s

estimated that around half of the UK population now own and use one.

They are becoming central to the running of consumers’ lives and whilst

mobile as a platform for marketing is still relatively new, many brands

are using it to great effect as a brand engagement tool and to influence

customers’ purchasing decisions.

No company likes to be left behind, feeling the pressure to embrace a

platform that they have little or no experience in navigating. Knowing how

your own customers are embracing new technology is one step towards

embracing the technology in the right way and ensuring investment in

mobile marketing is a success.

Ikano’s 2012 loyalty survey

At Ikano, we work with multiple retailers to launch and run successful

loyalty programmes that drive profitable relationships with their customers

underpinned by promoting a trusting and relevant relationship.

Ikano monitor that the programme is meeting customers’ expectations

and is future proof. Earlier this year, we ran a survey on behalf of a major

high street retailer to establish their members’ level of loyalty programme

satisfaction and to ascertain the direction they wanted their loyalty

programme to take in future.

Key Findings1) App is a growing mandatory requirement

52% of the respondents stated they want an app to replace their

loyalty card.

With, on average, 4.8 loyalty cards per household, customers have

limited capacity for loyalty cards in their wallets. Launching a programme

and producing the card collateral is no guarantee of the programme’s

success. You have to make sure your loyalty card gets a space in the

wallet and you can significantly increase this likelihood by launching

your loyalty programme with an app.

Loyalty apps significantly reduce card production costs, which for many

companies is one of the most significant portions of their loyalty budget.

2) Appetite for mobile account management

In addition to significant customer desire for an app to replace their

plastic, 34% of customers have indicated that they would like to use

their app to manage their loyalty account. This ensures that their details

and preferences are up to date and allows them to receive latest

information and offers wherever they are.

Smart phone based apps aren’t just a way for retailers to reduce

their collateral costs and increase loyalty spend, they allow

companies to push out relevant information and offers to their

customers – and this can now be based on their geographical location.

Imagine pushing out a relevant offer on a product that you know your

customer is interested in, when they walk past one of your stores?

3) Customers want to set their own expectations

We all have the experience of registering our information with a company

only to be bombarded with emails, postal mailings and SMS’s that are

not in any way relevant and far too frequent for our liking. Most of us

quickly unsubscribe from these communications or move the emails to

our spam box.

Customers are increasingly seeing their personal information as a

commodity, trading it in exchange for discount or reward from retailers.

Customers are communicated to far more frequently than ever before and

they only want what’s relevant to them. Asking customers upfront what

interests them and how best to communicate with them, means that retailers

don’t have to wait to monitor their spending patterns and response rates

and can even increase response rates to campaigns.

A recent survey of 26,000 customers by retail loyalty experts Ikano, revealed 3 key indicators for the future direction of loyalty.

The surveyIkano conducted quantitative research via an online questionnaire.

Members were invited to participate by email.

The aim of the survey was to ascertain the level of programme

satisfaction among the loyalty programme’s members, focusing on

the following areas:

• What customers valued about their loyalty card membership

• How they rated the services and benefits

• What they would like from it in the future

The respondents

Over 26,000 members replied to the online survey. The majority

of respondents had been members for 6-months or longer and had

applied for their loyalty card in-store.

More than12 months ago

37%

How long have customers been loyalty card members?

How did customers apply forloyalty card membership?

0-6 months27%

6-12 months36%

In-store95%

Online5%

More than12 months ago

37%

How long have customers been loyalty card members?

How did customers apply forloyalty card membership?

0-6 months27%

6-12 months36%

In-store95%

Online5%

ResultsThe programme and its benefits

Looking at what prompted members to join the loyalty programme, it is unsurprising to find that the majority of members signed up for the reward card to receive rewards, with 83% of respondents stating it as a reason for signing up.

There is also a strong sense of brand loyalty among members, with

54% of loyalty card members stating it as reason they joined.

Other reasons, members signed up were in order to:

• Receive Pre-Sale Notifications • Keep up to date with information about the brand

The programme that Ikano has set up with the retailer issues customers

with regular reward vouchers, based on their spend threshold. As well

as receiving regular reward vouchers, members receive exclusive pre-

sale notifications, information about new products and new range

launches and other exclusive member offers.

All communications are tailored specifically to the customer’s needs,

so that they only receive information and offers that are relevant to them.

This segmentation is reflected in response rates and incremental sales

driven by marketing campaigns and also in members’ responses in the

survey’s questions about communication.

It’s important to get the balance of communication right, to ensure the

brand reputation isn’t damaged. To mitigate this, Ikano uses advanced

segmentation tools to ensure that members receive communications that

are relevant to them. The effectiveness of these tools are reflected in

reduced cost of DM campaigns, higher ROI and now also in the survey

results, which indicate that members are satisfied with the level of

communication received.

Reasons stated for customers signing up to the loyalty programme

Other offers e.g. discounted magazine subscription, cosmetics, spa days etc

In store events

Competitions/prize draws

Launch previews

Exclusive products

Free gift with purchase

Double/bonus rewards

Discounts

10%

12%

14%

21%

19%

52%

82%

90%

Customers enjoy the benefits of the rewards and discounts that they signed up for

In line with the reasons they joined the loyalty programme, members stated that the primary benefit

that they enjoy with the programme are the discounts they receive back for spending with the retailer.

Members also enjoy other discounts – in the form of bonus points and gifts with their purchases.

Ensure that you attract customers with a sustainable offering

What we often find is that companies who sign up customers with introductory offers to increase their

user base also increase the volume of members who become disengaged once they’ve received their

initial reward. This often comes at a significant cost to the retailer, in collateral, discounts and resource.

The company has to then work harder at reactivating these customers.

At Ikano we work with companies to maximise member activity by offering a long term sustainable set

of membership benefits that will keep them engaged with the programme and with the brand

long term.

Overall, Ikano’s survey indicated that members were positive about their programme and the brand,

and over 67% of them stated that they would recommend the programme to their family and friends.

I feel the rewards scheme offers good benefits & offers

with regular information

Fantastic and a worthwhile scheme for the whole

family to enjoy

Think it’s great to get rewards for purchasing products that are great quality so would

definitely recommend

The impact of membershipAmong the primary aims of any loyalty programme is to generate more spend from your existing customers. Aside from ongoing monitoring of increases in sales over time, Ikano’s survey has highlighted to the retailer that members are also noticing that they spend more as a result of membership to the programme.

In particular 46% of members agreed that the card made them visit store

and website more frequently and 43% agreed that the card leads to them

considering the retailer first when looking for something new.

Increasing your share of wallet

With more loyalty card programmes in the UK market than ever before

and customers signing up to an average of 4.8 loyalty programmes

per household, the competition for ‘share of wallet’ comes not just from

increasing share of customer spend but actually getting your loyalty card

in their wallet in the first place.

A major proportion of annual loyalty budget is allocated to card production

and can become a costly waste if your card doesn’t make your customer’s

final selection.

Ikano found that 69% of its retailer’s loyalty members remembered to swipe

their card with every single purchase. The portion of members who do

forget to present their card in store, stated that they found reminders from

sales staff helpful but suggested that providing an alternative format for the

card would be preferred, with considerable support for a loyalty app.

I don’t always have it with me - would be easier if it

was an app

I forget to put it in my purse and I have too many loyalty cards. Any chance of an app

for the phone?

As a result of having my loyalty card

I spend more

I am more likely to purchase from the retailer than anywhere else

The retailer is always the first store or website I visit when looking for something new

I visit the store or website more frequently

24%

38%

43%

46%

Ikano wanted to gain member’s views on how they would like to see their programme develop in the future.

Customers want to be proactive

Retailers often segment their communications by past customer purchasing

behaviour. Ikano’s research suggests that 59% of members want to be

proactive in setting their own communication preferences and set their own

channel preferences.

Loyalty on the go

There was continued support from members for an app to enable them to

service their account and use their card in one place, with 52% of members

stating they’d like to see an app to store their loyalty card, instead of carrying

a card in their wallet. Imagine reducing the cost of producing cards by a 52%?

More accurate and up to date customer information

Mobile Account Management was also a service that members stated they

would embrace. Mobile Account Management would enable members to

keep their details up to date and manage their rewards. This keeps

the loyalty database cleaner and reduces the volume of calls into the

customer services helpline.

App is a growing mandatory requirement

There was already an established appetite, from members who had

trouble remembering to bring their card on every store visit, for an app

to store their card details.

The rise of smart phones, tablets and app functionality is changing the

way consumers engage with brands. As the phone has become an essential

item for so many consumers that may soon even supersede the wallet, retailers

now have an opportunity to use the channel for their loyalty.

Whether your customer wants to register into the program, update their

details, use their phone as their loyalty card, find the local store or redeem

their rewards, Ikano can deliver this functionality across multiple platforms

including iPhone, Blackberry and Android.

The future

I often forget I have it and I have lots of loyalty cards, if you could put

out an app for my phone I would always be able to use it

How would customers like to service their loyalty card in the future

Live web chat (to resolve meber queries)

Mobile Account Management (to update your details, view your rewards ec)

SMS alerts with reward information

Being able to use your mobile phone to show your loyalty card details...

Product preferences (what product information you would prefer..)

Communication preferences (how you would prefe tobe contacted)

14%

32%

33%

52%

57%

59%

What can Ikano do for you?Ikano as loyalty providers

Ikano are the retail loyalty experts. We have the skills and experience to provide our retail partners with programs that provide insight which makes their marketing budgets more effective.

Our modular approach means we can help you at whatever stage you

are at with your loyalty program, from data capture and value proposition

through to integration of sales promotions, behavioural segmentation

and communications.

Our partners use our loyalty programs to support their marketing

and merchandising approaches benefiting from customised marketing

information, the ability to track trends and minimise waste.

Most importantly our partners enjoy more profitable relationships with

their customers underpinned by promoting a trusting relevant relationship.

Ikano Insight

One thing is for sure; your loyalty program will generate data - lots of it.

For many retailers building this data rich asset is the primary reason to

run a program - it is the way to harvest significant information about your

customer base.

Turn data into insight

Collecting and storing data though, is only a means to an end. Insight is the

true reward for running a program. We understand the importance of this

and from the outset we work with our retail loyalty partners to design and

operate insight strategies that have a demonstrable impact on the bottom

line. We provide the skills and experience to turn raw data into action.

Benefiting from your data

We’ll guide you to use the insight we develop to deliver value through

• Targeted sales promotion activity (lifestage/shopping habits/location) • Behavioural triggered communications • Targeted sales promotions by customer segment

We would be happy to discuss how our products and services can help to improve

your customer loyalty and increase sales.

Contact us today and we will arrange a convenient time to meet and run through

our solutions in more detail. We look forward to meeting you soon.

Get in touch.

Call us: 0115 850 3545

Email us: enquiries@ikano.net

Visit our website: www.ikano.net