Experiences, Not Incentives, Are Essential To Win Consumer Loyalty

Hackett and Naked Wines are leading a trend that swaps impersonal loyalty cards for data-driven, personalised rewards backed up by exceptional customer service. This is where AI comes in to help make sense of the data.

There was a time when giving customers a branded piece of plastic for collecting points in return for data was the start and finish of any loyalty programme. But this one-size-fits-all approach is no longer enough.

It’s no longer as effective, either. According to Nielsen research, Britons are “drowning in a sea” of rewards schemes they struggle to understand and so do not use. Although the U.K. places second, just behind Finland, for the number of people most likely to own a loyalty card (3.6 per person), it is also the market where customers are least inclined to use them. In addition, only half (51%) said they are swayed to purchase from a brand just because they own its loyalty card. This statistic is backed by the Norwegian Business School, which found that across Europe, 58% of loyalty cards are never activated, let alone used.

So what can brands do? According to a recent study from Adobe and Goldsmiths University, “Reinventing Loyalty: Understanding Consumer Behaviour in the Experience Era (PDF),” the key is realising experience is everything. To succeed, brands must differentiate themselves with standout retail experiences and personalised offers flagged up to customers through digital channels.

Hackett Hacks Experience

That has been the thrust of what high-end British menswear retailer Hackett has been striving for through its cardless 65B loyalty program, developed with the help of marketing loyalty agency ICLP. In doing so, Hackett has gained far better insight into its customers base in return for what the brand’s CMO Mark Blenkinsop describes as “soft benefits,” such as free monograms on purchases.

“We’ll often have a promotion where we’ll tell someone at the point of purchase they get a free tie with that shirt, which is a lovely surprise,” he said. “There are also regular opportunities to win ‘money-can’t-buy’ hospitality prizes offered through our sponsorship of key events, such as polo, Henley Royal Regatta, and F1 races.”

Shoppers either sign up online or are enrolled in-store, where Hackett’s employees across the U.K, France, Germany, and Spain are equipped with iPhones to collect customers’ information for the program. The same data is collected online when people sign up with an email address.

Such information enables the staff to know whether a customer is a suit, smart-business, or casual shopper, which can prove helpful in making further recommendations. This segmentation will soon influence the type of email marketing each type of customer receives.

“We’re [also] toying with the idea of giving our top tier of customers a set of cufflinks that use RFID to tell us when they’ve entered a store,” Blenkinsop said. “At the moment, we can look up someone when they identify themselves so we can pick out the right sizes and suggest what would go well with what they have previously purchased. With the cufflinks, though, people could come immediately to our attention, so long as they’re happy to be identified, of course.”

Loyalty Through Community

Naked Wines uses a similar approach with its loyalty program, whcih is not based around cards or one-size-fits-all promotions. Rather, the online wine retailer has signed up 180,000 “Angels,” who commit to paying £20 a month, which they can put towards wine purchases. Prices are discounted for members.

The subscription fee is used to crowdfund independent winemakers. They interact with customers, who rate their purchases and recommend wines to one another. It is a novel idea that leads to loyalty but does not have loyalty as its obvious intention, according to Laura Riches, marketing director at Naked Wines.

“We never wanted to be seen trying hard to engender loyalty. Instead, we’ve built a community where customers talk to one another and winemakers to help each other discover new wines,” she said. “The loyalty is what comes out of this. We’re very lucky that we can do an awful lot with the data we gather through our Angels. We have a tech hub that lets us personalise our offers. Everyone gets offered a free bottle of wine with their next order that we’re very confident they’ll like because it’s based on their purchase history and how they’ve rated the wines they’ve enjoyed so far.”

Tailored Incentives

Personalisation is an important point for Rachel Aldighieri, managing director at the Direct Marketing Association U.K. While there is no doubt customers are basing loyalty around experience, actual rewards are still welcome so long as they are personalised. In fact, recent DMA research showed that nearly three in four consumers (72%) cited “rewards that are exclusive to me” as the top incentive for their loyalty.

“Loyalty now comes from being helpful, and, for most consumers, that means offering great customer experience that is personalised,” Aldighieri said. “Offers and rewards that are tailored to be relevant to an individual are far and away the biggest trend we’re seeing. It’s what Marks and Spencer is doing with its Sparks card, tailoring offers around what people choose, so they feel the scheme is built around them.”

Artificial intelligence is expected to further personalisation efforts in real time, according to Adobe and Goldsmiths researchers. With so much data moving at high velocity, they predict AI to become the tool to help make sense of each shopper’s habits. This will allow rewards to be tailored rather than appear as blanket offers, which can look impersonal and, therefore, discourage loyalty.