Comment: Retailers should embrace loyalty programmes or risk losing customers

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Adopting customer loyalty programmes can be a means of surviving the tough economic climate. By Phil Szymala

Phil Szymala, Business Insights Director at loyalty marketing company ICLP UK, says: "The recession has acted as a catalyst for the rise of discounting among retailers in the UK as consumers look for the lowest price on quality brands, but this approach is just a short-term solution. In such a market, retailers need to be offering more than competitive pricing: they need to consider long-term market share over short-term footfall and offer customers a real incentive to remain with their brand. Loyalty programmes are a perfect option."

Szymala believes that without motivation to remain loyal, consumers searching for the best deal will switch between retailers. The reward offerings provided by a loyalty programme give customers a tangible incentive to continue shopping with one specific retailer. The impact of loyalty programmes on market share can be illustrated by the success of Sainsbury's over the Christmas period. Having invested heavily in loyalty offerings to customers, Sainsbury's celebrated the company's best ever Christmas results. In contrast, Tesco, which moved away from loyalty offerings and focused on a "Price Drop" initiative over Christmas, had a torrid time in terms of sales."

He also raises the importance of customer engagement, saying: "The important factor to consider when developing a loyalty programme is how the rewards align with customer interests and spending patterns. Although the traditional points programme remains a popular option for retailers, loyalty programmes don't have to follow this approach. The loyalty programme launched by Waitrose, where customers receive offers, competitions and ideas tailored to their individual needs and interests, is an example of the alternative options out there. For a loyalty programme to be successful, the rewards must be tailored to customer spending habits so programme members receive tangible value for money."

Don't miss the Retail Bulletin's 3rd Customer Loyalty Conference. Join us in London on June 13th 2012 and find out how to Maximise customer loyalty and stability by communicating brand value, build trust and engage your customers. Sponsored by The Logic Group, speakers already confirmed are from Tesco, Costa Retail, The White Company, Shop Direct Group, Npower, Orange-France Telecom, Lush, Phones 4U, Joules Ltd, Just-Eat, Topshop, Great Ormond Street Hospital Children's Charity, Logic Group,  Empathica. Click here for further details and registration.

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