Loyalty programmes: on the pull

11 July 2014
Loyalty programmes: on the pull

One of the best ways to get tills ringing is to keep regular customers coming back for more with a loyalty programme. Rosalind Mullen looks at how technology is changing the type of schemes on offer

If you doubt whether it's worth spending time and energy on building customerloyalty, think again. According to panellists at a recent American Express Insights Network on consumer trends and the future of loyalty, loyal customers are more valuable than new clients because they generate business.

"Loyal customers are 30% more likely to recommend us to their friends," explains Ian Cranna, EMEA vice-president marketing and category at Starbucks.

Katie McQuaid, Clubcard operations director UK at Tesco, adds that customers usingits loyalty scheme are an astonishing 15 times more valuable than a transactional customer. OK, so she works in the retail industry, but while the nitty-gritty of loyalty offers might differ from hospitality, the justification remains the same.

Everyone's at it. Even pubs, as Maria Hamilton, senior marketing manager for digital and loyalty at Orchid Group (a large chunk of which has recently been sold to Mitchells & Butlers), explains: "Consumers are surrounded by loyalty propositions and hooks in the retail sector and they come to expect a similar type of offering from those businesses they eat out at regularly. However, industry players are continually raising the bar in terms of quality, service and environment, so for pubs to retain their customers' loyalty, a reward proposition can be the edge that's required."

Orchid's recently launched scheme could be the shape of the future, integrating loyalty, reservations and till data into one system. Hamilton predicts loyalty schemes will burgeon in the sector over the coming months, and price-conscious consumers will start to engage with schemes that provide the most instant rewards. In her view, schemes must be simple if they are to be successful - and the strongest rewards are usually monetary.

For Tessa Shreeve, managing director at dining club website Design Restaurants, there are six considerations for a loyalty scheme:

  • Does it deliver real benefits?
  • Is it sustainable?
  • Will it drive repeat purchases and loyal behaviour?
  • Can it collect data?
  • Will it enhance the brand?
  • Does it use technology?

In the moment
Certainly, the use of technology is increasingly relevant to loyalty schemes. While collecting stamps on cards or saving points still have their place, there is a definite trend to developing apps.

Design Restaurants offers an app withGPS, so members can search for restaurants in their locale (see panel). It's also working on technology that will allow its restaurants to target offers at members walking past. It is still building this iBeacon technology with iPhone, so there are no results so far, but Shreevereckons it is the way forward: "Customers are increasingly promiscuous," she says. "Transmitting offers to the customer when they are in the vicinity will have a profound effect on our marketing. This will enable a far greater prompt to action - right message, right time, to the right people."

More pertinently, technology is increasingly being used by hospitality businesses to garner details about customers. Orchid has linked its loyalty scheme to an Epos system, for instance, so it can collect information on when individuals typically prefer to visit, how much they spend, how often they transact, which
products interest them, which offers they tend to respond better to, and so on.

Operators are increasingly seeking this type of information so they can better shape their offer around what customers want to buy, make marketing more relevant and helping them forecast sales trends better.

But businesses need to tread carefully. Some consumers The Caterer spoke to are hostile about organisations collecting their personal data. That said, while privacy concerns some, Facebook's Cotterill points out that people volunteer huge amounts of information on social media sites every day.

Shreeve believes there's no going back. She sees loyalty schemes as crucial in a climate where acquiring new customers has never been tougher. "Combined technology is revolutionising marketing," she says. "Loyalty programmes can now give a company agility to be proactive and reactive. We have a better understanding of the customer and their usage, more communication points and now the ability to engage with them geographically in real time."

Presumably, though, even the best loyalty scheme won't stand up if you haven't got good business practices. Or what if you're a victim of your own success? Surely a rushingcommuter will ditch their coffee shop loyalty if the service is slow, the beverages are not up to scratch or the queues are too long?

Long queues are "out of the realms of loyalty," agrees Cranna. "Loyalty comes back to how well the operator executes the service. We can help to reward them but, ultimately, it comes down to the quality of the coffee."

Design Restaurants
In a nutshell
Design Restaurants is a list of destination restaurants in the UK with Michelin, AA or Sunday Times Top 100 awards. It was launched in 2005 to make use of non-proprietary call data gathered by parent company Vision Marketing, which creates loyalty and reward programmes for the luxury hotel sector.

Some 60% of the 25,000 members of Design Restaurants' dining club joined direct, while 40% have come through hotel schemes. The objective is to attract a loyal crowd of high-spending, fine-dining regulars.

Non-members Get the use of a free app that acts as their own restaurant concierge - finding, advising, booking and marking as "favourite" the best venue for their location. The theory is that casual users will become club members when they see the benefits.

Club members Can get savings of up to 50% at specific times at participating venues. Some 47% of featured restaurants provide some kind of offer.

Affiliated members of hotel rewards schemes In addition to dining club benefits, users can also enjoy benefits at their host hotel. The hotels, in turn, receive commission on annual subscriptions, see increased spend and get a branded, managed, localised sales campaign with no costs.

How it is funded
The restaurants don't pay - revenues are generated through an annual membership fee of £90 for subscribers to the dining club.

How it works There is no plastic card. The app allows members to download a digital 'card', which shows a barcode that can be scanned by the restaurant for its tracking records. The app also allows members to scan the barcode or quick response (QR) code on the receipt or bill at a participating restaurant, so they can record their own visits and later redeem loyalty rewards.

In fact, it is technology that drives the scheme's success; particularly the app's geo-locale service, which enables members to search for restaurants wherever they are and which is currently being upgraded.

The strategy is to offer club members discounts, customer recognition and added value. Venues can list their offers on the app and the website. These include competitions, complimentary entry to exhibitions, shows and sporting events, deals at hotels and spa offers.

Both sides benefit. Club members get added value and restaurants get to drive off-peak business from high-spend diners. While price is still a driver, the scheme is designed so it doesn't undermine luxury brands.

"It is more complex than the casual dining market, where discounts are the driver and brands do not require the same level of sensitivity for the marketing message. For us, messages are increasingly more personalised," says managing director Tessa Shreeve.

How successful is it? Shreeve says there is an increase in consumer interaction, supported by social media trends, which has driven a 59% rise in downloads of the app in the past year.

Sodexo Reward Tree
In a nutshell
The Sodexo Reward Tree app, launched in February, is one of the first in the contract catering industry and was developed in response to the growing consumer appetite for discounts. The company's research shows that 30% of customers visit its restaurants at least once a day and 15% visit more frequently.
The app has only just been launched at 400 Sodexo-run restaurants in workplaces, hospitals and universities across the UK. However, the long-term aim is to roll it out to defence sites, Sodexo Prestige, and even some school contracts.

How it works
It is a virtual loyalty card that can be downloaded free from either the App Store for Apple devices or the Google Play Store for Android devices. The customer registers with the scheme via their smartphone.

Whenever customers buy a hot drink or spend the qualifying amount on their meal, they scan the quick response (QR) code at the till and receive a "stamp". If a customer buys eight hot drinks or eight qualifying meals, the ninth is free.

Marketing director Ben Forbes says it is too early to talk figures, but he is encouraged by the number of users who have already downloaded the app. He expects a minimum of 25% of the customer base to use it regularly.

Benefits to Sodexo The app will be used to collect consumer data and give the Sodexo team the ability to analyse its customer profile and get an insight into customer purchasing patterns.
"We can then send targeted promotions to the customer," explains Forbes. "This is a first in the sector, so it helps to reinforce the important message to our customers that we are innovative. Additionally, it enables us to reward our customers for their ongoing loyalty."

Where is the technical expertise from?
The app was developed in association with Stampfeet, which provides support to the Sodexo marketing team. The team can update content at the click of a button.

My Starbucks Rewards
In a nutshell

Customers can manage My Starbucks Rewards (MSR) via an online account and on a bespoke mobile payment Starbucks app.

The company has 1.4 million members in the UK. Members can pay using their mobile by linking their account to the app. More than 11% of transactions a week are now made with a mobile device, and nearly 10 million customers globally use this mobile app.

How it works Loyalty customers collect stars for every visit and after 15 stars they receive a free drink. If a member collects 50 stars a year, they are moved to Gold membership, with free extra shots of espresso, selected syrups and whipped cream and an upgrade to the Single Origin Espresso series. Customers remain at the Gold MSR level only if they continue to buy 50 drinks a year.

Trends in the loyalty market
Cranna says consumers have come to expect loyalty programmes from their favourite brands. "The key difference we see for loyalty, and what makes us stand out from the crowd, is technological developments," he says. "We were the first on the high street in the UK to introduce a bespoke mobile payment app. We saw that many of our customers were choosing not to use cash, but also don't want to carry a wallet full of cards, so our app is quick and convenient. We now provide loyalty and payment on one app, which has made it even easier to use."

Starbucks has developed its loyalty programme by taking account of the emotional as well as the functional benefits. Besides dispensing stars that can earn a free drink, it gives customers money-can't-buy benefits, such as the chance to try seasonal beverages a week before anyone else.

"This means loyal customers can engage with us on an emotional level," explains Cranna. "They can share on social media that they have just tried an early Pumpkin Spice Latte."

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