The loyalty industry is heavily saturated with lots of schemes, coupons and offers, and innovation can prove to be difficult. Some businesses have attempted to innovate, whether this is by introducing new methods of customer identification or new ways to serve up offers, but few succeed in providing truly innovative changes, or even changes which deliver real value for the customer or the business itself.
This lack of innovation ultimately stems from the fact that it is risky; if it wasn’t, every business would be doing it and the notion of ‘innovation’ would be somewhat diluted. It is risky because there are often significant costs involved, or there is a chance that the current member base will be alienated and move elsewhere. However, companies that do take a deep breath and jump into innovation head-first can find a competitive advantage in differentiating their customer loyalty offering and by defining a new standard for loyalty.
Leaders in Innovation
My Starbucks Rewards is a good example of a loyalty offering that shook up the industry, by combining payment and loyalty into an integrated, multi-channel approach. As a result, it is often cited as a leader in customer engagement, and mobile and physical Starbucks Card payments now account for over 30% of the company’s US transactions.
Taking a different approach, US shoe and clothing eCommerce business Zappos is renowned for its customer loyalty business model which ensures repeat business through an exceptional customer experience. The company has a dedicated Customer Loyalty department, comprised of about 400 people who are empowered to go the extra mile for customers, which includes sending personalised, handwritten thank-you notes to customers of their choosing, or sending flowers to customers on special events such as birthdays and anniversaries.
Amazon has been consistently revaluating its business model to stay on top of the competition, rolling out its Amazon Prime rewards system in 2005 to combat customers abandoning purchases because of high or unexpected shipping costs. For a fee, customers can expect unlimited 2-day shipping with no minimum amount on purchase. But the real benefits here are their online rewards in downloadable free digital content provided to their members every month. It is estimated that this rewards system has resulted in their Prime members spending on average 4 times the amount than non-members.
BalticAir innovates within the ‘rewards’ space by encouraging customers to burn their ‘flown miles’ as calories. In return, customers receive not only BalticMiles points, but a sense of achievement and motivation to continue to beat the challenge that flying sets them.
Source (clockwise from TL): Starbucks, Zappos, BalticAir, Amazon
Changing the Proposition
A very recent example of loyalty innovation comes from Morrisons, the 4th largest supermarket in the UK. In October 2014 when the company launched its new loyalty scheme, Match & More, it was hailed as ‘game-changing’ by industry analysts. This game change is driven by Morrisons’ decision to take the core supermarket loyalty proposition and improve it to provide a seamless customer experience. By including price match as the core earning mechanic within the loyalty offering, Morrisons not only made it easier for customers to collect their rewards, but demonstrated that innovation within a potentially stagnant industry is definitely possible.
In a ceremony hosted by Loyalty Magazine, Morrisons Match & More won the award for Best Loyalty Industry Innovation in the 2015 Loyalty Awards. Judges said that "in a fiercely contested category where opinion was polarised, brave Morrisons demonstrated huge take-up. The result of focusing on the customer in a commoditising market, they brought price comparison to real time".
Morrisons were accompanied by representatives from Capgemini, who acted as the systems integrator and strategic partner for the development of the Match & More scheme. Steve Hewett, Capgemini’s Head of Retail Customer Engagement & Loyalty, said:
“Morrisons has defined a proposition which allows the company to engage and reward its customers. The scheme is not a typical 1p per £1 spent scheme, it builds in a number of different levers which can therefore be pulled to drive engagement and personalisation at the same time”
With the significant amount of data that businesses now collect about their customers - combined with the advancements in today’s technology – there are very few excuses that can be made for not innovating in order to provide the best experience possible for your customers.
Consumers want to be delighted at every stage of their transaction, in return for their loyalty. If they don’t get this, their eyes will start to wander elsewhere and could be disloyal. Successful loyalty programs fit seamlessly into the customer journey, which Morrisons demonstrated with Match & More; it improved the customer experience, not just the customer journey.