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Building customer loyalty

Seventy-four per cent of all retailers – and 88% of online-only retailers – are prioritising investment in customer loyalty and retention programmes this year – but, if retailers think they can buy loyalty, they are missing the point, argues Steve Rivers.

Recent research by Eccomplished of 100 of the UK’s top multi-channel and online only retailers highlights customer loyalty as the highest priority investment for growth.

This begs the question, how do you build a loyal customer base? It may not be a perfect example, but I think Tesco’s loyalty scheme illustrates a central point very well.

The Clubcard gave Tesco a huge advantage over its competitors. But not because it created loyalty in its own right – rather it gave Tesco the ability to gather and act upon copious customer insight. That insight was applied to everything from in-store promotions and store layout, to pricing, customer communications and much, much more.

In other words, it gave Tesco the ability to earn loyalty by giving its customers what they wanted, when and where they wanted it.

It used the data to find out about its customers at pretty much every touch point – in store, at the petrol station, online. That insight, not the ability to gather and spend points, is what ultimately underpinned customer loyalty and, I would argue, contributed to stellar performance (OK, a booming economy helped too).

That is a lesson those online retailers investing in loyalty and retention would do well to learn: Loyalty is not a one-way street. You can’t create it - you earn it. I hope, and not purely for selfish reasons, that the same thought process is shaping at least some online retailers’ plan to invest in ‘loyalty’.

In fact, a failure to draw together rich customer insight from every online touch point, organise, analyse and understand it, is to ignore one of the most significant advantages of online commerce over bricks and mortar. It is much, much easier to gather a lot more detail about customers’ online behaviour – and not just when they buy.

Intelligence drawn from every interaction, whether on the eCommerce site, via an electronic newsletter or any other online channel can be easily drawn into a single customer view – a view that tells us not only what customers do and when, but also, vitally, what they do not do.

It’s staggering really that the value of that kind of deep intelligence is so often overlooked. It is exactly the kind of insight that enables brands to earn loyalty – not by ‘selling’ more efficiently, but by organising themselves to make it easy for customers to buy what they want, when they want - to closely target promotions, customer communications and everything else.

The point is, if brands want to build loyalty amongst customers online, they need to make the effort to really understand them and how they behave across an increasingly complex set of channels.

It doesn’t even require any action from customers like the Clubcard did – the data is already there. Retailers only need to acquire the tools required to organise it intelligently, interrogate and understand it.

I firmly believe that the brands which make the effort, rather than simply ‘playing the loyalty card’ will win in the short term, but will also build a lasting advantage – and not just in terms of customer loyalty. They will be in a position to base future investment on real insight, rather than what amounts to educated guesswork.

Steve Rivers is the Managing Director of Intelligent Reach, and a founding member of Eccomplished.

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