By Pete Howroyd, The Loyalty People
It feels like a millennia ago that we were able to go into a store and browse the latest fashion, buy a coffee or sit and relax in a trendy bar. COVID -19 has changed the world – and it has changed it for good. As we begin the long road to recovery, the question I am being asked most often is: what role, if any, does loyalty have to play in the recovery process?
It’s important to say at the start that a loyalty program is not a knight in shining armour, swooping in to save a broken business. The fundamentals of product and price still apply and these need to be spot on before a loyalty program will work. If a business was struggling before the pandemic, the chances are it will continue to struggle afterwards.
If the fundamentals are in place however, the pandemic hasn’t changed the potential of loyalty as a powerful tool for businesses. Capturing customer data, communicating with customers and rewarding them for specific behavior, building incentives such as tiers or bonuses, and channeling valuable insight back to business leaders to help their tactical and strategic decision-making. All of this is just as relevant, if not more so, in the post-COVID era. What has changed, however, is the way that these tools should be used and every business must understand the ‘new rules’ of loyalty as they rebuild over the next few months.
Throughout the pandemic, across the entire population, there have been countless acts of kindness, whether that be food donated to food banks, volunteers signing up to assist others, or the creative activities families and individuals have used to raise money for charity. Never before has an entire nation stood on their door step every Thursday evening and clapped in appreciation for those on front line.
All of this comes down to emotion. And I believe that this is now the strongest and most powerful asset for all companies in the post-COVID age. The challenge: how to connect with customers on an emotional level and steer clear of anything that looks or feels like a hard sell – at a time when many businesses are struggling financially.
Cue the loyalty program. Loyalty programs allow businesses to talk to customers in a non-intrusive way, mainly because a customer has opted in to become part of a brand’s community and, as long as they don’t get bombarded with irrelevant content, then will most likely enjoy receiving messages and updates. Brands can use their loyalty program to communicate and in some cases create moments of emotion effectively. For example, they could offer exclusive tiers of benefits to key workers, making them feel good, but also generating a sense of pride and warmth throughout the full customer base. You can see many examples of this happening already: the big four grocers have offered priority access to their stores, Hertz offered a 40% discount on car hire, Vodafone offered unlimited data, and many others joined in with similar offers to send an emotional message to the market. Recovery for these brands will be a little easier as they have already started their emotional position to the market and won over the hearts of many.
Loyalty programs can also be used to create personalized communications and high value service, bringing a sense of emotion into the transaction – both online and in-store. Customers have always enjoyed being recognized for their loyalty, so brands with the capability to have loyalty based conversations such as birthday wishes, rewards due or a simple ‘welcome back’ should do so. There should also be no friction between the online and offline experience, so for companies who don’t already have a fully integrated loyalty platform across stores and e-commerce, they should consider an upgrade to ensure that they can compete.
Retain your new customers
The virus has changed people’s buying habits. They’ve had to shop in stores they may previously not have set foot in. This means that some businesses now have a massive amount of new customer data which they can cultivate and grow for future sales. Loyalty programs are a great way to build a relationship with these new customers, but they may need different treatment to those already on the database to stop them returning to their old retail ways. This could include stronger rewards and benefits, an incentive over a fixed time period to increase visits and secure a higher retention rate, a seamless onboarding process, and communicating value added services and benefits in the early stages.
Win back lapsed customers – but only the valuable ones
On the flip side of this, brands whose trading has been restricted or has declined during lockdown will need to work incredibly hard to reactivate shoppers who may have wandered onto competitor sites and succumbed to their allure. Loyalty programs in this instance are powerful tools, and have the advantage of a customer’s past buying history at their disposal and the ability to personalize offers and services.
Businesses must however take into consideration the value of the customers they are targeting for reactivation. Huge sums of money are wasted by targeting low value shoppers with high value incentives and promotions. Start by running analytics to compare frequency and AOV rates to non-pandemic behavior, to pinpoint which customer types are causing a decline in visits or sales. Segment the customer base and invest in the most valuable and at risk customers. Remember Parato and his 80/20 law – take care of those who are, or were driving 80% of your sales and many costs will be saved. Keep focused on building the all-important emotional connection, personalization and using past customer preferences. For example, a business with high value VIP customers will find a simple phone call to ask how they are and how they have found the pandemic can go a long way. Similarly using whatsapp and Facebook messenger to have personal conversations with customers can add that all important emotion into the relationship. Saying all of this, it’s also important to accept that some shoppers will not return, however much you try to persuade them.
Dial up emotion through social channels
Social media integrated with loyalty will play a large role in recovery. Many businesses are seeing an increase in the volume of social interactions during the pandemic and those who have integrated loyalty platforms which can reward customers for likes, follows and other behaviors have a head start in creating engagement across their customer base – even if customers are yet to make their first purchase. It’s a great recipe for strong recovery, and adding gamification across these channels is particularly engaging.
Don’t rush to discount
Some brands may be preparing to push out large scale discount messages, targeted at their full customer base, sending blanket emails to everyone to drive instant sales. This may work in the short term, but it’s not a viable long term strategy and can cause an erosion in brand perception. Once you introduce customers to the drug of discounts it’s incredibly hard to wean them off it. These tactics should be used strategically and only for customers who are not already of relative high value.