Last month we saw the introduction of two new loyalty schemes from Marks & Spencer (M&S) and Asos, aimed at driving loyalty by providing rewards for engagement through reviews, social sharing and more. M&S may have had its problems recently after a fault with its website allowed customers to see each other’s details, but both examples signal a positive change in step by retail marketers towards rewarding customers who do more than just purchase their products.
It’s well known that it’s far more expensive to acquire a new customer than it is to retain an existing one and that the average order value of repeat customers is significantly higher than a first purchase. Rewarding customers for purchasing products is a tried-and-tested approach that encourages repeat purchases. From Green Shield stamps to Nectar points, as the value of the purchases (and therefore their number of points) builds, the value of the rewards increase.
This measurement of loyalty by the number – or value - of transactions is a common example of behavioural loyalty. Consumers that show this level of loyalty are arguably only in it for the points or discounts, so rewarding with points for purchases doesn’t prevent customers from being “disloyal” and shopping elsewhere.
Some retailers have made a concerted effort at evolving their basic “spend money, get discount” model. You don’t have to think too hard to come up with examples of non-financial based rewards being offered by brands. Airlines have long offered airport lounge access for loyal customers, while this year Harvey Nichols launched a new take on a loyalty scheme. The solution was housed in a mobile app that allows customers to choose their rewards from a tiered suite of services, perks and privileges.
Asos and M&S represent the first real move by retailers to expand the scope of what it is that brands reward existing and potential customers for. 84% of consumers say they would spend more with retailers that reward non-purchase based activities, according to 2014 research from Colloquy. The survey also indicated that 89% would visit a retail location if it offered rewards for non-purchase activities. This is a trend we’re likely to see more retailers and brands following.
This new stage of loyalty indicates a closer level of customer interaction – a shift from behavioural loyalty to attitudinal loyalty. This new approach to generating and harnessing brand loyalty rewards consumers who show their affiliation with a brand or retailer not simply through financial transactions, but via positive affection and shared experiences with the brand or retailer.
Asos is perhaps the most advanced of the two in rewarding this type of behaviour. While M&S rewards shoppers for reviews of items, therefore encouraging customers to engage and share their experiences of M&S products, Asos has gone further to embrace social media.
The online retailer embraces what its chief executive Nick Beighton calls “total loyalty”. Points will be offered for engagement through the likes of its #asseenonme platform, where customers are encouraged to share their Asos-bought outfits – images of which are subsequently fed into a stream on the website. Consumers who are proud, visible brand advocates are exceptionally valuable, showing more loyalty to a brand than those who make a simple financial transaction.
Historically, behavioural loyalty has been favoured by brands and retailers because of its demonstrable impact on the bottom line. Attitudinal loyalty tends to be the domain of other brand-level marketing activities that are measured but don’t usually provide rewards.
While the financial transaction remains as important as ever, it’s not the only way that a consumer can show loyalty. In order to become loyalty businesses (ones that are effective at keeping hold of their customers) retailers must follow M&S and Asos in focusing as much on what they reward as on how they reward.
Gareth Evans is business development director at Five by Five
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