Big Data: The Secret Weapon Behind Loyalty Programs

A loyalty program provides an all-encompassing platform to build and grow lasting customer relationships, and yet not enough companies are recognizing what the real secret is.

The obvious way a loyalty program builds bonds with customers is by providing benefits—reward points, discounts, freebies and other enticements—but the true driver behind a successful modern program is Big Data—the detailed information it captures on consumers through an array of interactions across all channels.

A common false perception among marketers is that ‘loyalty programs’ and ‘rewards programs’ are the same. However, reward programs offer nowhere near the value a loyalty program does. A rewards program is simply a platform for promotions, giving no clue as to how these actually can and should be targeted more precisely. A loyalty program provides a sophisticated means of tracking every transaction between a customer and a brand so that the Big Data can then be analysed to better understand the buyer’s habits and needs.

The latest research from GI Insight—a survey of over 1,000 UK consumers—shows that generating customer insight from a program positions companies to not just keep buyers coming back but to coax them to spend more and more often, and even move to higher margin products. The research also indicates that the vast majority of consumers see real value in these programs.

According to the survey, 87% of consumers say that, where a company has a good loyalty program, they have continued purchasing from that brand over the last few years, and 33% have even switched brands because the company they shifted their purchasing to had an appealing loyalty program. And 82% of consumers confirm that with the economy picking up they will keep buying from businesses whose loyalty programs have delivered value in the last few years.

Not only should companies get on board with how important loyalty programs are but they need to recognize that consumers have come to understand how brands are using their information. The research showed that 64% of consumers are, in fact, happy for a company to retain and use a considerable amount of information on their shopping behavior and personal preferences as long as it continues to send them “relevant and timely offers.”

Not only do loyalty programs provide a platform to influence consumer purchasing but consumers are seeing loyalty programs as a strong indicator of a trustworthy business. In fact, our research revealed that 76% of consumers are now expecting “any credible retail chain” to have a loyalty program in place, as well as 76% of consumers being very reluctant to hand over their data to a company unless it actually has a proper loyalty program set in place.

Companies must not get complacent when it comes to these programs; too many believe that merely getting customers to sign up will be enough to ensure a customer remains loyal. This is absolutely not the case. Loyalty programs need to be treated as a trade-off, meaning they need to provide something of value to the customer and in return customers will provide their personal information along with the permission to track their shopping behavior and actions providing that Big Data.

Using this data to provide sensible offers is critical to this understanding between brand and customer, yet too many companies are failing to use their data to target loyalty members with offers they value. In fact, a GI Insight survey conducted in 2014 revealed that, although 94% of UK consumers belong to at least one loyalty program, merely 47% of members remain active participants on average and only 27% feel brands are analysing their needs and sending them enough relevant offers.

Offering personalized rewards and incentives to your customers strongly positions you to win your customers consent for capturing further personal information. It is essential that they feel they continue receiving benefits and offers they find worthwhile—data analysis is integral to meeting these expectations.

It has become quite clear that loyalty programs don’t just capture a short-term relationship with a consumer but rather they forge a continuous on-going relationship. These days loyalty programs infrastructure should extend beyond the capture of transactional data to the analysis of real-time digital data so that you can even respond ‘in the moment’ to customers’ online interactions when they are mulling a purchase.

In the age of Big Data, the loyalty program is fundamental for companies wanting to achieve a customer-focused approach. A full program provides your company with the information and tools it needs to retain your best and most promising customers—but it also equips you to extend those relationships by encouraging return purchases and greater spending, while simultaneously flagging up cross-selling and upselling opportunities. This makes it an essential element in the customer engagement mix of any business.

Andy Wood is managing director at GI Insight. He can be reached at [email protected].