Truth

Loyalty programmes are worth gold. 42% don’t get that.

From retention initiatives to club programmes, many of the companies we analysed hugely underestimate the business value of loyalty. And when just a 5% increase in customer retention can increase profits by up to 95%, it’s an area more retailers and brands should be investigating in as a matter of urgency.

loyalty

In every industry, one area divides top performers and low performers: loyalty. Not just loyalty club programmes with benefits, but all aspects of loyalty.

From enlisting new members online and in-store to collecting data on customer buying behaviour, most of the retailers and brands can improve their efforts in targeted offers. Choosing not to prioritise loyalty is an enormous mistake, according to Kasper Holst, CEO of IMPACT.

You miss out on a huge opportunity to collect customer data and to communicate directly to your customers. You end up spending a large amount of your marketing budget to get customer to visit your physical stores, while missing the opportunity to increase customers’ brand interaction.

Kasper HolstCEO of IMPACT

The fact is that it cost five times more to acquire a new customer than retaining an existing one. Companies with loyal customers have higher profits than companies without, and the most loyal customers are the customers who earn retailers and brands the most.

But only 58% of all retailers and brands have a loyalty club.

Crucial area of improvement

The retailers and brands without a loyalty club are missing an obvious opportunity to cross-sell and up-sell based on customer behaviour.

Online shopping encourages customers to be disloyal because of almost limitless choice. Customers can easily switch retailers and brands if they receive a better offer.

Christian Vermehren, Head of BI and Customer Insights at IMPACT Extend, explains:

Loyalty programmes are a crucial area of improvement. Companies with loyal customers have higher profits than their competitors, and loyalty clubs are a great way to start working more systematically with loyalty.

Christian VermehrenHead of BI and Customer Insights at IMPACT Extend

He continues:

“Using data collected from membership cards, for example, you can build rich customer profiles across online and offline touchpoints which enable you to create more targeted and personalized offers.”

More than a service
58%

Of all retailers and brands have a loyalty club

The hard work starts when the purchase ends. Retailers and brands must understand that it is a great investment to persuade customers into doing business with them over and over.

There is a lack of insights into the economics and mechanisms of communicating with customers. Many aren’t aware of the value created by boosting Customer Lifetime Value, rather than investing in new customers.

Kasper HolstCEO of IMPACT

Loyalty clubs are not just a service to customers, retailers and brands benefit greatly from them as well. The loyalty programme is a tool for retaining customers by giving them a strong incentive to buy again.

According to Bain & Co., increasing customer retention by just 5% boosts profits by 25-95%.

Furthermore, loyalty clubs are a tool for collecting customer data. By enlisting and working systematically with loyalty programmes, retailers and brands obtain more customer data which they can use to create personalised experiences and strengthen relationships.

But it demands that companies analyse the customer data and segment each customer into A, B, C customers etc.

With insights into customer behaviour, buying habits, and preferences, companies can tailor their offerings to specific groups of consumers and their inventory management, pricing, and promotional planning.

Retailers and brands will know which customers earn them the most and can create dedicated campaigns to activate inactive customers.

Customer data is equal to Amazon

When it comes to loyalty clubs, Swedish brands and retailers are years ahead of Denmark and Norway.

85% of Swedish companies have a loyalty club where customers can see their purchase history. Regarding Denmark, the result is 32% and 56% for Norway.

With the exception of the home and interior industry, almost every retailer and brand offer this omnichannel service.

Within the home and interior industry, only every second company offers the service. The same goes for the industry in Norway and Denmark.

Loyalty programme in each country
85%

in Sweden

56%

in Norway

32%

in Denmark

‘Home & kitchen’ is among Amazon’s three best-selling industries in the UK, France, and Italy, and Amazon is excellent in collecting customer data.

This should be more than enough to convince retailers and brands to invest in a loyalty programme.