Threat of downturn must shift attention to loyalty 

Rising interest rates, a recession on the horizon and high levels of inflation combined, make for a perfect storm that will put huge pressure on retailers already under strain after the pandemic, unless they get better at retaining customers through loyalty initiatives.  

Mark Presnell, who is the managing director of eCommerce integration company Convergence, said a clever loyalty programme can create the highest marketing return on investment by helping to keep customers engaged. 

“But it’s important to ensure any offline rewards system is synchronised with an online system, otherwise all those marketing gains could walk right out the front door.” 

The old marketing maxim that its more profitable to re-engage a current customer than to acquire a new one is true for a good reason.  

Anecdotal evidence suggests acquiring a new customer can cost five times more than retaining an existing customer.  

“On top of that, the success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is 5-20%.” 

Presnell said these kinds of statistics prove how vital it is to retain customers through some type of loyalty programme. Companies that take customer loyalty seriously can pull ahead of the pack in highly lucrative ways. 

The key is finding a method to marry the offline versions of loyalty schemes with the smooth online approach of redeeming them. It’s nice to have a buy-five-get-one-free punch card, but most people do a large chunk of their shopping online, so those points must be internet transferable. 

“A loyalty programme is a great tactic for generating repeat customers. You want to reward them for choosing to shop with you. It doesn’t much matter if a company is primarily online or if it still has brick and mortar stores. Setting up a loyalty programme is quick and easy. 

“However, the tough part is ensuring the online system ‘talks’ with the offline redemption of loyalty points immediately. It is crucial to set up an automated system so customers aren’t redeeming points in store, then running home and redeeming them again online—which is a real issue,” Presnell said. 

The solution is creating a system that is user friendly and synchronises instantly with any in-store redemption scheme. 

“People will game the system if you create a system that lets them do that. It’s human nature to try and find a loophole.  

“Most companies run quite close to the edge in terms of margins anyway, so creating a rewards system with loopholes that might lead to double dipping could be enough to tip a business into insolvency,” Presnell said. 

That risk is not a reason to avoid loyalty schemes, far from it. Presnell only warned that, like any modern technology, it will only be as robust as the rules set up around it from the beginning. 

“The cost of a robust loyalty scheme depends on the software system you choose to deploy. But it will become expensive if you set it up without forethought. That we can guarantee,” Presnell said. 

He offered a few tips for companies interested in boosting customer loyalty with reward programmes. 

1. Offer rewards that are meaningful 

To retain customers, your loyalty programme must offer rewards that your customers want. This could include discounts, free products or services, exclusive access to events, or personalised experiences. 

“Think about which customers you want to reward and build a programme to reward those people. Go beyond rewards for buying three of the same products. Think outside the square of what your ideal customer might find truly rewarding,” Presnell said. 

2. Ease of use 

A complicated loyalty programme can be off-putting to customers, so make sure it is easy to understand and use. This could include offering a simple point-based system, allowing customers to easily track their rewards, and making it easy to redeem rewards. 

“Ease of use includes deciding on the currency of your reward and whether it can be exchanged for discounts, other products, or ancillary service from another company. Sometimes a reward system that offers access to a complementary product at a partner business can be hugely attractive,” Presnell said. 

3. Push ageing stock 

Loyalty programs can be a powerful tool to move old stock, as they offer an incentive for customers to make purchases. A great use of a loyalty programme data to target customers who have previously shown an interest in the old stock, and offer them personalised promotions or discounts to encourage them to make a purchase. 

“Just because stock is old doesn’t mean it is valueless. If a customer has purchased something int the past, a loyalty programmes to offer them a strategic discount or even encourage customers to try a new product range,” Presnell said.


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