By Paul Martin, KPMG Global Retail Lead & UK Head of Retail
Loyalty is not dead, but it is certainly changing its look. The days of retailers needing only to look at what goes on inside their own stores are numbered as the retail industry is transforming in the way it views loyalty. So far within retail, we’ve gone through 5 generations of loyalty:
- 1st gen - The Advantage Card: in-store earning points, to bring people back into the store.
- 2nd gen - The Membership Card: the big innovation was looking at SKU level data, so cross selling was done between products. People that buy ice-cream might also like chocolate sauce.
- 3rd gen - The Exclusive Club: wanting customers to feel like they are part of an exclusive club by offering special events, special discounts, exclusive gifts.
- 4th gen - The Service Bundle: Large ecommerce were re-writing the book on loyalty by understanding that it’s about frequency of consumption. Began bundling various streaming services, shipping, and payment methods for the customer’s convenience.
- 5th gen - The Superapp: an app which the user never leaves. It serves all their daily task needs from communications through to shopping and commerce.
Retailers must remember that consumers don’t think about having a different wallet per brand - to them there is only one wallet, their own. It’s the retailer’s task to capture as much of that wallet as possible. The key activity therefore is to ‘predict future behaviour’ which means you have to be able to measure performance in near real time.
Some clear trends we are seeing within the retail industry are a drive towards greater customer power and choice and a rise in purpose-led businesses. Business models are changing and partnerships are becoming key to the future of retail. The cost of doing business is also shifting, for example running retail is getting more expensive and essential retail will have to reduce their costs by 10-20% by 2023. Non-essential retail will have to reduce even more by 25-50% of their costs to stay competitive.
We are seeing that retailers are actively looking for new-gen loyalty solutions. For instance, some major supermarkets are currently investigating and launching new loyalty programmes. A decade ago in 2010, retail’s main debate was online vs offline. However this ship has sailed and it’s no longer one or the other but rather both. Since 2020, there’s a new debate and it’s all about privacy vs convenience for the customer.
My advice to retailers is get to know your customer as well as possible and know the costs of acquisition, net retention costs, sales costs per customer. Look for the right data and tech, focusing on quality over quantity and drive purpose & reputation in your proposition. Thinking about the well-being of the individual, the planet and the mind is key.
I am very supportive of the research into the Upside ‘point of loyalty’ as I believe Open Banking and spend data, and most importantly understanding customer lifetime value at a near individual level, is a great addition to retailers to help them stay one step ahead of their competitors.
Andries notes: “Let me repeat Paul’s great advice: get to know your customer as well as possible! Look for the right data and tech, focusing on quality over quantity and drive purpose & reputation in your proposition.”