Core Strategy Division looks at the formula of a real loyalty scheme and how some brands are using them in the 21st century.

1. Is your loyalty
scheme a
loyalty scheme?
Core Strategy Division

2. Introduction
Loyalty schemes can be incredibly
powerful tools to attract and retain
customers.
Done right, they can help build a brand
and deepen customer relationships.
But many are used tactically, as short-
term fixes that may only drive sales.
They may even undermine the very
thing they’re designed to create.
In this report, we look at what
defines a loyalty scheme and the
different ways they can be used as
marketing tools.

3. What is a loyalty scheme?
Loyalty schemes have evolved since the first
supermarket stamps and air miles programmes.
In today’s data-driven world, loyalty
programmes have become more
sophisticated – for example, Tesco
Clubcard pioneered the use of data
analysis and personalised customer
rewards to drive Tesco’s growth.
But despite their evolution, the basic
formula for a real loyalty scheme has
remained essentially the same over
the decades …

4. Incentive Data Loyalty
A loyalty scheme is a sales incentive plus data collection, applied.
Otherwise, it is sales promotion or discounting scheme through ‘collectible rewards’.

5. What is a loyalty scheme?
A true loyalty scheme is one where the
brand
• Has figured out what customers are being
‘loyal’ to, and then
• Uses data to learn from customers how to
make them happier.
In essence, today, we need to be talking about ‘loyalty marketing’.

6. Loyalty for 21st century brands
The hard reality for brands in the 21st
century is that consumers do not need
brands anymore.
Today, we are bombarded by choice and by marketing
messages. Brands need to give consumers a real reason to
care about them and to stick with them.
This is there loyalty schemes come in.

7. We took at look at some ways
loyalty schemes are being used in
this new 21st century brand
reality.

8. 1.
Loyalty is about
creating great
customer
experience

9. Customer experience is key to loyalty
The real value of a loyalty scheme is in providing
a business with rich customer data to help them
continually deliver and improve on their product
or customer experience.
Sometimes coming from unexpected insights, these can
have much longer-term effects than simple discount tactics,
which can help get people through the door, but not
support long-term brand growth.

10. Neiman Marcus, the US luxury
department store, is using
customer data to offer an improved
customer experience.
It takes personalisation to new
digital heights with the help of its
branded app, which alerts the sales
agent who last served each
customer when that specific buyer
is back in the store.
Shop assistants have instant access
to customers' previous purchases
on their tablets, enabling them to
make relevant recommendations.

11. In its London Horsham store,
Tesco’s Clubcard data revealed a
high volume of customers in the
early morning but sales figures
seemed off.
Their customer data showed the
store’s car park did not have
enough capacity to meet peak
demand, leading customers to shop
elsewhere.
By expanding their car park
capacity, they responded to a
customer need which resulted in
uplift in customer visits,
satisfaction, and profits.

12. So what?
Loyalty is really about
customer experience
A loyalty scheme is not an end in itself – it is a tool to
understand how to get closer to customers in order to
meet and exceed their expectations.
This may be through finding opportunities to increase
customer value, improving products and services, or by
revealing unknown barriers to business growth.
Check out our Slideshare for more.

13. 2.
Creating
disproportionate
added value for
consumers

14. Creating disproportionate added value
Real loyalty schemes help make deeper connections with
customers in ways that have a disproportionate relevance
and meaning for them.
This is how loyalty schemes go beyond just discounts. For
example, earlier frequent flyer programmes let people
exchange miles flown for free flights which have extra
significance, like reducing the cost of precious family
holidays.

15. By 2010, the Boots Advantage Card
was a well-established loyalty
programme. In the post-recession
climate, Boots needed to attract
Christmas shoppers to spend more
under one roof. They incentivised
customers to treat themselves at
Christmas by offering double-points
on selected lines.
They harnessed their loyalty
programme to roll out a highly
personalised direct marketing
campaign with ‘treat yourself’
coupons. The campaign boosted
incremental profits by 60%
compared to Christmas 2008.

16. Walgreens, one of the biggest US
pharmacy retailers, had to chose
whether to attract new customers or
reward loyal ones. They saw that 15%
of their customers drove two-thirds of
their revenue. In 2012, they developed
the ‘Balance Rewards’ programme
which rewarded loyal customers for
making positive health and lifestyle
changes.
By tapping into customers’ own
aspirations, Walgreens what products
and services their customers wanted
and linked their brand to something
truly priceless – their customers’
health. By 2015, the programme had
80 million active users.

17. So what?
Customer experience is
the key to loyalty
Loyalty schemes can be powerful tools to make
deeper consumer connections provided they offer
customers benefits of real personal significance,
beyond price.
This is especially powerful when loyalty schemes
reflect a brand’s core values.
Check out our Slideshare for more.

18. 3.
A way to engage
younger audiences

19. A way to engage younger audiences
One particular challenge for the future of marketing is the
extent to which younger generations – particularly
Generation-X – are disloyal to brands.
This digitally native generation is presented with an
overabundance of choice, bombarded by more advertising.
In today’s help-yourself culture, with shorter attention
spans, they expect immediacy. Instant rewards and
gamification are two ways to capture them.

20. Starbucks’ mobile wallet combines
their loyalty scheme with mobile
payment. Customers can use it to
buy coffee and immediately earn,
and redeem their loyalty points or
gift them to others. The app is
linked to a bank card, making
transactions faster and more
convenient - particularly attractive
among Millennials and Gen-Z. By
offering these immediate customer
benefits, Starbucks has attracted
10.4 million active members who
regularly visit Starbucks stores,
becoming one of the most
successful mobile wallets in the
world.

21. McDonald’s in Denmark wanted to
revitalise its loyalty scheme among
price-sensitive teens. To drive
engagement, they created an app
and ‘virtual currency’ – McDonald’s
‘Coins’. To earn these Coins, friends
had to play against each other
through the app. Effectively
discount tokens, Coins could be
redeemed at McDonald’s
restaurants. Use of this innovative
loyalty scheme grew among their
target audience significantly over a
two year period with a 60%
redemption rate and additional
sales of €2 per coin redeemed.

22. So what?
A way to engage
younger audiences
Instant rewards and gamification are two innovative ways to
engage younger generations in loyalty schemes. By adding
value to their lives in ways that fit well into their digital
native mindset, brands can also overcome their relative lack
of attention given to brands.
Check out our Slideshare for more.

23. 4.
Loyalty schemes
can incentivise
disloyalty

24. Incentivising disloyalty?
A different outcome of so-called loyalty schemes is how
some actually incentivise disloyalty.
Especially rife in insurance, mortgages, mobile phones, utilities where
churn can be high, marketing efforts tend to be focused on acquiring
new customers from competitors more than retaining long-standing
customers.
Messages like “offer available to new customers only” send strong
signals to loyal customers that they are less valued and this can
increase their risk of churn.

25. Incentivising disloyalty?
Since another word for loyalty is inertia,
some businesses have been smart in how
they have used loyalty schemes to
creatively encourage disloyalty or
to fight against churn.

26. One group of independent US
coffee shops in Washington DC
developed a ‘disloyalty programme’
– customers of one shop would
receive a free coffee after collecting
six stamps, provided they collected
those stamps at each one of the
other five cafes. Similar
experiments have taken place in
Cincinnati among restaurants. But
while called ‘disloyalty
programmes’, they are, more
accurately, a new breed of
‘coalition loyalty’ programmes,
helping generate business within a
wider community.

27. UK energy brand, Seeboard, were
operating in a high churn market.
Their choice was whether to feed
into that by seeking new customers
or to hold onto their existing
customers. They chose to counter
churn by introducing a new range
of products to existing customers
and harnessed their customer data
identify who to offer their products
to.
In this way, different from other
brands, Seeboard found a way to
deepen loyalty in a high-churn
market and speak to their brand
identity as a company ‘full of ideas’.

28. So what?
Are loyalty schemes
incentivising disloyalty?
In high churn categories, loyal customers can feel left behind in
the race to attract new customers with up-front offers.
Brands that utilise customer data to reward loyalty can create
strong incentives for customers to stay, and to retain them in a
way that also builds on their brand.
Check out our Slideshare for more.

29. Interested in
learning more?
Contact us.
Thomas Geoghegan
Shane Doyle
Andy Pierce
16 Sir John Rogerson's Quay
Dublin 2, Ireland
Tel : +353 1 649 6316
Email: info@coremedia.ie