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Down to Business

Building customer loyalty has become the endeavour of every major brand on the planet. While consumers used to stick with a shop or service they liked for decades, today’s savvy shoppers are flitting from one to another on a constant hunt for the best possible deal. It’s a highly competitive market and as the nation’s Big Four supermarkets will attest, customer loyalty can be a tough nut to crack.

For boutiques offering an amazing service and covetable product line-up, the market is perhaps less volatile. But as department stores turn heads with flash sales and brands sell collections through their own e-commerce sites for less, it’s becoming even harder to get every customer to commit a monogamous relationship.

“In a competitive market where customers are being tempted by constant discounting and low cost clothing, standing out and maintaining margins is a real challenge faced by boutiques,” says Sonal Mehta from e-commerce solutions company Paraspar (Paraspar.co.uk). “However, all is not lost as there are some real strengths that boutiques have over their larger high-street neighbours when it comes to loyalty; it’s in their DNA, they just need to execute it well.”

Indeed, smaller businesses can have a great advantage over larger brands as they are able to offer a personal service – and this alone can be enough to keep clients returning. “The foundations of loyalty are built on good quality products, good value for money and a good service,” says Mehta. “These alone will keep customers interested.”

But to turn shoppers into devoted buyers, the expert believes boutiques need to inspire and develop a deeper emotional relationship with their customers: “Depending on the size and scale of the boutique or retailer, this process can take different forms – from very personalised one-to-one customer service to structured loyalty programmes making use of technology to deliver them.”

Get scheming!

Increasingly the natural method of cultivating a loyal fan base is no longer enough and more boutiques are turning to tangible loyalty strategies. “Customer loyalty cards general operate by giving a customer points per purchase that can be used against a future purchase,” explains Patrick Heslin, MD for Retail Integration Limited (Retail-int.com). “The benefit to the customer is the more the shop the more they are rewarded. In return the retailer gets valuable marketing material that can be used to identify customer habits and trends and inform marketing decisions.”

But traditional loyalty card schemes as we know them have evolved dramatically in recent years. According to experts, the Boots Advantage Card points-for-discounts type of system is becoming increasingly unpopular. “Many of us are walking around with an entire wallet filled with loyalty cards these days,” says Caroline Kimber, data strategy director for customer acquisition and engagement agency Stack. “So many brands are offering them but I think the problem is that customers feel they have to spend a lot to get a decent return. It’s just not a rewarding experience from a consumer perspective.”

For the business owner, point-based schemes that can be swapped for monetary discounts also pose a challenge. While it’s great when clients are gathering points, it can be a different story when they want to redeem them. “It could have a direct impact on your bottom line if lots of clients decide they want to cash these in, say, right before Christmas,” says Kimber. “It means you’re losing out on those full price sales and that can be quite problematic to any business, especially a small one.”

Instead we’re seeing major brands re-thinking their loyalty strategies. Waitrose is offering free coffees and newspapers to its members who spend £10 in its stores on a Saturday. Meanwhile, mobile phone provider O2 has broken the mould with its Priority Scheme, which, among other things, sees members receiving early access to concert tickets. Online retailers have also jumped on the bandwagon. ASOS Premier membership, for example, gives customers free next day delivery on all items for just £20 a year, ensuring that when they buy fashion they do so through its site.

“Consumers today are more interested in receiving perks that make them feel special,” says Kimber. “They want to feel like there’s real benefit to being part of a scheme and are receiving treatment that’s above and beyond a ‘normal’ customer. Money-can’t-buy type offers are leading the way in the loyalty arena.”

Indeed, leading retailers are now actively using technology to gather information about their customers. Armed with this knowledge, they can then offer them the best possible service. “Currently brands such as British Airways, Costa and Boots invest heavily in their loyalty programmes, which gives you an indication of their value,” says Heslin. “But you must remember that these large brands are only trying to replicate what the small independent retailer inherently has – an intimate knowledge of their customer.

“Offer loyalty incentives that will make the customer feel special: an acknowledgement that they are a regular customer, an invitation to an event, a discount where appropriate or an occasional reward for being a great customer will all build loyalty.”

Francesca Nicasio, retail expert at retail management company Vend (Vendhq.com), agrees that perks shouldn’t just be limited to points or pounds. “You should always be aiming for ‘smart’ rewards,” she says. “Think of benefits that would make members feel like they’re really part of something exclusive. For instance, Sephora’s rewards programme offers birthday gifts, free beauty classes, first dibs on new products, advance access to sales, and more. Or you could offer queue jumps or remote ordering. Starbucks does this really well – they track all of their loyalty programme customers and their purchase cycle, such as what they’ve bought, when they’ll buy again and then target people based on this information.

“These perks go beyond monetary factors; they also educate customers, give them a sense of exclusivity and celebrate moments in their lives – and they don’t have to cost you anything.”

 

Knowledge is power  

For retailers it’s all about gathering the right information so you really get to know your customers and can target personalised rewards to them. “By collecting customers’ basic information and tracking their shopping activities, you’ll be able to provide more thoughtful benefits,” says Nicasio. “It doesn’t have to be complicated. Look for one key trend and focus on one or two customer groups. For example, it’s really helpful as a first step to identify shopping behaviour – find out which of your customers shop with you once week, once a month, once a year.”

The expert also points out that indies should identify their second best customer – and not their first. “Your second best customer is the one that you can grow whereas your best customers is already engaged with you,” she explains. “Determine what your best customer is doing that your second best one isn’t, and use that information to create your loyalty programme, or inform the kinds of rewards you provide to customers. Doing this really helps to strengthen the connection that customers have with your brand.”

Of course, collecting information is no small task. So investing in technology that takes the headache out of data collection can be money well spent. “Before you begin to consider a loyalty strategy, the most important thing is to know the customers that come in their store and buy,” says Dr Greg Gregoriou at retail solutions firm Esperus (Esperus.com). “Therefore, they need to invest in a technology system that can capture customer details easily and effectively at the point of sale.”

A good system will provide analysis of the customers’ buying patterns. This data should then be automatically segmented by gender, age and dress size, which will give the boutique detailed information about their customer and use that both face to face, in store, online and through targeted marketing. “This specific strategy to encourage loyalty will then be developed by the analysis of this data,” explains Gregoriou. “For example, if the data concludes that 80 per cent of your customers are female and over 50, then in-store events and a telephone campaign could be perhaps most relevant. However, if the majority of your customers are 18-25 then a social media and online strategy campaign would be perhaps more suitable. So unless we have the data and it is carefully segmented you cannot form the basis of an effective strategy.”

 

Capture your customers

The expert maintains that boutique owners need to rethink the role of their cash desk entirely: “In current times, where customers are so valuable and competition is fierce, the POS is no longer a passive money taking till,” he says. “It is now an advanced marketing device that captures details and displays buying patterns so retailers can fully engage with customers.”

The Fashione EPoS system boasts a loyalty scheme feature, which tracks each customer’s spending. It helps gather the relevant information so stores can target shoppers with personalised incentives: “Getting to know what motivates your customers is a great way to encourage customer loyalty,” says Karen Shaw at Fashione (Fashione.co.uk) With the Fashione Epos system you can view individual customers purchase history and view reports on customers buying certain collections or on average spends. This way you can invite them to events which suit them such as product launches which interest them.”

Retailers can use the information to create direct marketing campaigns that will drive sales and improve loyalty. “The Fashione Epos system will capture your customers’ data,” says Shaw. “This can be easily exported and used to mailshot your customers with news and events. Engaging with the in this way is highly effective and will benefit your business.”

Loyalty schemes can also help indies improve other areas of their business, such as encouraging customers to recommend them to other shoppers. “You could offer extra points for liking your social media pages or signing up to your newsletter or recommending friends to shop at your company,” says Shaw. “The great success of this is that it keeps customers engaged in your company but can also increase the word of mouth exposure. Customers are therefore rewarded for their actions improving their relationship with you as well as encouraging new potentially loyal customers to start a relationship.”

As when implementing any new strategy, the starting point for creating your loyalty scheme should be deciding your business objective. “Too many organisations jump into a loyalty scheme without fully considering what they’re trying to achieve,” warns Kimber. “They often end up giving away far too much margin and that’s not what loyalty is about.”

She concludes: “So really think about the behaviour you’re trying to engender, whether you want your clients to visit more often or spend more during each visit. Only then can you start planning your scheme.”