Leanne Papaioannou, Managing Director of Chilli Pepper and Gerard O’Neill, Chairman of Amárach Research discuss the results of the Loyalty Performance Index focussed on Irish Retail Loyalty Programmes.
The biggest change witnessed in the minds of marketers in recent years has been the awareness that loyalty cannot be taken for granted, particularly in light of the collapse in trust in so many institutions and businesses in Ireland and elsewhere.
As economic recovery gets under way and consumers’ spending power improves, brands are shifting their focus to look for ways to generate deeper levels of loyalty from customers. For many brands, this is done through the development or refreshing of their loyalty programmes.
This can be seen by the changes in Ireland’s loyalty landscape over the last 10 years with a significant number of brands investing in Loyalty Programmes across every sector, all with the purpose of trying to find out who their customers are, how they can get closer to them and what they can do to retain their custom and share of wallet.
As a result, Ireland is now a nation of ‘Enthusiastic Belongers’. Not shy about joining Loyalty Programmes, each adult in Ireland carries an average of seven loyalty cards in their wallet. However, identifying which programmes are having the greatest success and impact on the businesses bottom-line, has been challenging to date.
Chilli Pepper and Amárach Research have created the Loyalty Performance Index (LPI), which is the first independent report on loyalty programmes in Ireland.
This unique research model has been developed to identify loyalty winners and provide useful benchmarking data for any brands currently running or planning to embark on a Loyalty Programme.
This Loyalty Performance Index focuses on the top 10 Retail Loyalty Programmes in Ireland across the food, fuel, beauty and fashion and home-ware categories. Its objective is to help retailers benchmark themselves against other retail Loyalty Programmes and more specifically programmes in their category.
The LPI uses the latest metrics to identify the impact of loyalty programmes in the retail environment including:
- Registration: Customers that have fully signed-up (registered) for a loyalty card.
- Penetration: The number of customers that swipe their card in-store versus customers who don’t have a loyalty card (usually based on transaction numbers).
- Participation: Customers that actively participate in the programme and frequently redeem the rewards available to them.
- Communication: How often they read the communication sent to them by the brand.
- ROI: How much more loyalty card members spend versus non-loyalty card members.
RETAIL LOYALTY WINNERS BY CATEGORY
- No.1 Food Retailer Programme: Tesco Club Card with 73% of adults registered for their Loyalty Programme and Loyalty members spending up to 80% more than non-loyalty members.
- No.1 Fuel Retailer Programme: Topaz Play or Park with 64% of their members pro-actively participating in the programme and actively redeeming their rewards.
- No.1 Beauty Retailer Programme: Boots Advantage Card with 61% of their members collecting points and 60% redeeming these rewards.
- No.1 Fashion & Home-ware Retailer Programme: Brown Thomas Black with 42% of their transactions being done by members.
Looking at the LPI findings across the entire retail industry, the food retailers account for two of the top four programmes in the survey, with Topaz coming in at number four, even though it is a relatively ‘young’ programme proving that longevity is no barrier to generating customer loyalty.
REGISTRATION VERSUS PARTICIPATION
One of the most interesting findings from this study is the massive impact of active customer participation on the programme’s success.
While customers may be aware of a Loyalty Programme and may be using their card to collect points, if they never or seldom redeem their rewards, then they don’t actually value being a member. On the other hand, customers who use their card, pro-actively participate and redeem their rewards, see the value and vote with their feet. This is where brands see the highest ROI for their programme.
Programme Participation therefore becomes the holy-grail for Loyalty Programme success: ‘The number of customers who proactively participate in the Loyalty Programme and redeem their rewards have a bigger impact in terms of spend and in terms of that top line contribution of loyalty.’
For some retailers this means that customers who are in the Loyalty Programme can spend between 40-50% more and in one case up to 80% more, than the customers not proactively participating in the Loyalty Programme.
Leanne Papaioannou, Managing Director, Chilli Pepper said of the Index,
“The Index highlights the shift that retailers have to make which is to focus on the depth of relationship with customers i.e. participation and not only the breadth of customers signed-up i.e. registration for their programme. The winners are those brands that make it easy for customers to redeem, pro-actively entice customers to redeem their rewards and who go out of their way to give customers real, tangible rewards that are of value to them.”
Gerard O’Neill, Chairman, Amárach Research, said of the Index,
“We are all in the ‘repeat business’ business. Loyalty plays a key part in ensuring we get repeat business from our customers. In a slow market, holding on to your customers is Job No.1 for marketers and their agencies. It is vital therefore to measure the impact of loyalty driven marketing in order to make sure that current practices are working and that opportunities for further improvement are not being missed.”
“We have plans to expand the LPI Report across other industries and expand its coverage both within Ireland and to other European markets so that companies running Loyalty Programmes can define how successful they are in the loyalty landscape moving forward,” he continued.
If brands operating a Loyalty Programme would like to arrange a confidential one-to-one briefing on the Loyalty Performance Index, then contact Leanne Papaioannou in Chilli Pepper on +353 1 531 1421 or Gerard O’Neill in Amárach Research on +353 1 410 5200.