Retailers should think beyond loyalty marketing

The research report Making the Connection: Rethinking the role of loyalty management was based on in-depth interviews with over 50 executives and senior managers from 27 retailers across 13 countries in the Asia Pacific region.

It revealed that retailers were slow to react to react to challenges brought on by increased competition and innovation in technology in a shrinking market. Strategies that worked for the past decade are no longer delivering the same returns.

“The challenge that most retailers are currently facing is one of the evolving consumer. We are seeing an unprecedented rate of change in consumer behavior and demands. What a customer wants today is not necessarily what they will want in six months, much less a year. Retailers now find themselves having to redefine their value proposition and reassess how they can best address the needs of the evolving consumer,” said Mr Ronan Gilhawley, Strategy Consulting Partner, KPMG Australia

The research found that despite evidence showing that investing in a more sophisticated loyalty management function yielded significantly greater returns, almost 100 percent of those interviewed said that their loyalty program was used only for direct marketing purposes.

“The loyalty management function needs to evolve beyond that of a marketing and promotions tool. There is a real opportunity to use it not only to gain insights into their customers but also to to embed it into the entire retail operation and devise more intelligent ways of targeting customers. Using the insights data gleaned from the function, will go a long way towards enabling retailers to tailor and adapt their offer, moving on from the use of price discounting as a blunt tool to drive sales volume,” said Mr Gilhawley.

He continued, “The new role of loyalty management is about ensuring that the entire retail operation is hearing and responding to the changes, however subtle, in customer behaviour. The ultimate aim is to use information from the loyalty management function to design an offering that aligns seamlessly with the customer’s needs and wants.”

The survey found that data analytics was a growing priority for retailers, with the majority of those interviewed signaling that they will be making significant investment towards fully embedding customer insights into operational decision-making.

“Retailers need to go beyond the basics of transaction data analysis and respond to the increasingly savvy consumer by leveraging all potential information available to them,” said Mr Gilhawley.

“To create customers and win their loyalty, the retailer who earns the customer’s dollar is the one that manages to meet the customer’s needs seamlessly,” he concluded.