Why are we talking about loyalty?

2023 has been a year of macroeconomic challenges which inevitably impacts how customers spend their money. 76% of previously ‘brand loyal’ customers said they will now buy from competitors if it were cheaper or more convenient to do so. Cost and convenience go some way to bring in and keep customers during an economic crisis, but these two tools alone won’t grow sustainable customer value over time. 

We know that propositions and experiences that grow customer engagement can be compelling tools in these scenarios. In fact, 89% of businesses trust loyalty initiatives to navigate inflation and potential recession. In the face of yet more economic volatility going forwards, loyalty stands as a critical mechanism to lock in vital customer value.

What do we mean by ‘loyalty’?

It’s important to note that a strong loyalty proposition does not necessarily mean a loyalty scheme. As well as loyalty schemes, there are a plethora of other models, such as memberships, subscriptions and clubs which businesses can lean on to boost customer engagement and value.

Key things you need to get right

We’ve seen first hand how successful loyalty can create an environment that makes customers never want to leave, so we set out to create a framework that businesses could use to facilitate better decision-making about where to invest to grow customer value.

We spoke to dozens of customers, reviewed over 1000 loyalty schemes and tested our thinking with 50 loyalty specialists from well known brands across retail and leisure to define the key principles for generating ROI from loyalty.

“We are potentially giving away too many discounts. That’s not what customers want. What they want is for value to be given to them in a different form that isn’t necessarily price linked.” 

– Director of Commercial Finance, High Street Retailer

To effectively grow loyalty, businesses need a laser focus on delivering outcomes for 3 customer groups:

1. Giving occasional customers a reason to come back
2. Recognising engaged customers and delivering them a differentiated proposition
3. Building enhanced relationships and experiences for the top 10% ‘crown jewel’ customers 

But it doesn’t stop there. Businesses also need to understand the needs of these 3 customer groups, then serve their needs using a careful balance of ‘delivery’ and ‘delight’ mechanisms. Delivery and delight combine experiential incentives and emotional rewards with the essentials of range, price, quality, availability, and customer experience to maximise lifetime value and the longevity of promotional efforts.

Where we’ve done this before

The brief: A leading high street retailer wanted our support to develop a competitor-beating loyalty club that was led by customer needs and would grow value for both new and existing customers. The proposition needed to sit alongside the existing loyalty offering and deliver commercial returns in FY24. 

What we did: 

Working closely with and being guided by customers, we reimagined the client’s loyalty offering, delivering a customer-led beauty proposition that integrated with existing loyalty schemes to defend and grow share of wallet.

• Conducted iterative rounds of qualitative research with a customer panel to validate core customer needs and co-create propositions to delight
• Ran cross-functional idea generation workshops to develop and refine the proposition
• Quantitatively validated the proposition and features with customer groups
• Developed a commercial value case to identify the size of the prize and 5 year forecast P&L
• Brought the proposition to life with visual design, user journeys and clickable prototypes
• Created an efficient execution plan for the new proposition, building on existing capabilities

Where we landed: 

1. ‘Developed a new ‘club’, to sit alongside the existing loyalty scheme, targeted at a specific high value segment of customers’
2. Identified £35m in incremental income across key customer groups. 

How Manifesto can help 

At Manifesto, we are experts in business models that grow customer engagement and value over time, through membership, subscription, loyalty and D2C. We specialise in helping global leaders in Retail, Leisure, Media, CPG and Financial Services pivot their businesses to focus on deepening customer relationships.

If you want to learn more about where to play and how to win at loyalty, you can read the full report, ‘Beyond Points: The Loyalty Blueprint’, here. The report delves deeper into the key things you need to get right, what happens if you get them wrong, the commercial objectives you should have front of mind and examples of the brands that are getting it right (and wrong!).

Want to learn more? Get in touch with our loyalty expert Sarah Neely to find out how you could optimise your ROI today.