Loyalty in the retail industry has seen an incredible amount of change. Starting over 100 years ago with trading stamps from Sperry & Hutchinson in the US, followed by the introduction of Green Shield stamps in the UK in 1958. Originally, a way to reward customers for their business and to encourage them to return, loyalty programmes have increasingly become tools to understand and communicate with customers in more relevant ways.
But Jan-Pieter Lips, president of international coalitions at Aimia, says loyalty is in the midst of another wave of change, thanks to digital devices transforming the way consumers shop.
"Loyalty programmes still essentially do the same thing – reward and understand customers better – but brands have to be more relevant and dynamic."
He points to how Sainbury's Nectar programme (which is owned by Aimia) has become mobile, paperless, and moved from regular campaigns to 'always-on' offers.
"The basics haven't changed, but now there's more data available and we can understand customers even better," explains Lips, who describes how Sainbury's loyalty offers are constantly being updated and offered to customers in real-time.
Lips also says loyalty programmes no longer need to be about points, "they are a means to an end," pointing to how Marks & Spencer is using points in a non-traditional way with its new Sparks programme.
But it is the insight which is the crucial factor. And to have that, retailers need data.
"Big data is a buzzword – it's a lot of data collected in non-traditional ways."
Lips says with the huge amount of data available, it is important retailers have a certain end-goal in mind when thinking of what to do with the information collected.
Aimia research concluded that over 80% of customers are willing to share their name, email address and nationality, while 70% are willing to share date of birth, interests and occupation. Meanwhile, customers are more guarded when it comes to their digital information – like web history and online purchases – but they are more likely to share this type of data in exchange for money-off vouchers, especially on mobile platforms where this information can be stored in a mobile wallet.
Aimia's data mining tool means retailers do not need to hire a maths whiz or data programmer to understand what customers want. Hundreds of Sainsbury's employees assess the Nectar data through the Aimia platform to understand customers, products and their stores.
"It's democratising data, making it so more people can use it," adds Lips.
He explains how Sainsbury's might use the data to choose what promotions to run on what products. While the data can also calculate which products will have the least impact on sales and customer retention when added or removed from a range.
"There's years of transaction history from which we can learn. Take breakfast cereals for instance, if Sainsbury's is considering removing its least profitable product from its range, we can show that people who buy that product, only buy that product – so if it is removed, the retailer would disenfranchise its best customers."
Aimia's 'Self Serve' platform was launched seven years ago as part of the Nectar programme – the latter was bought by Aimia in 2007 and Lips went on to run this side of the business for four years. Sainsbury's is one of many grocers around the world using the platform which Lips says receives significant investments to keep up to date, including a significant roll out of Hadoop technology for its big data gathering last year.
"When we launched, we could run a piece of analysis in two minutes which would normally take two weeks, that tech has now moved on and the future generation can get that done in seconds."
Online vs in store
But despite omnichannel being the word on every retailer's lips, it is data which is holding retailers back from being able to implement seamless customer journeys.
"If you go into a shop and buy something with cash and leave, retailers know nothing," says Lips. "But with online there's a lot of data."
He explains that in theory, eCommerce companies should be able to dig out very relevant data and therefore target the experience for customers. "But it's not that easy."
According to Aimia research, only 22% of shoppers say the online experience is better than in store. "There's still a lot of room for improvement," he adds. "But online and offline seem to be coming together and with online retail, a lot of data is used but it has limited human touch, because you're talking to a machine.
"Offline, you're lucky you get that human touch, but they have no data on you," he explains.
"In the future those things should start blurring, with the opportunity to chat online or combining customer insight with human touch would be very powerful, by enabling store staff with customer data and an iPad. That's where a lot of innovation will be net few years."
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