Customer loyalty programmes have been the key weapon for businesses in the battle to win the hearts of customers who might have been wavering as the recession dragged on, our recent research shows.
Our study of 500 marketing decision makers found that 71% of respondents felt that loyalty schemes had become more important to successful business during the recession and 60% of businesses are concentrating more of the their budget on loyalty programmes and their associated marketing activity than they were a year ago.
Changes in consumer behaviour and spending during the downturn made it essential for marketers to alter their strategies in order to retain customers. As tough economic times encouraged a culture of promiscuous shopping with consumers seeking out the cheapest deals, many businesses started to concentrate on customer retention and development in a bid to stem customer churn.
Many businesses have clearly recognised that making use of existing customer loyalty programmes and customer data to better understand customer needs and shopping habits during the recession was a wise use of the marketing budget. Some firms even launched loyalty schemes during the recession – e.g. HMV, CDWow, Play.com and CBS Outdoor – proving that businesses are realising the value of having a programme in place.
So, although the resources of many businesses in various sectors took a pounding during the recession, it appears that loyalty schemes are still paying dividends in the eyes of the majority of businesses.
Nonetheless, 50% of marketing decision makers believed that the vast majority of loyalty schemes were not fully integrated with all other marketing activity. If marketing activities are not integrated, then a business is less able to ensure consistency of message, which could be problematic as the UK exits recession. Companies that fail to integrate marketing activities – especially when it comes to existing customers – risk being inefficient and contradictory in their communications to customers, thus hurting the potential ROI of their campaigns.
However, those that have integrated their loyalty schemes with other marketing activities will be in a better position to develop strategies for retention once the downturn is over.
Some businesses have clearly positioned themselves to come out of the recession with a strong, integrated approach to marketing. However, even if they are well-placed to do so, business must not embark upon customer acquisition without thinking about how to treat new customers once they start spending.
Often a new customer will spend once and then never again. It is in these early stages when it is vital to nurture the customer relationship. Every effort should be made to turn that new customer into a long-term, loyal customer who can then be encouraged to spend more and spend more often according to the usual customer management strategy. And, although prospecting for new business may seem like an efficient use of the marketing budget, even in good times companies cannot ignore existing customers.
The test will come for any business that has survived the recession without seeing the need to invest in loyalty or integrate their marketing activities, as they are going to have a tough time catching up with those that prepared themselves for the good times as well as weathering the bad.
