In the battle to retain customers during an economic downturn, loyalty schemes are one of the most effective weapons brands can employ. Consumers welcome these as a source of real value and are willing to exchange personal data for the rewards and benefits that come from participating in a loyalty programme – which in turn, enables the kind of targeted marketing companies really need to do to hold their ground during tough times.

During any major economic slump, when budgets are tight and customers are more willing to shop around for bargains, companies have to decide how best to secure their interests – whether to use their marketing spend to retain existing customers, or poach those of competitors. With studies showing that it costs up to ten times more to generate new custom than to maintain existing relationships, retailers should, in fact, be doing all they can to hold on to and build stronger relationships with the customers they already have.

The latest research from GI Insight shows that one of the best ways to do this is through a well-implemented loyalty programme. More than 1,000 UK consumers were surveyed, with 68% saying that at a loyalty scheme has been a factor in keeping them purchasing from at least one of the companies they buy from in during the recent tough times.

The findings also demonstrate clearly that loyalty schemes are an essential means of collecting vital customer data necessary to providing a personalised approach to customer marketing and management. Consumers are more likely to place their trust in loyalty programmes than in other mechanisms for capturing data, according to the research, which shows 77% of respondents don’t like giving details about themselves to a company unless it is through a ‘proper loyalty scheme’.

What’s more, consumers do notice when this data is used to tailor marketing to them. The survey revealed that 74% of respondents have seen companies ‘wake up to the need to give their customers better, more individual service, attention and offers’ as the downturn has dragged on. By utilizing the data customers revealwhen they’re part of a loyalty scheme, brands can personalise the communications they have with each individual, alerting a customer, for instance, to discounts on relevant products. It is a tailored approach such as this that helps a customer feel valued and, in turn, value the relationship they have with a brand – 54% of those surveyed believe that companies they deal with have used knowledge of their preferences and needs to improve the service provided over the last year.

Indeed, the research indicates that most consumers do feel that belonging to a loyalty programme helped create a mutually beneficial relationship between brand and customer during the course of the recession and continuing economic turmoil. More than half of those surveyed (58%) say they have stayed loyal to certain brands over that time because they feel these firms have ‘somehow given me value in return for my loyalty’ despite the fact only 40% noticed the schemes they belong to increasing points, improving rewards or providing more bonus point opportunities.

If the recession per se is about survival, the post-recession period requires perseverance and grit if businesses are not just to survive but thrive. Certainly, companies do seem to be continuing their retention efforts, realising that management of existing customers must always come first, no matter what level of attention might be given to prospecting during recovery. As such, 58% of the consumers surveyed have noticed that many of the companies they buy from have been sending a greater number of relevant and personalised communications and offers over the last year.

With a ‘double-dip’ recession now threatening to shatter the hopes of recovery in 2012, many companies need to do all they can to preserve the strength of their business. The fact that companies across the board are maintaining their retention strategies – and that customers are responding – indicates many businesses have found the use of rewards to entice customers to join or remain in a loyalty programme, and then employing the data gathered though the scheme to build a more solid, lasting and profitable relationship with each customer, a winning strategy.

There are more testing times ahead for all businesses and customer churn is a major issue. Therefore, as the UK moves further into a tough economic period, marketers need to know their customers so they can communicate with them more effectively and provide better service than competitors. To do this, companies must take full advantage of the opportunities they have to gather data on each consumer and use all available channels to reach those individuals with the right communications at the right time. It’s providing a personalised service – which can only be offered when data collected through a loyalty scheme is utilized – that will keep the customer sweet.

Andy Wood

Andy Wood


Andy Wood is the Managing Director of GI Insight.