Terry Hunt, co-founder of EHS 4D, played a pivotal role in the programme’s launch, explained lessons learnt during the time he was involved:

1. Give customers a reason to prefer you
‘Success with a loyalty programme comes from winning many small victories. When marketers aim to increase customer loyalty, they can only create a little extra gradual, marginal preferences, and make incremental shifts in marketing behaviour. But a lot of small, positive choices by many customers can add up. The key thing for a loyalty programme is that it needs to be a cumulative benefit to customers.’

2. A loyalty programme is a means to an end.
‘The aim of a loyalty programme has to be very well defined – if loyalty’s the answer, you need to ask yourself what the question is, and what it is about your business that you want to improve. What do you want from it – increased sales, footfall, or something else? There are plenty of examples of loyalty programmes that haven’t worked because they haven’t been well thought-out.’

3. WHAT do you want people to be loyal to?
‘What precisely do you want your customers to be loyal to – your brand? Your product? Their local branch of your business? Or even to your loyalty programme? If you get it wrong, people won’t appreciate it – British Gas ditched its own loyalty scheme as no customers felt there was anything interesting about being loyal to their energy supplier.’

4. The programme has to be a natural child of the brand
‘The best programmes make people think “I can see how this emerges as a natural way for me to get more out of that company or service”. Be true to the brand and its values – personalise its promise. O2’s programme taps into customer enthusiasm, emotions and aspirations – very few come close to it.’

5. What’s the customer contract?
‘The idea with a loyalty programme is to move from anonymous single transactions to long-term customer relationships – almost the idea of a customer “account”. Be straightforward about this – you need to say “Here’s the deal about what you (the customer) is getting out of this”. Because loyalty works both ways – it’s as much about you showing loyalty to your customer as your customer showing loyalty to you. It’s a two-way street by which you can communicate mutual benefit.’

6. Reward the behaviour you seek
‘Reward is the key word. It can even be just treating customers politely. Loyalty programmes are about encouraging customers to behave in a certain way – so think about what behaviour it is you’re trying to encourage. The way to do this is to add value to the behaviour you want to encourage and give people an incentive to do so.’

7. Turn customers into “members”
‘The concept of “membership” as a behaviour is growing more and more as traditional societal structures become more fragmented. A good loyalty programme will feature a reward element for people to chase. But it’s other benefits that promote interest and help give an advantage. The idea of “membership”, being part of a real club, with the exclusivity and benefits that it confers, works really well. Take time to consider the “footprint” – what people want from membership – of such a scheme.’

8. It’s better to be chosen than give something
‘The normal default for marketers is to give people a “package”of the product or service being sold. There’s very little confidence in letting people choose you. So you have to give them a reason – with Clubcard, we introduced ways to modify the membership, such as Tesco wine club, baby club and more. The act of choosing something takes it to the forefront of someone’s mind. However, refreshing the scheme is hard work, and you’ve got to pay attention to it. That said, it’s an opportunity to refresh the customer relationship, and sustain participation. For example, BT offered a discount with its “friends and family” service, but customers were unaware of it. The moment BT gave customers the ability to choose which numbers they wanted to include (rather than BT designated the 10 most-used numbers) customer satisfaction shot up.’

9. Simple works, complicated doesn’t
‘Unless you say it in the simplest, quickest, shortest way, people will ignore you. Loyalty schemes are, after all, not that important to people. So you’ve got to have a simple proposition. Look at Café Nero’s cards; they don’t gain any customer information from them, but it’s such a simple proposition – “buy nine coffees, get one free” – that it works. Every programme has to boil down to something simple – in essence, “join, and save money, or get access to benefits”.’

10. Loyalty is not monogamy
‘Face it – no one is going to give everything to you – what you’re looking to boost is the margin of preference.’

11. “Easy to earn, quick to burn”
‘It’s important to get two things right: the amount that customers need to strive to earn points or benefits, and over what period – if it takes me three years to earn enough points to buy a half-price toaster, I’m not going to be interested. Of course, how long each of these periods are depends on the sector – but the fact remains that if you set the bar too high, people will give up. For example, with Orange Wednesdays, you’ve only got to wait until… next Wednesday! It has to be short enough to keep people interested, but long enough to give them a delayed and accumulated reward. If people had to wait a year to reclaim Clubcard points, the scheme wouldn’t work.’

12. Conditional vs. unconditional rewards
‘The idea of a conditional reward is very much a “bankers’ response” – in other words, if you buy a certain product, the experience of buying with an added benefit will be better than it was otherwise. This is a pretty conservative approach. A retailer would say that the reward would eventually pay for itself. It’s difficult to persuade finance directors that unconditional rewards - where the benefit is free - are a good thing, but marketers understand it’s a great thing.’

13. Keep it fresh
‘As with most things, you can’t sit on your laurels with a customer loyalty scheme – people will lose interest eventually. But don’t change the scheme so radically that you lose the predictability or regularity of the main offering.’

14. Knowledge rich or knowledge light?
‘Obviously, it’s good to gain more knowledge about your customers, but there’s no point if you gather masses and masses of data that you can’t use. So make sure the data you want to capture is relevant.’

15. De-average your marketing
‘Marketing is difficult and expensive. But loyalty programmes make it easier to engage in a conversation with people – as they’ve already given you the permission to talk to them. It makes marketing much more of a one-to-one proposition, and it pays.’

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