Wednesday, 31 December 2008

2009 – Year of loyalty?

Well it seems customary at this time of year to look forward into the next to think about what may be round the corner. 2009 promises to be a good year for loyalty marketing as now is most definitely the time to be concentrating on existing customers. That said, it will also be a year of increased focus on marketing budgets and all marketing disciplines will need to deliver the goods - loyalty will be no exception.

#1 – Loyalty marketing will become more accountable

2009 will be the year of accountable marketing - Group M, the media buying subsidiary of WPP is projecting that traditional above the line advertising will be down 9% in 2009 and Business Week reported just last week that US advertising spend is projected to be down 10%. This is not in itself unexpected, as the President and CEO of the Interactive Advertising Bureau (IAB) said recently "It's a normal recession trend: Above-the-line dollars are moving below-the-line".

As the blog Note to CMO puts it "What happens to a poorly led company when the economy goes south? The marketing budget gets cut. What happens to a well led company when the economy goes south? The marketing budget gets cut, as well; but in a well led company, the budget doesn't just get axed -- it gets reallocated…You see more channel promotion, more marketing development funding, more sales incentives."

When times are hard, marketers will be expected to get the best value for every pound spent, as a Marketing Week survey showed, 71% of UK marketers said they felt more pressurised than usual to demonstrate the impact of every marketing activity. This means all forms of accountable marketing will benefit, with online marketing projected to grow by 6%-10% but I'd also expect most below the line disciplines to benefit including loyalty marketing.

Loyalty programmes will have to work harder though – moving from a "points = prizes" mentality to one which looks to utilise all available behavioural information to target customers at every point with relevant messages and offers – recognising and rewarding the interaction not just the transaction.

#2 – Coalition schemes will expand

Coalition programmes will have an increased focus in 2009.

The coalition programme makes sense for many companies – not only are costs shared but companies that don't have enough frequency or margin to make a compelling programme can still participate and benefit from loyalty within the programme as a whole. I think we'll see more emphasis in 2009 from coalition programme providers such as Nectar and Airmiles as well the widening of existing standalone programmes and the creation of new programmes containing a number of partners. This makes sense as loyalty is going to be the watch word in 2009 and with more companies wanting to have the benefits of a loyalty scheme without the cost or long lead times of establishing one - any way of short cutting this will be taken.

Coalition programmes also make a lot of sense for consumers as it allows them to accumulate points from a larger share of their spend with a single provider. Airmiles are already reporting increases recently in new members and increased usage of the programme and have recently launched a £3.5m TV campaign to drive awareness.

#3 – Physical rewards will be back in vogue

I think rewards requirements may be a little different in 2009. Recent changes in the strength of the Pound versus the Dollar and Euro have made international travel more expensive at a time when people are also watching their spending. Vouchers or gift certificates, another popular reward choice have also taken a knock recently - with retailers such as Woolworths and Zavvi going into administration many of the vouchers issued cannot be used and also weren't being accepted by the other solvent partners such as Comet and B&Q. With predications of 10-15 other UK retailers going to the wall in 2009, people will be wary of choosing a voucher which may not be worth the paper it's printed on. Merchandise including durables such as home-wares and electrical goods as well as entertainment products like downloads, CDs/DVDs will become more popular as people stop spending money easily and so items that were simply purchased on a whim are now saved for or put off.

It's also in the programme operators interest to move rewards towards merchandise as there is very little margin in either travel of voucher based rewards and with many companies looking to reign in their marketing budgets, one simple way to do this is to offer merchandise rewards. When introducing rewards though it will be key that these don't cheapen the programme through the introduction of low value brands and items – instead as Rachel Deacon, Client Partner as Carlson Marketing puts it "With house prices deflating, people are not so interested in moving and are starting to put down roots - this is reflected in more colour being used in houses and more furnishings rather than just stark, basic furnishing. This focus on and pride in the home means people will put more premium on quality items than has been the case in the Ikea world of the past decade."

#4 – Loyalty will get more social

I've written previously about how I feel loyalty and social media can work together well – however convincing many brands of the value this could bring to their loyalty programmes has been more challenging. Social media can provide customers with reassurance that they have made the right choice through recommendations and reviews – whether this is the choice of their purchase or the choice of their loyalty redemption. It can also make it easier to sell additional products and services to other customers, once the relationships between them is understood as friends of friends are up to 3-5 times more likely to purchase a service that a friend already has.

It has however been seen as a new, disruptive technology – something that is hard to control once the genie is out of the bottle. 2009 though may be the year when we see its use within loyalty programmes as marketers look for more creative ways to utilise their budget. As Ann Handley, blogger and Chief Content Office of MarketingProfs puts it, "Dwindling budgets suddenly make low-cost social media look like the pretty girl at the ball".

#5 – Consistency

The final prediction is simply more of the same - consistency – don't rock the boat too much and make sure that any changes made work well within existing marketing efforts. Doug Burton says in Progressive Marketer "When faced with an economic downturn, some companies shoot from the hip, jumping into new mediums with no real plan for integrating their brand message or measuring the return on the investment..As consumers become more cautious and contemplative with regards to their spending, it's simply going to require a more consistency and persistence to move the needle"

Well those are my thoughts – feel free to chip in with your own thoughts and suggestions and have a Happy New Year!


4 comments:

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