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How to drive customer loyalty in a tough economic climate

How to drive customer loyalty in a tough economic climate

By Angee Walls, Managing Director, Catalina Marketing UK

With the economic climate becoming tougher by the day, the issue of customer loyalty is a significant concern for the retail community. 

If we look oversees, reports from America indicate that the country is facing the worst food inflation for 20 year and as a result many American families are changing they way they purchase food. 

They have stopped buying luxury items, they are planning meals before going to the shops and importantly they are only choosing to purchase in supermarkets which are offering discounts. 

With this stark reality retailers must ensure that marketing budgets are assigned to the most effective method of providing value coupled with increased customer satisfaction.  However, the vast majority are not embracing every strategic customer loyalty approach available and as a result they are missing huge opportunities. 

Instead many retailers are undertaking marketing activity which is based fundamentally around cost; with many running point of sale campaigns utilising untargeted money off vouchers or BOGOF offers. 

Yet while these can drive trips and increase basket size, the successes witnessed will be limited.  Furthermore, I would argue that they can in fact harm retailers’ and brands’ price perception and ultimately offer limited value to the retailer in the long term.

Alongside these offers many retailers also run loyalty card schemes and since their introduction it is widely recognised the significant returns they can produce.  However, I would suggest that there are in fact drawbacks with these.  

As a mechanism, loyalty cards will never reward new customers who happen to visit the store for the first time.  Additionally they often don’t provide an immediate reward.

What retailers must do is embrace a complete customer relationship management solution.  This is more complex that it sounds and to begin retailers must undertake a scoping exercise to understand what is required and install a strategy that is developed with all available internal and external data. 

After this has been completed the next process is to develop a sophisticated campaign through undertaking advanced predictive modelling, which would produce a multi channel programme. 

While this is a detailed process, once undertaken will allow the retailer to understand what the right blend of activity required would be. Our experience has shown that these recommendations may consist of a loyalty card but importantly, this would be coupled with activity which would ensure instant communications with consumers.

Often the activity which involves instant communications is forgotten but vital for driving new customers.  A highly successful approach which is widely understood and used outside of the UK, is a strategy which integrates marketing activity and drives immediate response from the consumer. 

To achieve this, retailers must adopt an in-store customer communication strategy, which is underpinned by sophisticated data analysis on purchasing behaviour.  The relevance of this activity is that it ensures that the customer is issued with a direct, targeted promotion designed to offer consumers savings for their loyalty. 

Unlike with existing loyalty schemes, this offers brands the opportunity to directly target the consumer, while allowing the retailer to benefit through an increase in frequency of visit and basket size.  Additionally brands have the further advantage of increasing sales volume without giving deep discounts and harming their price perception. 

Notably this activity can integrate seamlessly with other approaches which nurture the long term relationships that loyalty schemes are designed to foster.  In the case of communication with the consumer, one activity most certainly doesn’t preclude the other. 

With our US clients, in particular we are witnessing a significant increase in coupon redemption rates in response to the testing times.  Even before the slowing economic climate, this approach was producing unrivalled ROI and clearly this is set to increase over the coming year.

Importantly, the global economy is increasingly stretching consumers’ budgets and retailers must respond.  Positively, reports from America do show that there are still some opportunities open to retailers. 

With reduced disposable monthly income, eating at home with friends is quickly becoming the new going out, clearly great news for the retailer.  And I would suggest that as with most trends, this behaviour will begin to appear within the UK very shortly. 

To keep ahead though retailers must inject life into consumer communications and start utilising everything that is on offer.



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