Given that large parts of the British retail industry are increasingly scrabbling to maintain footfall and sales growth, encouraging customer loyalty has never been so crucial.

As key industry players increasingly divide into winners and losers, it does beg the question of whether there is a smarter approach to capturing the evermore fleeting customer and remaining in the winning camp.

Just as the retail landscape has evolved rapidly over the years, so too have customer loyalty initiatives. At one time, a customer would simply return to their local store because of the trust generated by their repeat custom or because they held a rudimentary store card.

Meanwhile, successive iterations looked at rewarding repeat custom by providing discounts, with the cost partly offset by the money generated from selling the consumer insight accumulated, as well as asking the supplier base to contribute.

“For some retailers, loyalty cards morphed into exclusive clubs, which continue to be a successful avenue for high-end brands”

The industry and consumers, however, were increasingly growing tired of all this. Retailers were left facing the threat of mounting liabilities on their balance sheets due to non-redeemed points, while consumers found themselves wading through a stack of seldom-used cards for discounts that were two a penny.

The truth is, consumers were presented with so many different schemes that such a tactic was no longer a differentiator.

For some retailers, loyalty cards morphed into exclusive clubs, which continue to be a successful avenue for many high-end brands, but it’s certainly not the right route for the whole industry. So where does that leave the majority?

Understand your customer

The platform business model has been on the rise in recent years, with the likes of Amazon or Alibaba offering a seemingly endless array of merchandising products and services from ‘cradle to grave’.

These ‘ecosystems’ are almost akin to a mobile phone’s operating platform, with consumers incentivised to remain loyal though their subscription to the platform.

Somehow a loyalty scheme has evolved into a revenue generator in itself, providing welcome relief from the ever-growing liability on the balance sheet.

The key question now is whether retailers are prepared to join such an ecosystem or form their own. Either way, it is vital retailers understand the impact these platforms have on their ability to influence loyalty.

If they decide to go it alone, a smarter approach is most definitely required. After all, customers today are demanding a different relationship with a brand. It is no longer a formulaic, transaction-based exchange. Instead it is a culmination of an ongoing relationship that puts customers at the centre.

Recent KPMG research revealed that brands that deliver the best customer experience achieve 54% higher revenue growth, so it is clearly the right way to go.

In order to achieve this, retailers must address the individual needs of customers, looking beyond economic reward and instead developing a deeper understanding that enables them to provide broader benefits.

For starters, retailers must look beyond mere plastic cards, realising that loyalty to a brand today must also span the consumer’s ability to shop in-store, online or via their mobile. It also entails not only reward, but communication and payment methods too.

Next-generation loyalty schemes

Personalisation and convenience are key drivers of loyalty, but they are not something shoppers appreciate, they are things they expect.

By leveraging advanced analytics to better understand consumer behaviour and motivations, brands hold the key to developing more emotionally meaningful relationships with their customers – and this extends to what actions might increase the probability of repeat custom.

Over and above this, next-generation loyalty schemes should also provide a sense of belonging and community, with the hope naturally being to transfer engagement into loyalty.

Many retailers are incorporating a gamification element into their approach by integrating achievable goals or milestones that unlock rewards, which in turn boosts engagement.

“Once a loyalty programme is established, it is very difficult to move the goal posts”

Retailers can also not afford to overlook how seamless and accessible the redemption part actually is for customers either. Breakages in loyalty programmes most frequently occur at the point of redemption – and without a clear and easy means for a customer to extract the goodwill they haveve accrued, they simply will not see the value.

Likewise, as many retailers have discovered in recent months, once a loyalty programme is established, it is very difficult to move the goal posts.

It is clear that customer loyalty is certainly not dead. However, just like the retail industry itself, its form and function has changed at pace.

Retailers must look to be equally as engaged in the development of disruptive customer loyalty initiatives as they are with their business offering, as both are inextricably linked.