How smart rewards programmes will kickstart the economy after COVID-19
It’s not often that you get the chance to slow down and take stock. Our pace of life is such that W.H. Davies even wrote a poem about it – and that was over a hundred years ago. You’ll have heard it quoted on an advert somewhere: “what is this life if, full of care, we have no chance to stop and stare”.
It’s a nice reminder to stop and smell the roses. The issue is that for many of us, the roses (along with many of our outdoor spaces) are firmly out of bounds while the COVID-19 crisis runs its course. Let’s not romanticise: this pandemic has been and continues to be catastrophic on both a personal and economic level. All the bread-baking and Zoom quizzing in the world won’t change that fact. But if there’s one small positive, it’s the chance these turbulent times have given us to stop, reassess and re-strategise.
For many, it hasn’t been a ‘chance’ so much as an unwelcome (and damaging) obligation. The majority of High Street stores have been forcibly shut and 20% of them won’t reopen. But for others, the last few months have been a frantic period of figuring out what comes next. And with shops now starting to reopen, that re-strategising is starting to ramp up.
After a long period of uncertainty, we’re starting to see some light at the end of the tunnel. But there’s a lot of competing advice out there, and little real clarity on what the future holds. So what exactly are the best options for kick-starting our economy once lockdown lifts, and where should retailers be focusing their energy?
Creating collective value
It’s not news that retailers have seen sales plummet over the last few months. Lockdown has left them with a surplus of stock and a serious cash shortfall. The conversation’s changed: the impetus is no longer on driving profit or growth, but survival. To cover costs, retain staff and keep their heads above water, retailers need shoppers back in-store and spending.
But things have changed for consumers, too. Many will have been laid-off, and had to re-prioritise where their money goes. While there’s been a big uptick in essential spending (and a reconstitution of exactly what ‘essential’ means), the general trend has been to conserve cash. And with attitudes unlikely to change anytime soon, retailers are left in a difficult position.
That’s where rewards come in. Rewards programmes that offer cashback and discounts create value for both parties. It’s proven that rewards programmes – especially those offering immediate benefits, like cashback – drive additional spend. A recent study by the Speigel Research Center saw customers spend 68% more when offered the chance to earn cashback. Rewards are great for retailers, and represent a real value-add for consumers, too. In today’s climate, discounts and cashback aren’t just nice to have: they’re essential currency for many cash-strapped shoppers.
Rewards are the obvious place to start for most retailers, and the likelihood is that they’ll work. It’s an approach that’s already driving results in other economies. Take China. The epicentre of the crisis, China is a month or so ahead of the UK in terms of ‘the curve’, and has already seen a swathe of businesses re-open. As of April 8th, nearly 50 cities across 16 provinces have issued a voucher system, which shoppers can redeem at various dining, shopping, travel, and recreational locations. Several more cities have committed to multiple rounds of voucher releases over the next few months. And it’s working: in Hangzhou alone, government-subsidised vouchers have so far driven consumption worth 1.25 billion yuan.
Building long-term customer engagement
Clearly, rewards work when it comes to jump-starting the economy. But if done well, their benefits can extend into the long-term, too.
It’s the ‘done well’ part that’s tricky. Rewards programmes often start strong, but see customer engagement peter out over time. The 2016 Bond Loyalty Report showed that while the average household is enrolled in roughly 13 loyalty programs, they’re only active in 7.
That’s partly because of the way that a lot of rewards programmes interfere with the customer experience. Vouchers, codes and cards add friction at checkout. Customers have to first remember to bring their voucher, and then to present it at the point of sale. It’s the behavioural change those actions require that makes long-term engagement so elusive.
Retailers can ill-afford that friction. Sure, the economy needs a kick-start post-COVID – but it also needs to sustain that engagement and incentivise consumers to make repeat visits. For that reason, a laser focus on the customer experience is key. By now, we’re all familiar with the stats: 59% of customers will walk away after a bad experience with a brand. But get it right, and you’ll build a relationship that pays dividends long into the future.
For that reason, retailers need to be smart about how they slot offers into their post-COVID strategy. Blanketing shoppers with vouchers might drive short-term gains, but they won’t sustain you into what’s still a very uncertain future. Finding an easy and frictionless way to deliver rewards to customers is a much better bet.
Driving transformational change with tech
Card-linking can help to achieve this. Connecting loyalty programmes to payment cards lets retailers push rewards to customers in a more controlled and strategic way. They can choose to offer rewards at a certain time of day or at a specific location, for instance, driving much needed-traffic to struggling parts of their business.
And crucially, they can do so without adding friction to the customer journey. Rewards can be automatically earned when customers pay using their card at checkout, with no need for them to perform any additional actions. The bonus is that every transaction also generates a huge amount of granular customer data. Retailers can use that to get to know shoppers better, and tailor their products and experiences accordingly. The result? Not only short-term spend, but long-term loyalty.
It’s a tactic proven to drive tangible benefits to local economies. Take Fidel’s 2018 loyalty project with Miconex. Miconex runs town and city loyalty programmes. With the help of Fidel, they built a new model for a city-wide loyalty scheme: Mi Rewards. Mi Rewards launched in Perth, Scotland, with a view to driving additional footfall to Perth businesses and rewarding residents for shopping locally. The MiRewards programme lets customers enrol simply by scanning their payment card. They then shop as usual, with qualifying rewards automatically earned in real-time. There are now around 80 local businesses participating in the Mi Rewards programme, and 2,200 consumer cards registered – a sizeable proportion of Perth’s 30,000 adult population. In the first six months since launch, Mi Rewards contributed £140,000 in increased spend to the local economy.
We’re all adapting to the new normal. As we look for ways to stimulate the local economy and drive sector recovery, card-linked offers will be critical. To find out more about Fidel could help support you as you strategise for life post-lockdown, download The Beginner’s Guide to Card-Linked Loyalty.