There is no doubt that massive changes in retail has been accelerated by the last 18 months, and businesses who maintain a high street presence face enormous pressure to achieve footfall. So what can retail brands learn from the ‘coffee experience’ to enhance their loyalty schemes and drive engagement?
The coffee experience in customer loyalty
One of the few continued high street success stories is the relentless rise of the coffee shop. Their highly visible ubiquity in every town centre, often filling previously empty units or replacing traditional retail outlets, is testament to consumer love for getting out of the house and enjoying social moments to eat and drink. According to a recent Barclaycard survey, more than half of UK consumers would rather pay for an “enjoyable experience than a material item”.
To back this up, recent Mintel research indicates that Brits are set to spend a whopping £4 billion this year in coffee shops. But that doesn’t mean the coffee shops don’t have to work very hard for their success. Competition is rife, new entrants constantly threaten, and consumers are fickle with their attention and loyalty.
The same Mintel report points to the fact that “annual growth slowed from an impressive 9% in 2015 when the market was worth £3 billion to a respectable 3% in 2019 when it was worth £3.9 billion.” And it adds that “a quarter (26%) of Brits buy hot drinks from fast food chains such as McDonald’s, while one in five (22%) buy from a supermarket/store café such as Tesco or Ikea.” In fact only one in six (16%) buy their hot drinks from traditional cafes, underlining the absolute requirement for loyalty schemes.
Additionally growth is also boosted by more high street coffee shop brands expanding into partnerships or presence within retail, travel and leisure sectors. Think coffee brands in book stores, on airlines, in train stations and all manner of visitor attractions. But coffee brands work hardest when it comes to good old points based loyalty schemes.
According to Household Money Saving, the 4 most popular loyalty schemes available from coffee shops belong to Costa Coffee, Starbucks, Café Nero and Greggs. And it’s no coincidence that they all follow a similar ‘earn and burn’ principle to chasing loyalty. Whilst the mechanisms for collecting points vary slightly, essentially they all offer a ‘free’ drink or similar against ‘points’ collected on every purchase.
And it clearly works, as they continue to reinvent their schemes, most recently adding greater engagement opportunities via smartphone apps that enable ongoing communication with customers.
But most most tellingly of all, it is the collection of ever broader data-sets on customer behaviour, actions and preferences, through these smartphone apps that is perhaps the biggest opportunity the coffee brands are now looking to leverage.
Perhaps the biggest lesson of all that we can learn from coffee brands is their ability to adapt and constantly innovate their strategies to maximise the value they both gain and offer at every customer touchpoint, to incentivise the customer to return.
Learning from the IKEA Family Loyalty Programme
Ikano Insight have designed and deployed the IKEA Family loyalty programme in many global markets, always taking into consideration local cultural variations that govern whether points or rewards are deployed. But irrespective of variation, one constant always appears – universal offering of vouchers in IKEA cafés, which in turn has proven to drive consumer spend increases across the board.
In one global market, providing free hot drinks through the loyalty scheme created an average spend uplift of almost $200. In another market it was proven that when a customer combines a store visit with a food experience, their spend in store is higher irrespective of loyalty scheme membership.
This categorically makes the case for loyalty schemes which are based around food and drinks offerings, but also for adding food and drink experiences to a retail experience in the first place. Whilst IKEA has the luxury of onsite facilities, partnering up with local cafes as a smaller business can be straight forward and a very worthwhile collaboration.
Ashley Patterson, Managing Director at Ikano Insight, whose team is responsible for the continued success of the IKEA Family loyalty programmes in key global markets, states that analysts must keep on top of all engagement data, given that peoples’ habits can change so quickly.
Only by taking a customer centric approach, and regularly interrogating your data, with particular focus on customer behaviours and preferences, can you identify the optimal components and actions to deploy within your loyalty schemes. This in turn will also drive your CRM and communications strategy, that ultimately leads to continued growth.