Comparing loyalty across the Atlantic

Loyalty programmes have been a staple of North American customer strategies across a variety of industry sectors for more than two decades. Whilst European programmes have had a slower start, both are approaching maturity and saturation with the average U.S. household belonging to an average seven programmes, the average European household belonging to four¹. It is important for loyalty programme managers from all regions to appreciate the key areas of difference and the drivers of success which can be applied to their own locality.

Reaching the audience

Studies conducted on b2c loyalty programmes across industries in Europe and North America have shown a clear difference in the way in which organisations reach out and interact with their members.

Whilst both regions use a mix of above and below the line activity, North American programmes tend to favour above the line activity as a greater part of their marketing mix.  More frequent advertising through radio, TV and billboards has been found particularly successful in reaching a substantial member base.  This drives active participation with an audience who have a wider choice of loyalty initiatives with which they can associate themselves.

In contrast, European brands tend to favour a more personalised approach in developing a relationship with their customers to drive engagement with their programmes.  Tesco employs extremely sophisticated segmentation techniques which enable it to deliver more than 9 million variants of their Clubcard statement. No more than three customers get the same statement.

Staying in touch

There is also an apparent disparity in the frequency of communication between regions primarily as a result of cultural differences.  North American consumers expect and are more receptive to greater levels of strong communications utilising tactical, direct response sales mechanics and striking colours. This is evident by the proportion, frequency and types of TV advertising. 

Whilst U.S. brands are not solely interested in pushing out short term and tactical messages, it does provide an effective method of creating stand out and maintaining consumer attention in a very crowded market.

In contrast European consumers have very different preferences - regular communication to be more tailored and relevant such as monthly or quarterly mailers detailing their recent activity, points accruals and corresponding rewards along with targeted offers.  Language is softer, design is modest and its execution more emotive. Regardless of region, the communications approach has to embrace consumer expectations as well as adhere to privacy legislation and best practice.

Engaging members in new ways

With major U.S. hotel and airline brands providing their customers with open choice but little to choose between them, North American programmes have had to innovate faster than European programs to create greater differentiation to their audiences. North American programmes have therefore maintained first-mover advantage in innovations like social media and web 2.0. This is particularly true of larger programmes, such as Starwood Preferred Guest, InterContinental Hotels Priority Club, American Airlines' AAdvantage and even Procter & Gamble's Vocal Point. 

However, Europeans were the first to actively engage mobile communications to promote interactivity with members. This is not surprising given the fragmented nature of the US telecoms and cellular market in comparison to the EU where most countries have one home domestic carrier.   Between 2006 and 2007, European programmes operated by Finnair, Aeroflot, Lufthansa and others began offering direct member account access via SMS and WAP technology.

Today, U.S. programmes have caught up and are possibly moving ahead with an abundance of smart phone applications, particularly in the travel and finance sectors.  Proximity-based offers are a key strength and those in retail have begun offering mobile coupons. This has been very effective in leveraging the current coupon-orientated shopping culture in the US and transitioning that behaviour to new technologies. This channel is effectively being spearheaded by the hugely successful iPhone application platform.

Member benefits

Although overall programme structures are often fundamentally the same, benefits tend to differ significantly by region.

Loyalty programmes in North America (primarily travel) are often significantly more generous with open access to redemption inventory and eliminated currency expiration dates.  Conversely European programmes want to avoid dilution and displacement especially on premium revenue routes, and so free or discounted upgrades are not offered as standard while currencies tend to expire after 2-3 years.

Elite status must be earned in Europe to protect the exclusivity of these benefits whereas it can be bought in the U.S..  With so much domestic travel, being able to be speed through security and being one of the first on the aircraft is highly coveted by consumers producing significant incremental income for the business.

Customer relationship results

With maturity in both markets, loyalty programmes in North America will continue to innovate and fight fiercely for members' share of mind.  Programmes in Europe will continue to evolve and deliver a differentiated approach to the consumer; but the success of both is their ability to acknowledge and incorporate the cultural differences.

Successful loyalty programmes on both sides of the Atlantic are those that support corporate strategy, are executed according to market culture, customer needs and value.  These will be the ones which will play an integral part in driving company performance now and in the future.

 

[1] The Loyalty Guide III - Jan 2008