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I'm Charlie Hills, and I'm the Managing Director and Head of Strategy for Mando-Connect. We are a WPP agency, and we specialise in loyalty partnerships, promotions, and rewards solutions for lots of different clients. What sets us apart is our laser focus on data, and making sure that everything we do is fuelled and underpinned by data, and then measured at the end to make sure that what we're doing is getting better and better and better.
The thing that we're best known for is our series of white papers: ‘What the British want from loyalty programmes’ and ‘What the British want from promotions’ that we've done since 2018, in partnership with YouGov. We love those papers, we live and die by them, and all the data that goes behind it.
In terms of my career history, and how I got here, probably the same sort of journey as everybody else. There were lots of different companies I've worked at; I've been on the agency side, I've also been lucky enough to be on the client side. I started my career out at Boots, which was then followed by some fantastic below-the-line agencies, partnerships, and promotions the whole way through. And then it probably got most exciting in 2017, where Becky Munday, my CEO, myself and Jo Ashdown, our Managing Partner, founded Mando-Connect and got cracking on all the stuff we do now.
It's a really good question. I'm 44, so I can't really speak for the very beginnings of loyalty programmes, which reach back a few decades, but I think the British loyalty market is a very interesting one. It’s held up held up internationally as one of the best, most advanced and most diverse loyalty markets, which is why I feel quite privileged to work in it.
I think when you look back, it’s changed dramatically. We’re all born and bred with Tesco Clubcard, Boots Advantage Card (which is celebrating its 25th year) and, Nectar , and all those big airline and hotel programmes. All of these programmes were born in a world where it was required to have points, tiers, and other things you did to earn your way up. And I think it's been such an interesting journey, because the British loyalty market has changed considerably in the last 10 years.
I think if you look at what the hotel and airline industry have been through, having to rethink their strategy right back from the beginning. Also, business travel is fundamentally different now to when those programmes were designed, and we're seeing continuous innovation in retail and pharmacy, which are the other really big store sectors in the UK.
We’ll probably get to it a bit later, but Tesco Clubcard is a really interesting programme that continues to innovate - their work in value has been particularly impressive with initiatives such as everyday low prices, the Aldi Price Match and the launch of Clubcard prices. So, it’s fair to say the market has really changed. What’s consistent, however, is that we’re pretty much a nation of loyalty lovers.
We've been tracking programme membership since 2018, and 70% of Brits are members of at least one programme, and on average a member of four programmes, which is extraordinary. We track loyalty across 13 different sectors, and we’ve seen it change and evolve as brands have got more sophisticated in their customer relationships and understanding what customers need.
That's a really hard question because I think you can't really talk about loyalty in Britain without talking about the big programmes and what their impact and influence has been. Every time we do our research, the top three programmes that stand out are Tesco Clubcard, Boots Advantage Card and Nectar. I think what they’ve done is to educate the British population about loyalty and teach people how to use points in ways that work for them, whether that’s money off their weeks shops, beauty treats, or spending them on partner promotions.
I was at the DMA Customer Engagement Conference yesterday and we saw a really interesting case study from Tash Whitmey, who heads up Tesco Clubcard, and she was talking about that continuous focus on what customers need and the importance of providing value. So, I think those big three kind of set the tone, and then beyond that there are some programmes that have made huge shifts such as Amazon Prime. Love it or hate it, Amazon consistently makes the top five and it’s one of the first big subscription models that really showed how subscriptions could be used in loyalty. I think that's going to be a big trend that we see; the rise of paid for loyalty in the UK.
And then some other really cool ones that everyone should check out are LIDL Plus, totally disrupting the grocery loyalty market and very quickly getting into the top 10 most appealing programmes in the UK. I particularly love that one because we work on it, but I use it all the time. Also, Sky VIP, the first programme to reward for tenure; Voxi Drop, the first telco programme to have no rules whatsoever, as it’s trying to appeal to a Gen-Z audience. We also have Vitality, which is the first programme to reward customers for brand appropriate behaviour with brand appropriate rewards in the UK.
And then my other favourite one is Pets at Home VIP, which is one of those secret programmes that has millions and millions of members. I always talk about it as probably the best example of personalisation that I've ever seen. So yeah, some really great programmes to watch!
The way different demographics and how different segments react to loyalty is, is a particularly interesting area. We look at some top-line things in our white paper, such as age and region, but we've got a lot more data points. Working with YouGov, we've got over 200,000 data points that we can look at and use. So, we're always conducting new investigations. But I think what we saw and one of the big changes for us was the impact of the pandemic and the lockdowns, and the changing lifestyles that that brought in.
We did see a drop in loyalty programme membership during the pandemic from 77% to 70%. We're forecasting that to increase significantly, particularly with the cost of the living crisis. The working hypothesis we've got is that loyalty programmes are going to come even more valuable to the British households, and that people will be using them even more because of the value that they provide.
People thinking loyalty programmes are a great thing is fairly consistent. We are a nation of loyalty lovers. It peaked at 72% that loyalty programmes are a great way for brands to reward their customers and it dropped to 70%, but a 2% drop still makes the majority of Brits who just love their loyalty programmes. Where we have seen a decline has been in people thinking that every single brand should offer them. When we started doing the research, we asked ‘should every brand offer a loyalty programme?’ 59% of Brits agreed, and that’s something that has actually dropped quite significantly to 48%.
However, what we've seen in that same period of time since 2018 is a massive explosion in loyalty programmes. You can't blink without seeing a new loyalty programme arriving and a new brand recognising the value of their existing customer base and wanting to engage and delight them.
I think when you look at those programmes, what they have is scale. What they have is a very large initial opening customer base to bring into their loyalty programme. So, I think it's natural that the biggest four programmes sit with, you know, some of the biggest brands in the UK. They naturally have that ability to dominate the market.
And I think what makes them so successful must be the impact that they have. Those are big, smart, savvy brands. So they're obviously delivering against their business brands and customer objectives for their business, which is obviously very important. When you look at Tesco, they're always talking about their customer focus; when you look at Boots, they're really singular on that treat moment, they really understand their audience, and they tailor the programme to kind of meet that ‘treat’ mindset.
It's the same particularly with Amazon Prime - they are constantly innovating to bring people in to create structural bonds into that programme, you know, be it that you love the gaming subscription, the reading that you can get, all the TV that you can watch, or just the free delivery. They're brilliant at that kind of frictionless customer experience. So, I think that's why those are so successful, but I'm not sure they're the most successful. I think they're definitely the biggest, I think when you look at the programmes that are trying to meet different objectives, you can think about loyalty quite differently, and actually how they're creating success in in different ways. The Co-op is also one of the biggest programmes in the UK, and I'm confident that one of their measures of success will be contribution to local community. And I'm sure they're absolutely smashing that KPI with all the things they do to support their local communities and their local stores. So yeah, biggest most appealing, but not definitely not the only ones to look at.
I think it's got to be customer and member focus. Now you have to remember, I'm a loyalty strategist, so obviously, I'm going to say that. I'm sure if you're asked a CFO that question, they'd probably lean towards the business case and the return on investment. And I'm certain that, depending who you talk to, you’ll get a very different answer.
From my point of view, I think it's the programmes that really take the time to understand who their members are, and how they add value to those members against the objectives that they have that excel. In the past, I worked on a programme for whom the singular KPI was to drive brand love, whatever you do, and the programme smashed it against that. Maybe the business case wasn't as strong but it was delivering against that KPI. So, I think meeting and exceeding your KPIs, focusing on the customer, investing in continuous innovation, and constantly trying to keep up with your customer, anticipate their needs and responding to them, are crucial to success.
This one's actually not difficult. I think a lot of loyalty programme owners really struggle with this question of how do I create something that's unique and differentiating? How do I create a brilliant loyalty experience? And how do I make it unique to me, so it's not the same as all the other programmes that I'm that I'm up against?
And that’s one of the things that we really look at in our research. We track it all the time, and we use our own internal insight sources to look at it, so I can answer this question fairly accurately. In our research, we found that:
And in the report, there's all the other kind of options and things that you can do, like creating communities and stuff that will track lower. So, those are the big four for the types of things that customers want. We also always recommend that no matter who you are, as the loyalty programme owner, you go and talk to your members and do some primary research. Use that data right and you’ll find it's not complicated to find out what your customers and members really want.
We've worked really closely with YouGov over the last few years to build a pretty immense set of data loyalty points, so we know what hobbies people have, we know what they like to do at the weekend, we know what their favourite activities are. So then, of course, we can then design tailored rewards to appeal to those types of people and their needs.
We've also got an internal proprietary tool that we use called reward DNA, which we use to look at all the different rewards we've got for all the different types of audiences. We break them down into the different types of mechanics, the emotion drivers, the values, the interest of degrees, and so we can really understand what kinds of rewards different types of members and all the various sectors will not only like, but also use.
We're now starting to bring in softer metrics to that as well, where we focus on how customers actually feel about different rewards. It's a brilliant tool for us to look at, and it's often very surprising. January is a great example. The nation focuses on a new, better, fitter, healthier you, but actually, the type of reward that performs best in January for most segments, is stuff that's warm and comfy and cosy and a treat to have on the sofa on a Friday night.
As marketers, that's a piece of common sense that we all recognise and understand in our personal lives and probably in our audiences’ lives, but with the kind of data we have to back it up, we can predict how a fitness reward will perform and we can predict how those stay-at-home rewards will perform. Both are essential parts, so you do need to be offering new health and fitness rewards to a certain type of person, and you need to be offering those “be comfy on the sofa” rewards to another type of person - and actually we’ve learned that can often be the same person.
I think that's new kind of thinking. Marketers used to be quite binary, you're either into that, or you weren't. And I think what we're recognising now is that the same person moves dramatically throughout the week about the kind of rewards that work for them. It’s a really interesting area for us.
Love that question! I think it's always been changing. I'd love to say that, you know, it's been consistent, and it used to be points, and everyone used to give away points. And the rule of thumb was that you gave one point for every pound. So, I think it used to be there were set rules. And I think what's really nice now is that there are no rules. The rule is find out what people want, what differentiates you, what excites them and create rewards to match. Technology is fuelling this change, and things like live experiences sort of exploded in programmes and during the pandemic, when we were all trapped in our houses.
John Lewis were absolutely brilliant at this; Marks & Spencers Sparks did it really well, too; TK Maxx Treasure also smashed it! Brands are now offering those really exciting, live digital experiences. I think one that really made me sit up and take notice came from Sky VIP, which was a sort of a Harry Potter quiz that was done with the talent from the film. As ever with Sky VIP, they leverage those great assets and relationships they have to create something really spectacular. I think technology has fuelled some of it; lifestyles have changed; and some of it is kind of an explosion of brands that are interested in taking part in loyalty programmes.
If you're thinking about a rewarding moment for your customer, you're no longer limited in the way that you used to be that it had to be in store. Tech has moved on now. So you can experience all sorts of things in all sorts of new ways.
This was a big new area that we started looking at in 2020. So, when we put the first white paper together in 2018, it was on the agenda, but it wasn't a significant factor. We didn't actually have any data points on it. And in 2020, we started to see it coming, but we also thought it was the right thing to look at. We thought, actually, this is something that's really important. It's a shared responsibility of all of us to look at, so I was really excited to explore it in such a detailed way in 2022.
We found that 71% of Brits think that loyalty programmes should help people live more sustainably or promote a healthier environment. So, it’s fair to say that any programme that isn't looking at it really should be. And I think where we took it to the next level in 2022, was actually understanding and exploring what programmes could do in this space. Despite good intentions, many companies may not know how to go about making their programmes more sustainable. One thing that we learned in our research is that most people want their loyalty programmes to reward sustainable behaviours.
A good example of a programme that is doing that is Costa. So, if you use their disposable cups, you need to buy eight coffees to get a free one, but if you use your own, you only have to buy four to get your freebie.
We also found that customers want rewards that help them live more sustainably, and one way to do that is by offering products, gift and offers from brands who are helping sustainability objectives. One of the examples I mentioned was one of our early rewards that we did with TK Maxx Treasure looking at the wax wrap, so that people could stop using clingfilm and single-use plastic in their house, and start using a reusable kind of wax wrap. Really simple things that programmes can do.
We also saw a shift among loyalty programmes towards helping charities and people offering their support to the NHS during the pandemic. It's now shifting back to a broader range of charities, but again, we're looking very closely at what impact the cost of living crisis is going to have on those charities that brands choose to support.
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To get some loyalty program inspiration, check out the Top 100 Loyalty Programs report, or peek into the future of the loyalty industry with our Loyalty Trends 2022 research.
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