Customer Lifetime Value – Getting Loyalty Right – H&M

Customer Lifetime Value, Getting Loyalty Right H&M

Following on from our previous blog on NikePlus we are looking at some of the best ways to develop Customer Lifetime Value, one method being loyalty schemes. Obviously, loyalty programmes aren’t just useful for developing CLV but they are also the richest source of data a brand can acquire.

Our role is to ensure that technology works how it should and also to provide rich and accurate data so crucial to retailers. When you know that just a 5% improvement in customer retention results in a 25% increase in turnover you understand that the quality of the technology feeding the data and the experience is vital.

Simply put, we are only doing our job when we know the technology delivers because we also know:

• It costs 5-25 times more to acquire a new customer than it does to keep an existing one.
• Converting an existing customer has a 60-70% chance of being successful

Earlier this year we reviewed the Nike loyalty programme looking at how they do it (brilliantly) and what results it was delivering. In this article, we will be looking at H&M which is in 71 countries around the world and have about 5,000 stores.

H&M Brand Loyalty Campaign Overview

The loyalty program from the Swedish clothing retailer H&M already has more than 100 million members, whom they say spend around 3x more than regular customers. They have differentiated their loyalty proposition by linking rewards to sustainability, meaning members who recycle can receive points and a digital voucher. They even reward customers for bringing their own bags.

• Core benefits: as well as exclusive discounts and early access to selected collections they give members benefits like these:
• Sustainability-linked rewards and one point for every £1 spent, with bonus vouchers worth £3 awarded for every 100 points collected.
• An introductory offer of 10% off when they join and spend £20.
• Occasionally members are given benefits from partners so they can take advantage of their points with other brands.
• The mobile app tracks orders and suggests products with reviews and post shares from customers globally.

Verdict

The Good

1. It looks great. The whole UX is excellent. Also effectively pulled into other channels and given that 48% of respondents say social media has the greatest impact they are doing a great job of being present across multiple channels and sharing loyalty benefits well. So big tick there.
2. Joining is easy: The sign-up process was simple and easy, allowing members to register with just an email. This stage can be a real barrier for customers, so if you are willing to share your name and email you’re set.
3. The rewards feel more meaningful given so much is centered around sustainability. Having said that they are pretty standard financially, (points unlock £3 H&M-exclusive vouchers).
4. Overall complexity: They have cleverly avoided the all-too-common frustration factor and kept things simple. It may not be a scheme that knocks your socks off but it’s easy to understand.

Possible Improvements

1. Mobile-only – not all customers want another app on their phone.
2. Lack of value: You have to spend £20 to even get an introductory 10%. As part of this, there does feel a lack of clarity early on in the cycle as to what you can realistically ‘get’ from the scheme. There is a danger customers may lose interest in the program if they don't see the benefits quickly enough.
3. Website Visibility: The loyalty scheme is not hugely prominent on the H&M homepage.
4. Personalisation: They could invest a little bit more into their personalisation efforts given we know 76% of customers would be more likely to spend. The app is ‘intelligent’ although I am yet to discover the benefits of this, it may be that a number of purchases are needed before it can ‘learn’. Your name gets dropped in throughout usage but it doesn’t feel deeply considered.
5. Expiration: Watch out - whether you’ve earned 1 point or 99 points. They will be gone in 12 months. Which feels like a very negative end to the process of collecting points all year.

What we think…

Overall, the H&M loyalty program has been well-received by customers and given the fashion industry is uniquely positioned to capitalise on emerging technology and consumer trends the social tie-in and review process feels well-engineered. They have reported an increase in customer spend and frequency of purchases among its loyalty program members so it's working.

However, they do have an opportunity to take it further by:

• Creating better value offerings and exploring more personalised connections beyond simply cashing in points.
• By utilising machine learning algorithms this app could be taken to the next level, personalising rewards better with a closer analysis of their purchase history and behaviour across other platforms. Not solely the 'H&M loyalty' app.
• We can see maximising capabilities through a headless commerce CMS system could help improve the seamless and personalised experience across this loyalty program and its further channels.

Looking ahead, we see AI, AR and MetaVerse coming into play for loyalty and we are sure H&M will be at the front.

As long as attention is paid to quality technology from the start, and then as the programme grows, the experience will always move in line with the customer's needs and therefore the businesses.