Is it really worth the big brands' while to try to win the loyalty of fickle net channel hoppers? And are they making the most of any opportunities to build lasting gains? Karen Dempsey reports Now that big brands are comfortable showcasing their wares on web sites, some of the more forward thinking companies are looking to the net to help foster customer loyalty. Given the fickle nature of the typical web surfing audience, it may seem rather odd putting the internet' and loyalty' in the same sentence. But some big brands are making big noises about their online loyalty schemes. What they keep quieter about is how much these high profile schemes are actually adding to their bottom line. Coca-Cola has dipped its toe into online waters by hooking up with auction channel in what it calls "a revolutionary cashless online auction". The scheme works rather like any traditional ringpull initiative. Consumers collect promotional ringpulls and labels which they convert into Coke credits. The difference from ordinary schemes is that the credits can then be used as currency to bid for items online. And it's not the typical branded baseball caps or glasses that are on offer. The line up of prizes includes the chance to win WAP phones, round the world trips and even funding of university fees. The initiative is designed to attract Coke's core teenage audience, many of whom are regular internet users but are ineligible for a credit card. Andrew Coker, director of communications at Coca-Cola GB, says: "This is not a loyalty scheme. We were charged with coming up with an initiative that engaged and excited our core consumers in a way that no other initiative had done before. Core consumers for Coke and the the profiles of net surfers are very similar so this initiative is bullseye. People may have viewed us as not particularly innovative but this proves what great marketing and thinking skills there are in this company. "We have to keep in touch with what our consumers want. If we put boring items in, then that will lose us credibility. But if we keep the prizes the best, then that builds their affection for the brand and further connects them with the brand. It's a complete step change." It's not just Coke which is luring consumers with the promise of prizes. Virgin has put its i-can loyalty scheme on to the net, where consumers can get discounts off products in the Virgin portfolio. Alyson Lilley, head of marketing at Virgin Drinks, says the scheme offers web exclusive discounts through wildcard' offers ­ obtained through six ringpulls ­ through which they can get Virgin mobile phones for £30, 40% off books from Virgin Publishing, and last minute deals on Virgin holidays. And even Cheestrings is giving away top prizes such as MP3 players and DVD players to kids who get the highest scores on online games featuring brand ambassador Mr Strings. The prizes are so aspirational, says brand manager Tina Dagnall, because they form part of the strategy to extend the lifestage of the brand from the core consumer aged eight up to 11 and 12 year olds. By offering these kind of dazzling prizes, one may question what these kinds of scheme are creating loyalty to? Is this kind of online strategy just a short-term gimmick to attract attention or can it be an effective tool for long term customer retention? Industry observers are not as upbeat as the brand owners about the value of online loyalty schemes. Peter Burke, internet strategy director at Logobrand, argues that the web is not the best medium for generating loyalty. "It's interesting that they're using the old industry mechanism of collecting ringpulls and using it in the new industry paradigm of the web," he says. "But the type of people online at the moment are flitters, channel hoppers, who use the web to find the next lowest price and the next fastest delivery. And this conflicts with the loyalty package. "The Coke scheme is aimed at kids who don't have any spending power of their own and they'll think warmly about Coke because of it ­ but it is doubtful whether in the long term they will sell more Coke as a result." Sean Raw, director of consulting at Glendinning management consultants, is similarly sceptical. "Loyalty schemes are about giving people good reason to stick with your brand. But any brand that requires something more than its own proposition to maintain loyalty could have a problem. People will buy because you're giving them a prize. The simple fact is that if you stop giving them a prize, they are likely to go somewhere else." Raw adds: "The reason for doing loyalty schemes can often be when brands do not have the strength of proposition to drive consumption to the levels they want. The use of the internet makes it more modern and contemporary and it's a bit of novelty to stimulate interest and get people to participate in yet another loyalty scheme, but it doesn't make the proposition any stronger. "Loyalty schemes are all about building the brand image and getting consumers to interact with it, making them see more value in the brand itself. This is not about loyalty programmes but about equity building longer term, in the same way above the line advertising does." Raw points to the Dove site that goes beyond talking about soap and features relaxation techniques and other elements that move into the realms of the feelgood factor. "Dove is taking a longer term approach than getting people to buy a bunch of stuff and claim a prize. The business idea is to build an interactive relationship with the consumer that makes them value the brand, not just a commodity they buy." You also have to make that you're offering relevance to your consumer, says Kristina Nordsten, principal consultant at PA Consulting, and make sure that loyalty schemes are part of an integrated message. She says: "It's about creating real relationships that matter. That world is so promiscuous and consumers have gone from shoppers to swappers within a certain repertoire. When you can create conversations with customers online, it should be a strategically rich dialogue. You should suck consumers in and make them become part of the content. By having a close relationship with customers, you start to understand their needs and empower them, and encourage them to interact with you. "In that way they help build the content so it can be a self-fulfilling vortex that nurtures and maintains the customer-supplier relationship." This is something that US retailer JCPenney aims to achieve with its approach to online retailing. Its site has a proprietary technology which recognises who its most valued customers are, enters them in a privilege scheme that recognises them when they come back on to the site, and gives them content based on their previous buying patterns. This is as close as you can get to the personal service you would get in the store itself, says Brian Blair, head of marketing for Europe at Modem Media, which works with JCPenney. He says this approach harks back to the days when the local butchers and bakers knew customers' names and what their order would be. "It's about me-business or you'll take your business elsewhere. Building genuine loyalty online isn't about schemes or gimmicks. Online you've got a better opportunity to create lasting loyalty because of the one to one nature of the medium. But it also gives companies the opportunity to lose loyalty within the space of a second. "In the digital world it's about providing a service that answers the customer's question: What can you do for me?' If you can't answer that in a few seconds then customers will go elsewhere. We recognise that the customer is in complete control of a digital relationship and brand loyalty is a mouseclick away. "The individual has the power to dictate where he/she will go online, which allows individuals to dictate what the brands mean for them. So individual brands and their messages will be tailored to individual needs. The value you get from the service dictates the brand value. And if you can't deliver that then the brand will struggle to survive," says Blair. But dare we ask if these various schemes are shifting more stock off shelves? Companies can of course measure the number of hits they get on their sites, but they can't actually correlate how that interprets into sales. They are bullish about the success of their initial ventures ­ though Cheestrings' Dagnall does admits it is hard to quantify the effect that online schemes have on the bottom line. "The benefits are intangible and we wouldn't expect to see additional volumes generated because of the web site. But the company is willing to make that investment as we see that as the way forward. "The only measurement we have is hits ­ which have doubled to 400,000 a month since we started the scheme ­ and as we see our sales growing year on year there is nothing to suggest that it is not working." Virgin Drinks' Lilley says: "The loyalty scheme has been hugely successful for Virgin Cola, increasing our sales by 15% in July [customer EPoS data]. "Research has proved that 15% of our consumers found out about i-can via the net which will obviously impact on sales. And since adding the i-can scheme to the site we have trebled the number of visitors and found they are spending much longer on the site ­ an average of seven minutes." Coker says that the Coke Auction initiative has "proved incredibly popular" and that 70,000 people are bidding online. He can't reveal figures but says the initiative "is adding real value to the business". Once it comes to an end at Christmas, it will be assessed and it may be something that Coke decides to roll out globally as the UK has been the test market. Mark Branston, manager, online planning/buying at Quantum New Media, says that Coke is actually ahead of the times at a stage when "there is still a lot of smoke and mirrors about trying to build a brand online". He says this initiative is a brave one in a world where banners and buttons and interstitial ads are still the core elements of online brand building. One way of making the schemes work harder longer term, says Branston, is to use the data collected to be more proactive in courting customers. He is beginning to suggest to clients that they initiate schemes for customer retention, such as e-mailing registered users. So, for example, when someone buys a holiday online and leaves an e-mail address, then that can be used to upsell products such as insurance or luggage. Glendinning's Raw agrees that, longer term, it's what brands do with the data that will counts. "Running loyalty schemes can be another cost to the business so companies have to be able to leverage an advantage from the information they're getting." At the moment Coke doesn't have any long-term plans for its Coke Auction scheme beyond Christmas. At this stage it is assessing what consumers are interested in and what they enjoy and "it is a long way down the line" before it does something else with the data. Virgin Drinks, on the other hand, views database building as one of the major pros of the scheme. Lilley says: "We are building a database of names which offers an effective way of building relations with our consumers. "We will be able to send regular news e-mails keeping them up to date with not only the Wildcard offers but also new developments and launches." Dagnall says that Cheestrings plans to e-mail its database with on-shelf offers. Through its VIP scheme it's been a way of finding out more about the customer base, what flavours the kids like, and what products they would like to be developed. This is the best lesson to be learnt from online loyalty schemes, Raw concludes: "People are amassing data but they are not getting insight and advantage there. Loyalty schemes drive short-term sales but you have to understand the behaviour of people within that scheme to leverage that to get longer term insight and use this to drive strategy." {{COVER FEATURE }}