Sometimes, viewing customer loyalty through another lens can inform a company’s decisions in a different light.
Loyalty360 talked to Mario Invernizzi, General Manager EMEA, Stellar Loyalty, about loyalty marketing in Europe and the similarities and differences with the American market.
What overall trends are you seeing in the European market in terms of loyalty marketing?
Invernizzi: Historically in the E.U., we’ve seen a lot of tractions related to gift cards and coalition programs, which offer incentives to customers of two or more businesses in return for allowing those businesses to collect user data, as well as with cash-back plans.
More recently, however, purely transaction-based loyalty programs are facing pressure as deeper, more holistic engagement with brands is becoming more of an expectation across all channels. Brands are realizing that European consumers are seeking broader engagement and want to be listened to, communicated with, and respected. Brands are also discovering they need to shorten the time of interaction with members from one acquisition to the next, and, as such, have to increase the engagement level and leverage all channels to do so.
What are the similarities/differences between the European and American markets when it comes to engaging with customers and building lasting relationships?
Invernizzi: As is usually the case, the trends from the U.S. generally gravitate over to the E.U., including the trend toward increased customer engagement. The primary vertical leading this change is retail because mobile technology and social marketing are such significant driving forces in the way consumers and retail brands interact. Consumer habits are now enabled by technology and brands needs to get to know more about their consumers through these channels. This is the “Engagement Omnichannel Promise” that has been much discussed in the U.S. and across the E.U. for some time now. In this regard, U.S. and E.U. consumers are very similar with the same expectations, because they all have a great deal of choice in the market.
That said, there are still some clear differences that U.S. brands should take into account when entering the European countries. Differences in English language skills persist across the European countries perhaps more than one would think. As a result, U.S. brands should accommodate local languages as much as possible, especially in the e-commerce business. In addition to the language aspect, European cultures can differ greatly and this difference is reflected in consumer buying habits and preferences, too. German buyers often prefer to compare offerings across competitors, taking a methodical approach to buying, while Spanish buyers often respond more to spontaneous and emotionally driven marketing approaches.
In terms of legal requirements, while the European Union is trying hard to standardize to facilitate cross-border business, many countries still have their own laws. When doing business in Europe, it’s important to be aware of these laws and be sure you are following both European and national laws. Also, favorite payment methods vary country to country. Credit cards and PayPal are widely adopted, but in countries like The Netherlands, most consumers prefer to pay with a payment method called iDEAL. These are just a few of the differences.
What challenges can American brands expect to encounter when entering the European market?
Invernizzi: U.S. brands need to adapt their strategies if they want to compete in the E.U. market. The E.U. market is not just one big market as some U.S. companies may believe. There are major differences in how British and Greek consumers, for example, engage with brands in term of brand affinity, recognition, payment methods, etc. The Quick Service Restaurant (QSR) category is evolving quickly in the U.S. in terms of consumer engagement and differentiation. In the E.U., we have perhaps only 10 or more large QSR chains versus hundreds in the U.S. Consumer habits of a fast food lover in the U.S. are vastly different from the one in southern Italy, where cooking is an art and the concept of “fast food” does not always fit with what customers are seeking, such as comfort, VIP treatment, food quality, and personalized treatment.
Popular U.S. retailers, for example, are losing ground versus homegrown European brands because the European retailers are often more client-focused, offer better shopping experiences and are likely to have a more loyal supply chain. In the U.K., almost 75 percent of British clothing and footwear are bought from British brands. Of the remaining 25 percent, European retailers take 20 percent of market share. This means that American stores are the last choice for British consumers. In addition, prices are higher because American brands are focused on setting up shop in flagship E.U. locations where rent is higher. Online shopping allows British consumers to buy American goods cheaper than in stores. These are just some of the frequent challenges I see American companies running into.
Localization, customization, and a deeper sense of understanding of the end user should drive every U.S.-based brand when they enter the E.U. to avoid major mistakes and to hit their growth targets. The brand’s marketing strategy needs to sync with local habits to do that.
We know the new data protection regulations are a big issue in Europe. What are they and how might they affect American companies doing business in Europe?
Invernizzi: The General Data Protection Regulation (GDPR) is a piece of legislation that will come into effect across the European Union on May 25. It lays out regulation from the European Parliament, the Council of the European Union and the European Commission intended to strengthen and unify data protection for all individuals within the European Union.
And yes, GDPR will affect your brand if your marketing and e-commerce operations reach a European audience.
For companies that operate in European markets or who have actual or potential customers within those countries—even if physical operations take place in the United States—strict compliance with GDPR is mandatory, and the penalty for failing to comply is a heavy fine. In short, if you process data about individuals in the context of selling goods or services to European citizens in any E.U. country, then you will need to comply with GDPR.
According to a report released by PwC, 64 percent of executives at U.S. corporations reported “their top strategy for reducing GDPR exposure is centralization of data centers in Europe. Just over half (54 percent) said they plan to de-identify [i.e. anonymize] European personal data to reduce exposure.”
Looking at GDPR in the context of the emerging “engagement” concept, this is another proof-point of how brands have to commit to their consumers that every time they ask for information, the data is kept safe and not shared with anybody else without precise opt-in by the consumer. If this trust is breached, not only will you be breaking the law, you will never earn the customer’s loyalty.