LOYALTY CARDS

Are we seeing the beginning of the end for supermarket loyalty schemes?

Tesco’s well-documented troubles (despite its once-innovative Clubcard) and Sainsbury’s recent halving of the number of Nectar points its customers earn in store seem to point that way. The discounters have certainly managed to shake up the grocery sector without having to resort to an in-house loyalty scheme.

This shift is symptomatic of an erosion of customer loyalty, which has nothing to do with the relative merits of any scheme.

Since the recession there has been a fundamental shift in household spending habits. Budgets have remained broadly flat since 2007. Customers are now far more likely to shop around to get the best prices.

Carrying round a handful of loyalty cards is an added inconvenience, and savvy shoppers would rather simply compare prices and buy the cheapest, getting their value there and then rather than trying to decode complex incentive schemes.

Digital loyalty schemes using smartphones, like the one pioneered by Starbucks, are one alternative route. Targeting shoppers with bespoke offers based on their shopping data holds obvious advantages over ‘always on’ schemes. Perhaps this is the route Sainsbury’s will go down. Perhaps others will follow.

We’re already seeing more and more retailers signing up for our card-linked programme, which allows consumers to earn rewards from a range of online and high street retailers that all land in the same account.

The system also generates huge quantities of data about consumers’ shopping habits, which can be used to target them with relevant, personalised offers.

Consumers are happy to share this information in return for rewards and discounts that interest them, instead of being bombarded with irrelevant offers. And retailers drive sales without risking the bottom line or devaluing their brand through across-the-board discounting.

This presents a rare opportunity for fast-moving, innovative retailers to gain a permanent advantage over their bigger competitors, as the discounters now have over the industry’s former powerhouses.

Andy Oldham is MD of Quidco