The launch this week of loyalty card, Nectar, will yet again stimulate a debate about whether these cards work and what benefits they bring. Research conducted by Mintel listed loyalty cards as the 10th most important reason for customers choosing one supermarket over another. Convenienve of location topped the list, a sad indictment perhaps for all of us in supermarketing. Then came product quality, and range, pricing, service, cleanliness, knowledgeable staff, checkout queues and ease of carparking - with loyalty cards last.
At Waitrose we took the decision many years ago that, given that priority list, all of our available resources would go into our products, service and environment, rather than deflecting capital elsewhere, and in particular into a loyalty scheme which would cost tens, if not hundreds, of millions of pounds to establish and maintain. It has been interesting to see over the years Morrisons maintain a similar position, Asda adopt it after early loyalty card trials proved fruitless, and Safeway follow suit as product, service and environment become the key focus for Carlos Criado-Perez and his team.
The simple fact is that research from several bodies does show that loyalty cards do not increase customer loyalty, but if anything promote shopping promiscuity as customers with several cards move from one shop to another to collect the offers. The assertion that segmenting data and direct mailing new offers to customers drives added sales is also spurious. A direct marketing campaign to persuade you to buy a car or expensive insurance is one thing, and arguably cost-justified, but persuading customers to buy tomato ketchup is quite another. If they buy it already it is a waste of margin; if they don't, they probably don't like it and never will, no matter how good the offer.
In fact, in recent years, even those who employ the cards have started to concede that customer loyalty was never what it was about, rather understanding purchasing patterns and aiding category management; an argument which I do concede.
I have been impressed by the way the music and video shop, MVC runs its loyalty scheme. If you sign up to its membership scheme, which is free of charge, you get a reduced price on all products. As a result, 98% of purchases are made through the scheme and I believe it currently has about six million members. The data MVC collects helps it to understand better its customer profile and is used for ranging, product development and store location.
But can this helpful information be gleaned in any other way? The answer is yes. At Waitrose we regularly run analysis on shopping baskets linked to credit, debit and the John Lewis and Waitrose account card. Although only in the latter can we link it directly to a customer profile, the other cards provide information on dependencies.
Auchan, the French hypermarket, has added another twist to the theme with its recently developed loyalty programme that gives rewards out at the till and so saves tens of millions in direct mail costs. The reward is a targeted offer rather than points-based and generally supported by suppliers. As a consequence, the costs are much lower than the traditional model, customers are immediately rewarded and sufficient numbers sign up to get meaningful shopping data.
All will watch with interest how the new Nectar card performs, but we will continue to hold the view that, for our customers, the best reward is investing all the money we can in great product, service and environment.
{{COMMENT - GUEST }}
At Waitrose we took the decision many years ago that, given that priority list, all of our available resources would go into our products, service and environment, rather than deflecting capital elsewhere, and in particular into a loyalty scheme which would cost tens, if not hundreds, of millions of pounds to establish and maintain. It has been interesting to see over the years Morrisons maintain a similar position, Asda adopt it after early loyalty card trials proved fruitless, and Safeway follow suit as product, service and environment become the key focus for Carlos Criado-Perez and his team.
The simple fact is that research from several bodies does show that loyalty cards do not increase customer loyalty, but if anything promote shopping promiscuity as customers with several cards move from one shop to another to collect the offers. The assertion that segmenting data and direct mailing new offers to customers drives added sales is also spurious. A direct marketing campaign to persuade you to buy a car or expensive insurance is one thing, and arguably cost-justified, but persuading customers to buy tomato ketchup is quite another. If they buy it already it is a waste of margin; if they don't, they probably don't like it and never will, no matter how good the offer.
In fact, in recent years, even those who employ the cards have started to concede that customer loyalty was never what it was about, rather understanding purchasing patterns and aiding category management; an argument which I do concede.
I have been impressed by the way the music and video shop, MVC runs its loyalty scheme. If you sign up to its membership scheme, which is free of charge, you get a reduced price on all products. As a result, 98% of purchases are made through the scheme and I believe it currently has about six million members. The data MVC collects helps it to understand better its customer profile and is used for ranging, product development and store location.
But can this helpful information be gleaned in any other way? The answer is yes. At Waitrose we regularly run analysis on shopping baskets linked to credit, debit and the John Lewis and Waitrose account card. Although only in the latter can we link it directly to a customer profile, the other cards provide information on dependencies.
Auchan, the French hypermarket, has added another twist to the theme with its recently developed loyalty programme that gives rewards out at the till and so saves tens of millions in direct mail costs. The reward is a targeted offer rather than points-based and generally supported by suppliers. As a consequence, the costs are much lower than the traditional model, customers are immediately rewarded and sufficient numbers sign up to get meaningful shopping data.
All will watch with interest how the new Nectar card performs, but we will continue to hold the view that, for our customers, the best reward is investing all the money we can in great product, service and environment.
{{COMMENT - GUEST }}
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