Loyalty cards are missing the point

Sainsbury’s, the supermarket which once dismissed loyalty cards as “electronic Green Shield stamps”, is finding that running its own Reward Card scheme is more complex than sticking a few stamps in a book ever was.

Critics of supermarket loyalty cards have always dismissed them as a gimmick that would eventually boomerang back to hit the supermarkets with high costs and loyalty points wars. Both scenarios seem to have come to life.

When Tesco first launched the Clubcard in February 1995, it had the advantage of being the first supermarket to offer such a scheme. But rivals Sainsbury’s and Safeway soon launched rival cards, and now it seems the supermarkets are pouring up to 200m a year into loyalty schemes which do little to engender real loyalty.

But the main point of the schemes is supposed to be the wealth of information they provide to the supermarkets about their customers – and having their names and addresses is just the beginning of the process. Collecting information about their buying habits is supposed to enable the supermarketers to “segment” their customers and “target” them with specific promotions and offers. But this part of the equation, it seems, is not so easy.

It is understood that Sainsbury’s only carried out four or five Reward Card mailings last year and inside sources say much of the data, the raw tool of relationship marketing, is unprocessed. One claims: “Sainsbury’s has got massive problems with the quality of its data. It would be difficult to carry out selections and modelling because much of the data is inconsistent and incomplete.”

While admitting that Sainsbury’s does fewer mailings than rivals Safeway and Tesco, brand director for Sainsbury’s supermarkets David McNair denies it is because the data warehouse is in bad shape. “It is not the scale of customer communications but the effectiveness which is important. We don’t do mailings on a monthly basis like Safeway and Tesco, but we have identified a more effective way of managing a relationship programme. There is confusion between direct marketing and proper relationship marketing,” says McNair.

Sainsbury’s has concentrated on double point offers on particular products at the point of sale which are open to any customer, rather than offering specific rewards to high spenders. The perceived value of the points is high, which is good for Sainsbury’s in the short term but the real value of loyalty cards lies in quality of data collected and quality of data analysis.

Safeway has recently pumped an extra 20m into its ABC card programme to launch the first tiered point scheme in an attempt to retain “total basket” share – most people carry more than one card. This could turn into a very expensive means of buying market share, according to analysts.

Verdict Research retail analyst Clive Vaughan says: “Safeway is struggling a bit. Triple and double points are an apparent boost, but it is really a means of buying share. There is a danger of getting into a dismal spiral of tripling, then quadrupling, points and ending up by giving away all your margins.”

Marketing activities are no good if reality does not meet customer expectations. Safeway brand marketing director Roger Ramsden says the supermarket has overcome the problems of availability experienced last year but will continue to improve its quality in recognition of what its customers want. After sending out 4 million customer questionnaires over the past year, he claims Safeway knows more about customer behaviour than ever before.

Ramsden says: “We have been using data for relationship marketing purposes for over two years. We have recorded every card swipe and every item bought. In a recent mailing for our bakery we sent out 60 different versions.”

Tesco, which at last week’s annual general meeting announced a slight fall in like-for-like sales to 4.8 per cent for the first 14 weeks of the year, is seen as the front runner in the loyalty card race. However, how much the Clubcard adds to its dominant position is open to question. It is understood to have split its customer database into 20,000 different groups. Vaughan says: “Tesco is performing more strongly than Safeway and Sainsbury’s but it is important to remember that it is not performing as well as Asda, which doesn’t have a serious card scheme.”

Asda says it has “no immediate plans” to launch a national card policy, while restricting its Clubcard to just 19 of its 218 stores. This has been the state of play for three years, while it has stuck to a policy of focusing on low prices instead of fancy loyalty schemes. However, Asda does operate a Fill & Save petrol loyalty card at each of its 125 petrol stations.

Sainsbury’s is rethinking its agency strategy for the Reward Card loyalty scheme in an attempt to improve communication with customers. Brann and Barraclough Hall Woolston Gray are on the verge of pitching for a large chunk of the Reward Card account, which has been in limbo for six months since WWAV Rapp Collins resigned “by mutual agreement”.

Sainsbury’s McNair says: “We have given those agencies (Brann and BHWG) a brief to address particular sub-groups of customers. They are competing on a single brief and we are looking for their recommendations.”

Credentials poured in from agencies when the WWAV spat came to light and McNair looked at a group of “considerably more than ten” before holding meetings with a handful of them. Brann has been chosen for its work on Sainsbury’s homeshopping service Orderline and BHWG because of its connection with the supermarket’s above-the-line agency AMV.BDDO.

Group chief executive Dino Adriano admits there is room for improvement in Sainsbury’s communication with customers. “In other areas it is important to communicate with customers through the relationship which is established. There is still a lot of opportunity with our ‘0-5 Club’ and ‘PetClub’.”

Loyalty schemes do not come cheap. For Sainsbury’s, marketing the card has meant one U-turn after another but it is not the only one to experience the pain of running costly loyalty schemes that seem to reward customers without ensuring loyalty.

Supermarkets may start wishing they could go back to stamps.

Latest from Marketing Week


Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now


Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.


From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.


Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3703 or email customerservices@marketingweek.com

If you are looking for our Jobs site, please click here