Loyalty schemes are a lifeboat in the post recession era

Brands and retailers are increasingly turning to loyalty programmes as a way to boost customer retention and there is a growing

trend to sign up to established programmes.

With consumers facing tough times following the Government’s spending cuts and the impending increase in VAT, all retail brands are looking to add value and convince customers to shop with them and not their rivals.

Partnering with established loyalty programmes will help retailers shore up business in the post recessionary climate can help soften the blow of the Government spending cuts on shoppers.

Whether they are termed reward, loyalty or customer retention strategies, they offer customers is an incentive to shop with a particular retailer so it’s no surprise that the past year has seen an increase in loyalty drives.

Boots opened its Advantage Card programme up to 50 online brand partners, Nectar has launched an ad campaign to champion its partners, Barclaycard launched its Freedom scheme and Tesco credited its relaunched Clubcard Double Points initiative with boosting its results.

With its Treat Street initiative Boots has realised that it can extend he value of its Advantage card programme by opening it up to other brand partners to allow shoppers to collect points with more brands.

The breadth of partner brands is something that Nectar programme partner Sainsbury’s also values.

Speaking at Marketing Week’s recent Customer Retention Summit, Andrew Mann, Sainsbury’s director of customer insights and loyalty said: “Nectar is a powerful loyalty scheme and it’s strength is that it’s a coalition. That makes customers feel like it’s a bigger scheme.”

Speaking at the same event, Barclaycard Freedom marketing director Sarah Alspach, said: “No brand is an island and companies gain advantage from understanding how they benefit from each other’s strengths.”

Alspach adds: “Having more partners in a programme makes consumers more likely to join because they see it as more opportunity to earn points.”

But she warns that just being part of a partnership programme doesn’t make it worthwhile and brands need to understand what they’re getting out of it and how to manage it.

Among the ’big four’ retailers in the grocery sector, both Tesco and Sainsbury’s use the data they gather from loyalty programmes to inform the business strategy.

More than three quarters of Sainsbury’s sales go through on Nectar Card and the supermarket uses the partnership to do three things; gather insight through data, send targeted communications and as a loyalty scheme.

Mann says that one of the supermarket’s most successful promotions, feed your family for a fiver, came out of insights gathered from its Nectar cardholder.

“Nectar provides data and insight so we can talk directly to customers about what they think as well as what they do,” he says.

Tesco is the market leader in the grocery sector and has built its business on the data and insight gathered from its own branded Clubcard since its launch in 1995.

Claire Roshanzamir, Clubcard marketing manager, says: “Clubcard is by far the most rewarding loyalty scheme in the market and the number one reason for our customers preferring to shop at Tesco.”

However, she adds that it is Tesco’s 600 partner brands that give the programme “added value and flexibility” and that Tesco sustains the excitement and relevance of the programme by intruding new promotions and brand partners through the year.

The supermarket relaunched its Clubcard last year and introduced the Double Points promotion to help customers earn more reward points but has this week changed its reward programme in a move it says will ease the pressure on partners and encourage new ones to join the programme.

Currently Clubcard holders can claim a reward voucher to spend in Tesco stores or redeem it with a partner brand for four times as much. From 6 December it will be reduced to three times as much.

Tesco could face a backlash from customers feeling that they no longer get so much bang for their buck with Clubcard, but a spokesperson was quick to point out that “the vast majority are better off” than before Double Points was introduced, and in order to maintain the promotion, something had to give.

She also pointed out that this change has been made to ease the pressure on existing partners, and enable more partners to come on board so that available rewards are “more diverse and appealing to a wide range of people”.

The question has long been asked how long Morrisons and Asda can compete without the same level of insight from data.

Now that Waitrose has launched is price-matching initiative and set itself on the same course as the big four, the same question applies to it.

With Boots opening its Advantage Card up, this could potentially be a route for a grocer without an existing loyalty scheme to get on the data trail.

Stuart Evans, managing director or loyalty specialist ICLP, says: “If they are bold, confident and strategic with a brand proposition strong enough to create value through interactive customer relationships these retailers may decide to go it alone with their own new build solution.”

“For those that are less able to take on this strategic marketing task they should look to hang onto the lifelines that established programmes offer.”