Lidl should be using its loyalty trial to collect data

Lidl has launched a loyalty trial in Scotland but the discounter has been quick to distance itself from the idea it might be collecting data on those taking part. That is an error, according to loyalty experts.

Lidl’s test has seen the discounter send out 4 million “smarter shopping” cards to consumers across Scotland – either via direct mail, by giving them out at its Scottish stores or through newspapers. Starting on 20 August the campaign will run for 10 weeks.

In the first two weeks shoppers will be offered a saving of £5 when they spend £25, with the deals subsequently changing each week to offer for example discounts on specific products.

A Lidl spokeswoman is quick to point however that it isn’t a loyalty scheme as such because there’s no data collection and people don’t have to accumulate points.

“[Customers] can redeem the offer right there and then at the checkout. It’s an instant reward and there is no restriction on how many times you can use the card,” she says.

Retail analyst Steve Dresser says the card should help Lidl reduce its reliance on newspaper vouchers and could help it offer a service similar to Waitrose’s myWaitrose card – where holders are offered a lower price at the till.

“Newspaper vouchers are still used by the discounters and they seem to like them, however they do attract customers who just use the voucher not necessarily gaining data or insight so whether it’ll go beyond is interesting,” he says.

He also expects it to yield “some element of data” such as insights into what customers are buying to enable it to possible change the offers in future.

Mark Evans, general manager at loyalty specialists ICLP, believes the biggest issue is why Lidl has decided not to collect data given that all businesses, discounter or not, need to know as much about their customers as possible.

“Even for a discounter this ability to understand customer behavior and provide targeted incentives seems like a missed opportunity despite the need for an IT investment to support it. Without this the concept doesn’t seem scalable,” he adds.

Repositioning the discounters as ‘main shop’ destinations

The discounters are keen to position themselves as places where people can do their main shop, not just top-up shops on particular items. That comes as their growth slows.

While both Aldi and Lidl are both still seeing double-digit sales growth, that growth is coming down according to the latest figures from Kantar Worldpanel.

Lidl says one of the aims of the trial is to position it as somewhere people can do all their grocery shopping.

“The feedback so far has been phenomenal because it’s seen as an innovative way to reward our existing customer base as well as encourage new customers to try us as the supermarket that they can do their mainly weekly shop with,” says a spokeswoman.

Evans, however, believes the current iteration is unsustainable.

“It seems the core promotion is either trying to address the fundamental discounter challenge of how to become the ‘main basket’ versus the ‘top up’ shop or is an acquisition tactic to drive trial. Either way it seems a pretty blunt tool and as a short term test is overly generous if intending to measure potential customer response from a loyalty perspective,” he says.