Customers feel worn out, overwhelmed, annoyed and suspicious of loyalty schemes. But the fundamental business benefits endure and industry is ripe for innovation of the ilk of John Lewis’ Kitchen Drawer, says Marie Anderson, loyalty expert at Maran Consulting.
Loyalty cards are everywhere. I can’t go shopping without someone at the till asking me to “sign up for our new loyalty card”. Working in marketing, I never say no, so I have fifteen of the things now, not to mention a raft of the inevitable coffee stamp cards. I’m going to need a new wallet soon.
When Tesco Clubcard and Boots Advantage Card launched in the 1990s, they were ground-breaking. No more Green Shield, no stickers required. Nice plastic cards, hand them over at the till, wait a bit until you amass enough points and bingo: extra £ to spend in store. Nectar changed the game again with its coalition – more chances to earn, more places to spend. Loyalty schemes offered something extra to customers, a thank you for shopping, with discounts on things you actually wanted to buy, and £ vouchers to spend in store to reward your loyalty. It was innovative and felt modern. Customers felt appreciated by businesses, and shopped accordingly.
Speed forward to 2015, where every other retailer has a loyalty scheme. Each has its own card to be carried, each has its own way of awarding points and each has its own peculiarities: statements vs coupons at till, instant redemption vs quarterly redemption, price match vs points earned vs free coffee and newspapers… the list is seemingly endless.
So how do customers feel? Worn out. Overwhelmed. Annoyed. Suspicious. Distrustful. I’d wager these aren’t the kind of emotions loyalty marketers want to inspire in their customers.
Retailers aren’t feeling much happier either. Schemes are expensive to run, the level of reward is often too high for post-financial-crash margins, and shoppers are becoming less loyal. Only this week, we have seen Morrisons scrap the Match element of its Match & More scheme (leading some wags to rebrand it the “Less” scheme). Tesco and Sainsbury’s have also made changes to their schemes in the past few years, and John Lewis scaled back on free tea and cake for its members.
Commentators have seen this as the “end of the loyalty card”, but this is premature. The fundamental business benefits of loyalty schemes shine even brighter these days – a way to retain customers in an era of high competition. Without customer data, you are flying blind. It is much harder to understand what works, if you’re a data “have not” rather than a data “have”, as Justin King used to put it at Sainsbury’s.
However, it is a market in maturity, long overdue for innovation, with schemes which must offer more than just transactional benefits to customers. Benefits must be easy to understand, easy to remember and show customers that businesses understand what they want and need. Loyalty schemes need to work with customers’ lives in 2015, not 1994. Simplicity is essential for customers – they don’t want to work hard to get the best experience. They feel loyalty should be effortlessly rewarded. Customers don’t care if your systems don’t talk to each other, they expect you to fix it and deliver the seamless experience they require.
Cards and paper vouchers are annoying and easy to lose, so put them on smartphones – just as Apple Pay is doing for payment cards. (Loyalive, the new start-up which aims to consolidate customers’ loyalty cards and points into one handy app has also picked up on this trend.) Customers want to pick their own offers – so make like Waitrose and allow them to pick their own.
Take, for example, John Lewis’s new “Kitchen Drawer” for My John Lewis members. Each time a customer makes a purchase and scans their card in store, their receipt is automatically uploaded to their John Lewis online account and held for six years. Brilliant. Gets rid of receipts (the bane of my life), connects the online and instore experience very neatly, helping customers to see that John Lewis is trying to make their lives a little easier. One less thing to worry about. John Lewis also gave members a one hour head-start on their Summer Clearance. Another good idea. Costs very little, but sends members the clear message they are important to the Partnership.
With this in mind, I was surprised to see Morrison’s handle the changes to their loyalty scheme so clumsily, announcing a loss of benefits without replacing it with something more inspiring. I’m very happy they have kept the scheme, of course. However, it feels like a missed opportunity to create goodwill and excitement with a new proposition, and the announcement seems to have provoked annoyance and frustration in shoppers, if Twitter is anything to go by.
The real winners with loyalty schemes in future will be the retailers/service providers who keep it simple and make it meaningful, who put themselves in their customers’ shoes and make their customers’ lives easier.
Marie Anderson is a retail, customer insight and loyalty expert, and Director at maran www.maran.consulting
This article was first published in Marketing Magazine on 9th October 2015.