Creating a loyal following

Tesco Clubcard: set to shift to online account management for 15m cardholders
Tesco Clubcard: set to shift to online account management for 15m cardholders

Retailers are scaling up their reward schemes in a push to win market share, writes Trevor Clawson.

The economy may be growing more rapidly than expected, but anyone taking a walk down a local high street can be in no doubt that Britain has yet to escape from the mindset of recession and financial crisis.

Witness the nation's supermarkets. According to figures from Nielsen, 37% of the products on sale in Britain's leading grocers were on special offer in September, the highest level of promotions on record. Consumer response to this was underwhelming: overall volumes rose by just 0.4% during the month.

Faced with flat consumption, individual retailers know they cannot simply sit back and reap the rewards of rising economic confidence. Growth will depend on their ability to increase market share and win business from rivals. The question is, how?

According to James Frost, marketing manager of Nectar, loyalty programmes are set to play an increasingly important role in helping retailers achieve their growth targets, not least because they underpin price-promotion policies. 'It's not simply about attracting customers; it's about data,' he explains. 'If you have information on customers, you can target resources and promotions much more effectively.'

Stuart Evans, general manager of loyalty scheme builder and operator ICLP, agrees, adding that the tough economy has highlighted the effectiveness of loyalty programmes. 'During the recession we saw retailers with loyalty programmes doing better than those that didn't have them, as they had a means to communicate with customers, incentivise behaviour and gather insight,' he explains. 'Now the recession is over, those companies with schemes in place know how to use them and are scaling up what they do.'

There's plenty of evidence to support his view. Marketing revealed last week that Tesco plans to move its Clubcard programme online next year in one of the most significant changes in the scheme's 15-year history. It says the change reflects shopping trends and will give its 15m members a more immediate way to manage their accounts, including the use of 'smart coupons'.

Meanwhile, Boots announced the launch of online portal, Treat Street, last month, enabling its Advantage Card members to earn loyalty points when buying goods from a range of 50 retail partners, including Asos.com, Mothercare, Play.com, Comet, Thorntons and Lastminute.com.

'Boots is continuing to innovate the Advantage Card to ensure that our Treat proposition and its status as Britain's most generous loyalty card is maintained,' says Ruth Spencer, Boots' head of loyalty.

Nectar, the loyalty programme that includes partners such as Sainsbury's, Homebase and BP, is also looking to extend its reach, having recently signed up British Gas.

Frost says it is vital that the scheme not only grows its user base, but also gives consumers the means to collect points from a widening range of high-profile partners. 'It's really a scale game,' he adds. 'As we increase the breadth of Nectar, we create a programme that is bigger than the sum of its parts.'

Sense of value

Regardless of scale, however, the challenge is to keep consumers engaged. As Sarah Buckle, client research director at market research agency Leapfrog, points out, this is the age of the post-recession 'savvy consumer' who is looking for value on price and from loyalty schemes.

'Shoppers are more discerning than ever and will weigh up the real value of loyalty schemes, so there's a pressure on retailers to make sure they add value in ways that are relevant to customers' lives,' she says. That means getting the whole proposition right, from good basic prices to rewarding loyalty schemes and targeted offers.

It is in the area of targeting that there is likely to be a focus on innovation, including more personalisation and one-to-one marketing, smart cards and online schemes. Nectar and Clubcard for instance, have both recently launched iPhone apps, designed to introduce a sense of immediacy to their loyalty programmes. 'It allows us to reach a new generation and target them with offers,' says Nectar's Frost.

Will all this investment buy customers' allegiance? According to a recent poll by YouGov Sixth Sense, the public appetite for loyalty programmes does not necessarily make them more likely to shop at a particular store. Some 93% of respondents would carry on shopping somewhere, even if a particular scheme were stopped.

The real value of loyalty programmes to retailers and brands is undoubtedly in the data they capture. Although the economy shows signs of growth, these unique insights into post-recession shopping behaviour are likely to offer retailers the biggest rewards.

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