Amanda Aldridge on retail: Retailers must play their loyalty cards right

Just the other week, I lost my purse. As anyone who has ever been through this experience will tell you, once the initial anger has subsided, the next task you have to face up to is cancelling all those credit and store cards. It's a tiresome task but it did at least make me realise just how many store cards I was actually signed up to.

Once I had finished ringing around all the relevant service providers, I had cancelled seven store loyalty cards. Of those seven cards, there were only two or three I used regularly. And of those cards, only one actually gave me something worthwhile or valuable in return. Even then, the £120 of vouchers that had been delivered to me was the result of an inordinately large (and decidedly one-off) period of expenditure on my behalf. All of which raised one question: just why was I carrying so many of these cards around in the first place?

After further consideration, I realised that, with the exception of the £120 of vouchers, I couldn't remember the last time I'd redeemed any sort of loyalty points, Air Miles or any of the other rewards these schemes offer. Assuming I wasn't alone in this, my initial reaction was that many of these schemes just don't work.

I soon felt moved to qualify this assumption, however: they don't always work for the consumer. I can't help feeling that retailers can get a huge amount of valuable insight out of such schemes - in terms of personal data, profiles and buying habits - but the payback for the customer isn't in line with this.

It made me wonder whether many of these schemes are more obsessed with simply signing up new people (and new data) to their schemes than actually rewarding loyalty. There's a TV ad at the moment that highlights exactly this point; that new members are the ones given the best offers, while the established ones are cast into the ether. This was brought to mind recently when a friend told me how her father cancelled his latest credit card in disgust after the 1% cashback offer which he had signed up for was reduced to 0.5% within weeks.

There's no doubt that loyalty schemes - for the retailers that throw themselves into these things - are big business. No one quite knows how much they cost because retailers are very cagey over the cost/benefit ratio. In fact, they aren't averse to over-playing the returns to spook their competitors into more drastic counter-actions which then eat into their profit margins.

I do wonder at what point the public will tire of such schemes if the rewards hardly ever seem worth claiming. The last big scheme to launch was Nectar, which succeeded in signing up a huge number of subscribers.

Was that down to the impressive array of retailers tied into the scheme as opposed to the actual rewards?

At some point, the UK public may say enough is enough, meaning retailers need to be planning today for how they can be more creative and original in the rewards they offer. The fact that I can dispense with six of my seven original store cards tells you everything you need to know about how valuable they are to me.

But perhaps more importantly, I hope that retailers keep hold of the fact that no amount of loyalty schemes and bonuses can take the place of good old-fashioned customer service. Surely that remains the biggest weapon in the retailer's armoury when it comes to retaining customers?

If you want customers to remain loyal, ensure they can get what they want, when they want it. It really is that simple.

- Amanda Aldridge is head of retail at KPMG

30 SECONDS ON ... LOYALTY CARDS

- About 85% of UK households have at least one loyalty card, reports TNS.

- After the introduction of Tesco's Clubcard in 1995, users of the card were spending 28% more at Tesco and 16% less at Sainsbury's.

- Nectar was launched in September 2002 by ex-Air Miles chief Keith Miles. Sainsbury's, BP, Debenhams and Barclaycard were among the initial companies behind the scheme, which had signed up half of all UK households by February last year.

- Boots Advantage Card is the UK's most popular card, with 15m households having one in their wallet or purse.

- The Co-op is the first UK retailer to trial a system that involves customers paying for groceries and accruing loyalty points by having their fingertips scanned at the till. It will remove the need for cards. The fingertip reader will link directly with the customer database.

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