CUSTOMER LOYALTY: Knowing me, knowing you - New by Carlson Loyalty Systems shows loyalty schemes miss the mark when it comes to changing consumer attitudes. David Sumner Smith reveals the results

Consumers’ pockets may bulge with any number of customer loyalty cards, but their perceptions of the brands that issue them remain the same, according to David Perkins, chairman of Carlson Loyalty Systems. ’Consumers play the loyalty card game, but although their behaviour is affected by loyalty schemes, our evidence suggests that their attitude toward the brands is unchanged.’

Consumers’ pockets may bulge with any number of customer loyalty

cards, but their perceptions of the brands that issue them remain the

same, according to David Perkins, chairman of Carlson Loyalty Systems.

’Consumers play the loyalty card game, but although their behaviour is

affected by loyalty schemes, our evidence suggests that their attitude

toward the brands is unchanged.’

Perkins was discussing the company’s annual Loyalty Monitor survey,

which this year has seen the familiar quantitative measures supplemented

by qualitative research gathered from eight discussion groups. The

survey will be presented in full by Perkins at the Haymarket/Miller

Freeman event ’Marketing 97’ on November 25-27.

Twenty-minute face-to-face omnibus interviews were carried out with a

representative sample of 1000 adults to measure their levels of

awareness and opinions on 33 loyalty schemes operated by companies in a

variety of sectors, ranging from DIY and supermarkets to petrol,

restaurants and airlines.

The survey revealed that 93% of adults are aware of loyalty programmes,

with more than half being familiar with Air Miles and the schemes run by

Tesco and Sainsbury’s. The greatest growth in awareness has been enjoyed

by Air Miles (thanks in part to the simplification of its name from

British Airways Airmiles) and the Sainsbury’s Reward Card, while the

points scheme associated with the Goldfish credit card has made a very

strong entry.

Supermarkets lead

Two-thirds of adults say they are actively involved in one or more

loyalty scheme. Of this group, 69% participate in one or two schemes,

23% in three or four and the remaining 8% in five or more. The

supermarket schemes are easily the most actively used, with Tesco,

Sainsbury’s and Safeway cards being used by 28%, 22% and 15%

respectively of all adults.

Homebase and Somerfield Argos lagged behind, at 11% and 8% respectively,

while Do It All scored 7%, BP/Mobil 6% and Barclaycard Profiles 6%. The

remainder of the 25 schemes in the survey have participation levels of

under 5%.

’Sleeping’ participants, who hold cards but do not participate, reveal a

variety of reasons for not using theirs. Nine per cent say ’I keep

forgetting my card’, while twice that number say ’I can’t be


Almost a quarter point to the low value of the rewards, whilst 37%

suggest that they do not purchase the product or service often enough to

make it worthwhile.

When attention is focused on active participants, however, the benefits

to the operator are far from clear-cut. Seventy per cent of users say

their usage has remained ’about the same’, with 22% saying usage has

risen and 8% suggesting it has fallen . The only sector where usage

increases exceed this average is in petrol retailing.

This is borne out by examination of data looking at whether the scheme

was the main influence or an important influence on the purchase

decision. Petrol retailers dominate the rankings of those brands with a

substantial sample size.

’The heartland of the survey is the question of what would happen if the

scheme was stopped,’ says David Perkins. ’The petrol retailers would

lose a substantial amount of business, but relatively few people would

change their supermarket.’

This does not reflect a ground swell in customer loyalty to the

supermarkets, however, but rather the fact that weekly shopping patterns

are largely determined by geographical convenience. ’Any uplift in sales

at the supermarkets is at the expense of local specialist stores, not

their competitors,’ says Perkins.

’Most shoppers know that companies attach great value to the data that

they gather on their shopping patterns, and feel that the rewards are

simply a payment for providing that information.’

But cultivating genuine customer loyalty demands that this one-way

transaction evolves into a two-way relationship.

Adding value

’Our qualitative research revealed a fundamental irony in the attitudes

of consumers,’ says Perkins. ’Customers want the brands to use the data

that they gather in a much more sophisticated way, to provide

personalised service that makes them feel valued - the classic

’corner-shop’ mentality.

’The term ’loyalty’ is often misused,’ agrees Matthew Hooper, managing

director of Interfocus. ’It is created by a multitude of factors, of

which rewards are just one. Reward schemes - which is a far more

accurate way to describe them - can provide a better profile of

customers, but they won’t increase sales.’

Anyone who thinks that reward schemes are a valid way of increasing

business is barking up the wrong tree, says Hooper. ’Reward schemes do

not make money, they cost money. The rewards are the price that you pay

for gathering customer intelligence.

’A reward scheme only generates extra business if you use that

intelligence to improve the fundamentals of product, price and


’Tesco’s success is because of improvements it has made using data

gathered with the loyalty card, not the card itself.

Reward cards seem to be a competitive imperative at the moment, which

can seldom be explained or justified.’

The benefits of improved customer knowledge are available to many

companies without the need for loyalty schemes, says Michael Page,

director of interactive services at Acxiom.

’It is a nonsense to presume that only a loyalty scheme can provide

these benefits,’ he says.

Where loyalty works

Loyalty schemes are only relevant where payments are made anonymously,

using cash, or where there is a third party involved, says Page. ’It

makes sense for airlines because it stops customer information being

held by travel agents.’

Real loyalty schemes, as opposed to reward programmes, will grow in

importance with the increased use of the Internet. ’Intelligent search

engines will allow users to scan every site on the Web to find the

product or service which meets their requirements at the best price,’

says Page.

’This could greatly increase promiscuous purchase patterns and

fundamentally change the basis of marketing.’

However, the Internet also offers fantastic opportunities. ’Online

marketing via the Web, or the telephone, can use personalised sales

messages based on individualised customer information.’

Page cites the example of Wells Fargo Bank, which will save dollars 84m

(pounds 51m) next year by offering online banking services. ’At the same

time, it is selling an average of 2.4 services to each of its online

customers, compared with the norm of 1.8 services per person. This

cross-selling has been possible by aggregating customer data and using

personalised information to build closer customer relationships.’

But the choice between simple ’points-for-prizes’ reward schemes and

sophisticated online loyalty programmes is given a new dimension by

initiatives such as Club Toyota.

In addition to roadside assistance and a regular customer magazine, this

enhances loyalty to the Japanese car brand through the provision of

services such as discounted insurance, a private coffee lounge at the

Motor Show and half-price entry to events such as Phil Collins concerts

and the Toyota World Matchplay golf championship.

Owners of Lexus luxury saloons are invited to events such as an

exclusive ball at the RAC Club, or offered a package of tickets for the

musical Beauty and the Beast plus dinner at The Ritz.

Leading the way

A total of pounds 100,000 is spent each year on events and offers for

Toyota’s ground-breaking scheme. ’It maintains loyalty by giving

customers more than just a car,’ says club manager Eileen Barton. ’Other

manufacturers are looking to follow suit.’

’Personalising the offers and the sales messages is essential,’ says

Nicholas Turner, business unit director at Acxiom, where Toyota’s

customer data is handled. ’There are different communications with

owners of saloons, sports cars, 4x4s and so on. Every customer gets

membership free of charge for the first year, but has to pay pounds

52.50 a year from then on - and half do just that.

’You don’t need better proof than that to show how customer attitudes to

brands can be influenced by personalised loyalty schemes.’ k

The Loyalty Monitor will be discussed at Marketing 97, November 25-27,


What would you do if the loyalty scheme was stopped?

                              % Carry on using         Change

                              1997        1996        on 1996

NatWest                        100          71            +29

Granada*                       100          85            +15

Sainsbury’s                     96          96              0

Homebase                        94          94              0

BT Premierline*                 93         n/a            n/a

Safeway                         93          96             -3

Bhs*                            91          98             -7

Tesco                           89          92             -3

American Express*               88          91             -3

Texas*                          85          81             +4

Source: Carlson (* small sample). Base: All adults who regularly

participate in a scheme

How does the loyalty programme affect your usage?

Brand                     Use more     Use more            %

                          (%) 1997     (%) 1996       change

Total                           33           31           +2

BP/Mobil                        30           29           +1

American Express*               30           31           -1

Shell                           25           30           -5

Do It All                       22           13           +9

Homebase                        20           17           +3

Safeway                         18           11           +7

Tesco                           18           14           +4

Texas                           12            7           +5

Bhs                             10           12           -2

Source: Carlson (* small sample). Base: All adults who regularly

participate in a scheme

How important an influence on purchasing is the scheme?

                            Main influence/     Change

                                  Important    on 1996

                              influence (%)

Beefeater - Emerald *                    65        +40

Beefeater - Family *                     38         -3

BP/Mobil                                 33          0

Diners Club*                             31        -12

Total                                    31         -7

Shell                                    29        -11

Forte*                                   26        -39

GM Card*                                 25         +2

Do It All*                               23         +3

BT Premierline*                          23      (n/a)

Tesco                                    21         +5

Texaco                                   21         +4

Homebase                                 21         +2

Sainsbury’s                              20         +7

NatWest*                                 17        -24

Safeway                                  15          0

Texas                                    12         -6

Barclaycard*                             12         -9

American Express*                        10        -21

Midland Bank*                             8         -7

Source: Carlson (* small sample). Base: All adults who regularly

participate in a scheme

Prompted awareness of loyalty schemes

                                   % of all


Tesco Clubcard                           67

Sainsbury’s Reward Card                  66

Air Miles                                56

Safeway ABC Card                         48

Goldfish                                 47

Homebase Spend & Save                    30

BP/Mobil Premier Points                  27

Do It All Bonus Card                     25

Asda Club                                22

Shell Smart Card                         21

BT Premierline                           21

Source: Carlson. Base: All Adults


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