CUSTOMER LOYALTY: Keeping tabs on loyalty

Loyalty schemes are everywhere. Now the Carlson Loyalty Monitor is here to track their effectiveness, writes Robert Gray

Loyalty schemes are everywhere. Now the Carlson Loyalty Monitor is here

to track their effectiveness, writes Robert Gray



There is a school of thought which says there are now so many customer

loyalty programmes in operation that they will cease to become

effective, that they will no longer offer any competitive advantage. It

is not a view that finds favour with David Perkins, executive vice-

president of marketing group Carlson.



‘I’m sick and tired of reading articles saying that if everyone has a

loyalty programme they will cancel each other out,’ says Perkins.

‘People don’t say companies that advertise cancel each other out. It’s

the quality of the programme that makes the difference.’



Carlson has more loyalty clients than any other agency in the UK -

British Airways (for which it runs Executive Club on a global basis),

SAS, BAA and Le Shuttle among them. Clearly it has a vested interest in

talking up the benefits of customer loyalty programmes.



But in June this year it commissioned some objective, quantitative

research into consumers’ perception of the 25 top loyalty schemes in the

UK. The findings - known as the Carlson Loyalty Monitor and published

here exclusively - provide perhaps the most enlightening comparisons yet

of the effectiveness of the different schemes.



Loyalty Monitor is based on omnibus interviews carried out using a

national representative sample of 1000 respondents questioned on their

awareness of and opinions on the 25 schemes used by companies in sectors

ranging from retail to credit/ charge cards, hotels and airlines.



It will come as little surprise that the loyalty programmes operated by

the large supermarket chains headed the list in terms of awareness.

Tesco’s Clubcard, launched back in February 1995 and now held by about

8.5 million consumers, topped the list with a recognition level of 66%,

followed by Sainsbury’s Reward Card (56%) and Safeway’s ABC (45%).



Next on the list were British Airways Air Miles (38%), Mobil/Argos

Premier Points (30%), Amex Membership Miles and Shell Smart Card (both

27%). At the bottom of the table was Holiday Inn Priority Club (3%),

just below Beefeater Emerald Club, Granada Card and Laura Ashley

Privilege (all 4%).



Responses to the second question posed were more of an eye-opener. Users

and non-users were asked to grade how ‘good’ they thought each loyalty

programme was on a four-point scale. Among users, BA Air Miles and Forte

Privileges tied for the top spot, followed by Beefeater Family Card,

Diners’ Club Rewards, BA Executive Club and Holiday Inn Priority.



The bottom five were Sainsbury’s Reward, Barclaycard Profiles, Do-It-All

Bonus, Texas Spend & Save and, at the foot of the table, Texaco All

Stars.



Texaco had the distinction of being the only one of the 25 schemes to be

scored more favourably by non-users than users, leading to the

conclusion that at least it has a reasonable image on which to build.



The three supermarket chains again led the way when the interviewees

were asked which of the schemes they participated in regularly. Tesco

(on 28%) had a significant advantage over Sainsbury’s (17%) and Safeway

(15%). Mobil/Argos, Homebase, Shell, Do-It-All, Barclaycard and Bhs

Choice occupied the next tier down.



It is at this point that the research starts to become really

interesting. Question four set about gauging the effect of the loyalty

programme on usage. The results (see table one) left the supermarkets in

the bottom half, with Forte, Diners’ Club and BA Executive Club holding

the top three spots.



The same three, but this time led by BA Executive Club, are the top trio

when it comes to assessing the influence of each scheme on purchasing

decisions (see table two). Beefeater Family, NatWest Air Miles, BA Air

Miles, Shell, Total Tops and Mobil/Argos all performed creditably

against this yardstick.



But for the others, all of which achieved less than 30%, the conclusion

must be that their schemes are not a major influence on the purchasing

decision for most users.



The final question (table three) sought to ascertain what would happen

if the customer loyalty schemes were terminated. Here, those schemes at

the bottom of the table are the ones which can be seen to be offering

the greatest inducements to loyalty.



Those at the top - particularly Diners’ Club and Laura Ashley, where

none of the respondents indicated they would switch should the programme

be brought to an end - had little bearing on purchasing choice.



‘One could question why retailers like Laura Ashley bother when their

loyalty scheme is not having much effect,’ says Perkins. ‘You could say

to Laura Ashley ‘you’d do better to go into somebody else’s scheme

rather than stand alone where you don’t have the critical mass’.’



Laura Ashley direct marketing manager Jillie Lyons retorts that its

Privilege Club account card is ‘extremely successful’ but concedes that

most of its users are already dyed in the wool, ‘brand loyal’ customers

who would carry on shopping at the stores regardless.



‘But I wouldn’t say they’d spend as much or as frequently without the

scheme,’ she adds.



Loyal following



Doubtless several marketers will harbour misgivings over the Loyalty

Monitor. The size of its sample, significant though it is, is still not

of an order where it would be free of all distortions and oddities.



Nevertheless, it is a statistically valid piece of research and at least

forms the basis for some sensible like-for-like comparisons. Carlson has

taken this a stage further by developing a new computer programme,

called Predator.



Using Predator, Carlson can analyse research data on different loyalty

schemes, breaking it down by geo-demographic groups. ‘It also enables us

sometimes to play God and simulate schemes,’ says Carlson head of

database marketing Roy Barker, whose team developed the software.



‘Predictive models’ can be created by changing the parameters of

existing schemes, such as the level of discounts and rewards offered,

the frequency with which they can be taken and the partners involved.

Changes may then be compared with the status quo to ascertain whether

they would be preferred by users.



‘We can actually work out a predictive model based on real people,’ says

Perkins. ‘We can, for example, look at Midland Bank versus Lloyds versus

NatWest using different parameters and model that out.’



Carlson has also been able to compare schemes in terms of the

attainability of the rewards they offer. In this way it can judge

whether high proportions of users are being put off because they believe

they will never accumulate enough points to acquire a reward they

consider worthwhile.



Barclaycard commercial director Shaun Powell agrees that getting the

balance right is vital.



‘We are very much a mass-market business with quite a wide variety of

customer types,’ he says. ‘And you’ve got to be able to offer a very

wide band of rewards.



‘With Profiles we have over 200 reward items. Some people want instant

gratification and go for small things. Others save up their points until

they can get pounds 1800 off a new Ford Fiesta through our partnership

with Ford.’



Powell believes that ‘reward scheme’ is a more appropriate name than

‘customer loyalty programme’ and commends Sainsbury’s for calling its

card Reward. He also thinks there will be a continuation of a trend

which has seen companies co-operate on schemes as a way of giving

consumers added value.



Bigger and better



‘The idea of large brands with large customer bases working together to

give their customers more is a good thing for the future. More of that

will happen. I can see a time where Barclaycard Profiles merges with

another reward currency or two to produce a sort of super currency,’

says Powell.



This process, involving as it does huge corporations, will not happen

overnight. But there are a number of good examples already.



Argos Business Solutions’ Premier Points, for instance, which allows

users to pick up points by spending at Argos, Mobil, Somerfield, Toby

Hotels, Graham’s Builders Merchants and, from January 1997, 2000 BP

service stations.



Shell, meanwhile, whose high-tech Smart card was launched in 1994 and

now has over four million users, has teamed up with Allied Domecq

Retailing, Cellnet, Ford, Next and Sainsbury’s to examine ways of

developing and expanding its already successful loyalty programme.



It is against this background that innovations like Predator and Loyalty

Monitor will become ever more important. Based on the data they throw

up, marketers will have to decide whether it would be preferable to

develop loyalty schemes of their own (and if so, how to attune them more

closely to consumers’ needs) or to join a ‘super currency’ such as Shell

Smart.



‘There’s lots of sophistication and developments in the US that haven’t

even started to come here yet,’ says Perkins.



Every indication is that they’ll soon be on their way.



------------------------------------------------------------------------

1. How does the loyalty programme affect your usage?

------------------------------------------------------------------------

                            Use more (%)  Use the same (%)  Use less (%)

Forte                           *55            34                11

Diners’ Club                    *43            57                 -

BA Executive Club               *42            58                 -

Total Tops                      *31            60                 9

American Express                *31            69                 -

Shell                            30            37                13

Mobil                            29            64                 5

NatWest Air Miles               *28            69                 3

Beefeater Emerald Club          *21            72                 7

British Airways Air Miles       *17            83                 -

Source: Carlson (*Small sample)

------------------------------------------------------------------------

------------------------------------------------------------------------

2. How important an influence on purchasing is the scheme?

------------------------------------------------------------------------

                 Main influence/Important influence (%)

BA Executive Club            74            GM Card            23

Forte                        65            Barclaycard        21

Diners’ Club                 47            Do-It-All          20

Beefeater Family Card        41            Homebase           19

NatWest Air Miles            41            Texas              18

British Airways Air Miles    40            Texaco             17

Shell Smart                  40            Granada            17

Mobil                        33            Bhs Choice         16

American Express             27            Tesco              16

Beefeater Emerald Club       25            Safeway            15

Source: Carlson 

------------------------------------------------------------------------

------------------------------------------------------------------------

3. What would you do if the loyalty scheme was stopped? 

------------------------------------------------------------------------

                      Carry on using (%)    Switch (%)    Don’t know (%)

Diners’ Club               100                  -               -

Laura Ashley               100                  -               -

Bhs Choice                  98                  2               -

Safeway                     96                  4               -

Sainsbury’s                 96                  2               2

Midland                     94                  6               -

Homebase                    94                  4               2

Tesco                       92                  6               2

American Express            91                  9               -

Barclaycard                 90                  9               1

Source: Carlson

------------------------------------------------------------------------



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