Rising consumer expectations up UK loyalty programme game
• Report’s comparison of approaches by two supermarket chains provides food for thought
After writing quite extensively about rewards programmes in my day job at the Financial Mail, I was pleased to receive a report on British loyalty programmes. Of particular interest to us was that it compared the approach of two supermarket chains.
One is Sainsbury’s, which has a lot in common with Pick n Pay, including continued involvement by the founding family. It has been a successful user of a loyalty programme called Nectar.
It also looked at Aldi, a discount retailer that prefers to reward customers through everyday low prices. There isn’t anything quite like Aldi in SA, but imagine a Shoprite Usave store run by Germans.
Loyalty programmes are already well-entrenched in the UK. Even before the term was coined, in the 1960s and ’70s Tesco, a far more downmarket chain than it is now, offered Green Shield Stamps. Stamps were given out at checkouts and put in a book until there were enough stamps to buy, say, a lawnmower. There was a hiatus after Tesco stopped giving these stamps in 1977, but it was not long before airline loyalty programmes became ubiquitous.
However, in the UK it is becoming less acceptable to offer a mediocre loyalty programme. In the YouGov survey called “What the British think of loyalty programmes”, three factors are making these programmes more sophisticated.
One is the increase in the level of consumer expectations, another is the improvement in the technical capabilities of the programmes and, thirdly, the fact that senior marketers are taking ownership of these programmes away from the relatively junior ponytailed geeks who might have run them before. Loyalty programmes are now considered an integral part of the client value strategy and even of the earnings growth strategy itself.
With effective data use, businesses can learn what types of rewards their customers want and which brand partners to work with.
More than three-quarters of Britons subscribe to loyalty programmes; among women it is 85%. There is certainly some British eccentricity in some loyalty programmes — for example, Pets at Home VIP Club talks directly to pets and not to owners. I am a believer in disintermediation, but please!
What might surprise people in SA is the extent to which interest in loyalty programmes increases with age. Among the over 55s, 83% are members of programmes, but among 18 to 24s, it is just 61%.
I am sure the statistics in SA would be quite different. But then the YouGov survey does not look at wellness programmes at all. It is impossible to look at rewards programmes in SA without referring to Discovery’s Vitality, in which the rewards are skewed towards younger people as they are more engaged with fitness.
In the UK almost one in three young men under 24 does not belong to any loyalty programme, yet in this group twothirds believe loyalty programmes are a great way for brands and businesses to reward their customers. Some of the reasons for not taking up loyalty programmes are “I prefer to use cash when out shopping” and “well-known brands are usually better than shops’ own brands”. Far more than in SA, these programmes give credit for buying house brands.
Some of the best established such as Boots Advantage and M&S Sparks still don’t offer partner programmes. Yet some businesses must accept that they offer products consumers need and do not love, such as airlines, petrol stations, retail pharmacies and supermarkets. Only beauty salons can get away with offering only their own products without worrying about bringing partner businesses on board.
In the UK, the largest reward sector by far is supermarkets, with two-thirds of the population. In contrast only 4% belong to a bank’s loyalty programme, quite different to SA where only Pick n Pay and Woolworths have loyalty programmes and all four major banks have one.
Nectar, launched in 2002, was initially a coalition programme, but it is now wholly owned by Sainsbury’s, which considers it a vital tool to get to know its customers better than anyone else.
Sainsbury’s customers, who are older and more affluent than average customers, told YouGov the loyalty programme makes them spend more, recommend more as well as the very unBritish concept of making them feel more emotionally connected.
Collectors aiming for a highend reward were saving up for domestic appliances, with brands such as Russell Hobbs and Bosch. The early redeemers prefer to spend a few units on Walkers (ie Lay’s) crisps or premium brands such as Kettle Chips and Tyrrell’s. Sainsbury’s focuses mainly on its own branded products, but the report recommended more rewards around national brands.
Aldi might attract no-frills customers, but 64% of them already belong to another loyalty programme. The report shows that 42% of customers spend more at chains in which they belong to loyalty programmes.
It suggests a pilot programme in northwest England, where Aldi has about 20% of its customers, tailoring the programme to regional tastes. The area might be famous for tripe and clog dancing but the report says 61% are interested in books and TV, 60% in music and 54% in films.
Yet this would be taking the eye off the ball. Customers go to Aldi for cheap eggs, sugar and baked beans, not to accumulate points to get a JK Rowling novel or a Suits boxed set. Can you imagine Shoprite Usave setting up a loyalty programme? Its customers would see it as an unnecessary frill.
SOME BUSINESSES MUST ACCEPT THAT THEY OFFER PRODUCTS THAT CONSUMERS NEED AND DO NOT LOVE