Loyalty Schemes: Value or Experience?

Loyalty schemes are changing. In April Tesco announced it is to end Clubcard Boost. The announcement is the latest in a series of changes to the UK’s major loyalty schemes after Nectar halved the value of points collected by customers at Sainsbury’s and Morrison’s dropped its Price Match scheme.

The loyalty proposition for customers continues to evolve as more retailers launch new schemes and existing loyalty schemes adapt to the changing retail market. Some retailers are looking to drive value to all customers by scaling back the rewards offered to cardholders to enable on-going lower pricing for all. Others are developing loyalty schemes focused on improving customer experience and engagement as we have seen at Waitrose and M&S.

The myWaitrose card falls into the customer experience enhancing category. Free hot drinks, free newspapers and self-selected items receiving a 20% discount. Marks & Spencer’s new loyalty scheme Sparks, launched last year, falls into the customer engagement category. Sparks uses no monetary value exchange, instead returning offers for amount of spend and frequency of visits as well as encouraging customer engagement behaviour such as review writing and participation in M&S’s Shopping Scheme.

Retailers are becoming more aware that customer loyalty cannot be bought but needs to be won by delivering fantastic experiences, convenience and value.

The challenge is to deliver this within the context of the explosion of digital shopping, mobile and eCommerce to a more connected, informed and empowered shopper. The modern shopper expects retailers to know what they want to make the shopping experience as hassle free and convenient as possible.

A recent Retail Week Personalisation Report revealed that 92% of retail executives say consumers are increasingly demanding a personalised approach to shopping online and instore. Also, 36% noted that their efforts around personalisation have driven 2-5x ROI or greater. However, 31% of retail executives have said that they do not have the data needed to create this personalised approach. The same old battle continues; retailers need to gain joined up visibility of their shoppers’ behaviour in store and online.

It is therefore essential that a retailer’s reward scheme attracts customers and that the scheme benefits continue to drive customers to use their loyalty mechanism each time they transact in order to capture the data needed to deliver on personalisataion and enable increased convenience for shoppers.

The question is, will returning value to customers or a good shopping experience be the key to this and are the two mutually exclusive?

The loyalty battle winners will be the retailers who manage to maintain scheme simplicity and to run a customer experience and engagement enhancing programme, delivering value at the same time as personalisation and convenience across all channels.