Traditional schemes may be under strain but loyalty programmes can still give retailers an advantage.
Traditional loyalty is under strain. We live in a retail world of price comparison sites, specialist discount forums and showrooming.
Digitisation has meant that you can even shop at one retailer while in the store of its biggest rival. The recession has had its impact too: Aimia’s Loyalty Lens research, which tracks consumer shopping habits, found that 61% of people altered their shopping habits as a result of the recession, turning to new ‘savvy’ shopping behaviour characterised by rewards hunting and discount shopping.
This challenges the very idea of retail ‘loyalty’. Many question where the concept stands at a time when customers are continuously shopping around for the best deal.
But we need to take a step back. There’s a place for discounters in the market.
If we look at their position across Europe, the UK is actually just catching up.
And while these discounters highlight the importance of price, we know that customers are interested in a lot more than price alone.
Therefore in a world of increased customer promiscuity, the pursuit of loyalty becomes more important, not less.
Retailers need to work harder to get their customers to keep coming back. A loyalty programme helps do just that, by building relationships through customer understanding, relevant communication and by saying ‘thank you’.
The good news is that technology helps loyalty programmes do this increasingly effectively.
Take for example Nectar, which is owned and operated by our company, Aimia.
When we started 10 years ago we took a standardised approach aimed at rewarding base spend.
But now retailers have the ability to know their customers better than ever and to communicate with them in a targeted way. So we shouldn’t just target them with generic offers.
This is why the way Nectar points are being awarded by Sainsbury’s is changing.
Through Nectar, Sainsbury’s rewards in two ways: base points, which are linked to total spend, and bonus points, which are linked to promotions, events and personalisation.
Sainsbury’s will be issuing fewer base points and more bonus points, the kind of points which are more tailored and therefore more engaging. This is the new way to engender loyalty.
This is part of an important evolution of loyalty programmes, shifting emphasis from base reward on spend to reward for active engagement.
As a result, customers will receive more personalised and relevant rewards for their loyalty, giving them a better experience.
For retailers, this shift will pave the way for more targeted marketing campaigns, and ultimately deliver a better return on investment.
As a nation we love loyalty and loyalty cards. Aimia’s most recent Loyalty Lens found that 88% of UK shoppers own a loyalty card.
And now, more than ever, we need to give our customers a reason to stay loyal.
- Jan-Pieter Lips is president of EMEA at Aimia, owner and operator of the Nectar scheme