Digital Marketing & eCommerce Innovation Blog

Digital Marketing & eCommerce Innovation Blog

The Future of Loyalty Cards In A Digital World

Don’t leave home without it. It’s the mantra commonly associated with credit cards, but it used to be equally true of loyalty cards as well. A few years ago, making sure you took your loyalty card with you when visiting your preferred supermarket or store was as critical a part of the pre-shop preparations as writing a list and organising the vouchers; but recently the influence of loyalty cards has begun to wane. What was once an indispensable way to add extra value to your weekly shop has now become a burden, an additional nuisance to remember that doesn’t really add anything. So where’s it all gone wrong?

What’s Happened?

Simple evolution. The modern day customer loyalty scheme is over 20 years old, having been introduced in earnest by Tesco’s Clubcard in 1995. It was always going to evolve – it always needed to evolve – but nobody’s really sure what it needs to evolve in to. The core idea, of course, remains the same. Speaking recently, former Tesco boss Sir Terry Leahy said that the central, and unchanging, value proposition for the retailer is to learn about their customers.

“On the basis of that knowledge they change their business and respond in a useful and relevant way with a better product, a better service, or some information that is useful for the consumer – that’s the basis for beginning to create a relationship of trust that then leads to loyalty and that’s the way to do it.” He also underlined that “a loyal customer is the most valuable asset a business can have” because “you don’t have to spend a fortune recruiting them, they stay, they are not that expensive to look after.”

However, with so many brands running loyalty schemes, the marketplace has become flooded. What marks Tesco’s Clubcard apart from Sainsbury’s Nectar Card? What makes Boots’ scheme stand out from Superdrug’s? Very little, in truth. The lack of differentiation affects the loyalty scheme concept as a whole. After all, if one loyalty scheme seems exactly the same as the next, they’re all cancelling each other out and the customer forgoes loyalty in favour of opting for whichever retailer is closest, most convenient, easiest, or cheapest.

Brands therefore need to innovate and evolve the loyalty scheme to make it more relevant for today’s tech-savvy customers. But how?

Personalisation

The first port of call is personalisation. As Leahy points out, loyalty schemes are based on the concept of creating a relationship and the best way to do that in the digital age is to personalise your messaging. That means more than simply addressing the customer with their name and a casual greeting; it’s about tailoring what you’re offering them to meet their needs and interests. This was underlined by recent research from iVend Retail, which suggested that 33% of consumers are disappointed by the lack of personalisation in loyalty schemes.

This is more significant than it seems and has a tangible knock-on effect. If customers are feeling disconnected from the programmes they’re a part of, they fail to be engaged by them and therefore fail to use their points or vouchers (48% of shoppers) or forget to take their cards with them altogether (15% of shoppers). According to iVend Retail’s Richard Kolodynski, there’s a simple solution and it’s all based on understanding the customer, the technology they’re using, and their need to feel a sense of relevance.

“Today’s consumers don’t differentiate between channels… And this is just the same when it comes to using loyalty schemes,” he said. “Nurturing a lifelong relationship means getting to know someone, so retailers need to make a concerted effort to tailor their loyalty interactions in the way that’s most relevant to their most valuable customers.”

And it seems some retailers are starting to learn the lesson. In October 2015, Marks and Spencers announced their new loyalty scheme Sparks, which is designed to reward regular customers with exclusive event invites and personalised offers. As M&S’s executive director of marketing, Patrick Bousquet-Chavanne, told Marketing Week it’s all about creating a “new relationship model”. “People are tired of receiving untargeted, irrelevant price offers and we wanted to address this in a ground-breaking way with Sparks,” he insisted. “Loyalty is now predictably all about transactional gains and this isn’t that at all, we want Sparks to be seen as the stage to build a new relationship with our brand.”

Ease

Part of the drive for personalisation comes from ease of use – it’s not just about giving customers what they want, it’s about giving it where, when, and how they want it. Mobile is the most obvious space for the next evolution of the loyalty scheme, and research has suggested that’s exactly where customers are demanding it moves to. A report by Apadmi found that 80% of people would be happy to collect loyalty points on their phone, with a further 71% stating that they think retailers could offer superior mobile app solutions for their customers.

Most significantly, the 80% who said they want to collect points on their phone also said that they want to be able to do so while in the store. It’s ease of use, again. By delivering points to and allowing customers to view them through their phones, the process of accruing and understanding these points is made much easier. Customers can make smarter choices that can be influenced directly by the number of points they have available, or need to gain to unlock a reward, and can make their shopping decisions based on that. They therefore feel more rewarded for their custom and are more likely to stay loyal.

A move to digital or mobile-based loyalty schemes would also help solve the problem of the 20% of people who forget to bring their loyalty card with them to store, as well as tap into the 63% of customers who say they’re more likely to remember their phone than their loyalty card when embarking upon a shopping trip. The equation is simple then: ease of use equals more frequent use. And more frequent use means the loyalty scheme can once again be used to build that all-important one-to-one relationship with shoppers. So why is technology not used more often to create engaging, useful, and most importantly used loyalty schemes?

Technology

Fear is the biggest blocker. Digital loyalty schemes are a relatively unknown quantity, and with physical loyalty schemes having worked so well for so long, there’s understandable concern about moving on. That’s not to say there haven’t been some low-level efforts made though. Early in 2015, Marks and Spencers trialled a digital loyalty app called M&S Barista in cafes across Greater London with an eye on replacing the paper stamp card prevalent in most coffee shops. It was a step in the right direction, but didn’t quite gain the necessary traction to make a truly game-changing impact.

Taking things to the next level is Asos, which has been experimenting with a loyalty scheme based in part around social engagement. Under the scheme, points will be offered to customers when they use branded hashtags, interact with content, or post on social channels. Further underlining the importance of mobile and personalisation to the future of the company’s loyalty offering, Asos Chief Executive Nick Beighton explained: “We have to be awesome on mobile. We have to make the experience more personal to compete with all the other apps and content so that it feels like a best friend recommending you try something new.”

Already finding joy on digital is John Lewis, which inspired 20,000 users to link their physical membership to the loyalty scheme’s app within two weeks of the digital element launching. Once again, ease of use was cited by John Lewis as the key driver to success. “A lot of feedback we get from members is around the hassle of remembering a plastic card,” Head of Customer Marketing Chris Bates told Marketing Week. “Loyalty is heading that [towards digital] but it will take time to become mass market… digital is a win-win all round, it costs less to produce and its easier for the customer because there’s one less thing to carry round. Everyone carries their phone around.”

Conclusion

If retailers want their loyalty scheme to achieve the same ‘don’t leave home without it’ ubiquity as credit cards have, then Bates’ point about tapping into an arena that everyone carries around is critical to the platform’s future. Loyalty schemes have been a fixture for the UK’s biggest retailers for a number of years now, but too few of them have found a way to evolve it for the 21st Century. Digital is that way, but retailers need to find the confidence, relevance, and user journey to take advantage. Loyalty works both ways, and if retailers aren’t showing their loyalty to their customers’ needs and preferences, why should customers show any loyalty back?

Over to you, what’s your take on loyalty cards? Let us know in the comments below or via social media and don’t forget to subscribe to the blog to get new articles straight to your inbox.

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