Head of Strategy and Planning
Loyalty programmes have existed for years – Air Miles started in 1992 and Tesco Clubcard was created in 1995;, now 94% of UK consumers have a loyalty card. However, consumers have become tired of the current model of spending money and seeing little return.
The concept of loyalty itself is being tested in the digital world too – research has shown the old 80/20 rule (the top 20% of buyers account for 80% of sales) is more like 60/40, and often half or less (How brands grow, Byron Sharp). Consumers earning over £90,000 a year on average over 7 loyalty cards; are people loyal or simply shopping for a bargain?
As a result, brands are increasingly looking to drive engagement and advocacy through these loyalty programmes, not just encouraging another purchase.
Driving loyalty or more frequent purchase is at the heart of most businesses, and loyalty programmes that encourage regular shoppers to sign up for membership and money off future purchases have long been the de facto tactic.
But participation levels in traditional brand loyalty programmes are showing signs of decline. A recent report indicates that eight million UK shoppers are using their loyalty cards less than they did a year ago and loyalty scheme membership has fallen by 15% since 2014 (WorldPay Consumer Behaviour and Payment Report).
Consumers have grown weary of poor payback on loyalty schemes. With brands holding a wealth of data on our buying habits, fewer and fewer consumers feel loyalty schemes are worth it.
These programmes still play a big part in how consumers make purchase decisions, and most still hold a loyalty card– even if they don’t use it often or consider it good value. Perhaps it’s time to look at loyalty in a new light... 54% of UK consumers said that they felt loyal to brands that present them with small tokens of affection, such as personalised discounts, gift cards and special offers (Accenture Strategy global consumer survey, 2018)
Loyalty programmes are changing to reflect consumer engagement and advocacy, becoming less based on transaction. Walgreens are rewarding customers who eat more healthily, and Tesco has updated Clubcard to a Netflix-style subscription service called Clubcard Plus, where members get more benefits across groceries, mobile network and even banking. And cards aside, Pret staff can offer customers free food or drink as a treat.
In addition, with consumers now likely to be part of multiple loyalty schemes, easier-to-use systems are catching on such as the Caffe Nero buy nine, get one free.
Standing out from the crowd and applying the right kind of reward is vital for brands.
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