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Customers and Loyalty

Posted by    |   May 18th, 2015   |   No Comments

What’s So Great About Supermarket Loyalty Cards?

I recently read a very interesting article on supermarket loyalty cards (here’s the article). It’s a very interesting read, so I recommend you give it a glance over at least, but here’s the salient point: supermarket loyalty cards don’t work for supermarkets, despite the fact that supermarkets seem determined to run and even expand them. Some of the main points covered were fairly straightforward and common sense – most people don’t own just one loyalty card, preferring instead to carry a walletful of options, making loyalty card shoppers the most disloyal of customers when the numbers are finally crunched (according to the above article, the average loyalty card shopper shops in 3.6 outlets for consumables, compared to 2.9 for non-loyalty card holders). The article also makes the point that compared to special offer leaflets and traditional deal promotion of that kind, loyalty card schemes are expensive to run (administration, IT, analytics, and most of the data they collect is collectable from transaction records anyway), the deals they offer are exclusive – you have to have a loyalty card to avail of them, whereas traditional methods allow you to attract a broader range of potential new customers – and finally, despite the investment in loyalty card deals, major retailers like Tesco have still found their business being eroded by discount retailers like Aldi. All in all, the article paints quite a bleak picture of the overall effectiveness of loyalty card schemes.

Having read the article, we decided to do some of our own research, to try and understand better from the customer’s point of view exactly what part loyalty card schemes play in influencing customer decisions and behaviour. Here’s what we discovered. The first question we asked was the most obvious and the most straightforward: Does having a loyalty card influence where you shop? The response was overwhelmingly positive: for 72.4% of our respondents, the answer was a definite yes. This means that almost 3/4s of the people we surveyed did decide where to conduct their supermarket shopping on the basis of membership in a loyalty card scheme. We also asked our respondents if membership of a loyalty card scheme (the availability of bonus points, specific loyalty card promotions, etc) influenced their specific purchasing decisions within the store, and once again the answer was (perhaps surprisingly) that it did – 68.9% said that it had. This would seem to put a lie to the findings of the initial article, which found that loyalty card schemes had such little effect on customer loyalty.

However, when we asked what factors affect a customer’s decision to enter a loyalty card scheme, by far and away the most important factor people cited was value for money (79.1%). No other factor came close, really, with brand loyalty accounting for just 6.9% and data security concerns just 3.4%. One shopper mentioned the proximity of the supermarket to their home, but the majority of those who wrote in a specific “other” factor mentioned things like “It’s just a little bit back. I wish Lidl did it!”, “What return I get from shopping there” and simply “rewards”. We can also say that when we asked people what store ran the best loyalty card programme – Tesco came out on top (41.3%), with the nearest runner up being Boots (24.1%) – only one of our respondents seemed unable to compare and contrast. That respondent said “As I have no experience of the others, it is not possible to give the “best””; all other respondents were able to compare and contrast quite happily, suggesting that the idea of “loyalty” doesn’t feature strongly in shoppers’ thinking about such programmes. Rather, they tend to shop around, factoring the loyalty bonuses and such like into their calculations of supermarket value. Regardless of how customers may initially say they feel about loyalty card programmes, it seems their behaviours tell a slightly different story, and a story much more in keeping with the findings in the original article.
There was one other contribution of note to survey. One of the respondents, when asked about the best loyalty card schemes out there, shared this anecdote:
“Years ago I had a Dunnes loyalty card, I used it when I shopped. After shopping in there and using the so called loyalty card every time I shopped they sent me a voucher for €1.00 ! I was so annoyed I said I would never shop in Dunnes again. Which I havent and I would never bother with a loyalty card again. It had a negative impact on me!”
This is something for stores to consider when setting up their loyalty card schemes – these schemes should be ways to extend extra value to your customers, but they can end up turning around and having an opposite effect. Ultimately, any store currently running a loyalty card programme should certainly step back and consider the costs of such programmes, and whether the benefits might not be achievable some other (less costly) way.

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