Loyalty card? Really? Why data-slurping store cards need a reboot

An IoT marriage is the future

Shopping cart photo, via Shutterstock

Loyalty cards – the little buggers are everywhere these days. When British supermarket chain Tesco launched its Clubcard back in 1995, it was a forward-looking idea, so much so that Lord Ian MacLaurin, then Tesco chairman, suggested that he knew more about his customers after three months than he did after 30 years in the retail business.

More than 20 years later and despite advancements in technology elsewhere in retail, and with the advent of things such as CRM, the loyalty card remains very much the same.

Still, they are logging items purchased by customers, gathering data that helps retailers build a profile then target them with offers or incentives to come back to the shop or restaurant again.

But with new data streams now available to retailers, it raises the question: is the importance of the loyalty card scheme and its data diminishing?

Now, retail consultant Rare has found that of the UK's most popular loyalty programmes, just two – My Starbucks Rewards and Amazon Prime – are exceeding customers' expectations based on a loyalty benchmark it's developed. The benchmark is based on a survey of customers asking how "loyal" they felt to a brand.

Each score is based on how much they agreed about four key experience metrics: ease of use, sales experience, delivery on promise and personalisation.

M&S Sparks, Superdrug Beautycard and Boots Advantage Card were about in line with customers' expectations according to Rare, but Nando's, Tesco, John Lewis, Nectar Card, and schemes offered by Debenhams and Co-Operative were well below the benchmark. Rare asked customers to judge brands on factors including good sales experience, personalised service and ease of use.

One of the reasons for this is that retailers haven't yet moved quickly enough to make their loyalty proposition digital.

A report from mobile engagement firm Urban Airship found that the majority of consumers (62 per cent) were more likely to use their loyalty card if it was on their phone – and it's perhaps unsurprising that the Tesco Clubcard and Nectar Card both have released smartphone apps to fill this void.

But the ratings and reviews for these apps are staggeringly poor – with users of the Nectar Card complaining that they can't actually use the digital version of the card in store and instead only use it to view points and other information.

The Urban Airship report made clear that Brits are more likely to join a loyalty programme in which points and rewards are automatically updated and immediately visible on mobile wallet cards. It is perhaps why there are new players on the market, such as Yoyo and UK startup Bink, which both enable users to plug in their payment cards and loyalty cards into their apps, so that payments are matched with points without needing to present a loyalty card at point of sale. Bink counts the likes of Topman, Virgin Atlantic, Avios and Morrisons as customers.

This type of consolidation is backed by Shiva Kumar, CIO of online mattress retailer Eve. "People shouldn't have to carry a Costa, Starbucks and Avios card – they need some consolidation to carry less, and then the rewards could be to earn points and use them anywhere you'd like," Kumar says, adding that there could then only be two or three major loyalty programmes which compete against one another – although it must be noted that there are some programmes like Nectar, which are used for multiple retailers already.

Another idea, from Loyalty Pro, has been to team up independent shops within specific areas and put them under a loyalty scheme with both cards and digital wallets available.

Twenty businesses in Hoole, Cheshire, have signed up to the Love Hoole Loyalty Card scheme, and Rob Meakin – technical director of Loyalty Pro – told El Reg that the shops are more likely to be able to compete against the major retailers and e-commerce firms with this kind of data at hand.

The shops can only look at and analyse transactional data of their own stores because some shops compete against one another, but a major difference, Meakin believes, is that the scheme works in realtime.

"Whenever a transaction is recorded it goes back to our database and returns information based on the customer," he says. "This enables them to address a customer by name, and enable them to put messages onto certain customers profiles immediately."

These messages could be to alert a customer that they've left their umbrella in the shop – or could be a note for the retailer to remember to upsell an item that wasn't there the last time the consumer was at the store.

"If they were at the bakers and they wanted a chocolate éclair, but the bakers didn't have it in, they could make an agreement with the consumer that they will have it in stock next time, and can market this through both email and in person when they have those éclairs in," Meakin says.

These little differences are perhaps why Starbucks is faring better than other companies – as it has added extra features and rewards in its scheme, many of which are personalised. Love Hoole is aiming to do the same.

Integrating other data touch points – such as those from the Internet of Things (IoT) and a web browser – with the loyalty scheme data could prove to be even more beneficial, especially if this is done in realtime.

But as Andrew Fowkes, head of retail centre of excellence at SAS UK & Ireland, says retailers have to ensure they distinguish between "creepy" and "cool" to make sure customers aren't turned off. He adds that consumers are accepting of services and experiences where data is used when they get value from it because it makes them feel appreciated.

It's an emotional connection that retailers will be hoping loyalty cards can begin to help offer along with personalised interactions, says Jason Foster, the former head of big data, analytics and marketing technologies at Marks & Spencer.

"[Loyalty schemes] need to get back to traditional retailing where the shopkeeper knew every customer that walked in the door, what they like, don't like, who they live near and members of their family," he said. "This used to enable traders to give a highly personal shopping experience to every customer."

It is this element of personalisation which retailers have been talking about for years, but haven't quite got up to speed because of the costs and complications of combining all of these data points.

Generation game

Another big consideration for retailers is that a huge part of their customer base is set to be "Generation Z" – who may be happier to share their data if it benefits them, but are also savvier in the way they shop.

"They're going to want you to find them, rather than them finding you," says LoyaltyPro's Meakin. One way of doing this is for loyalty schemes to be readily available in a mobile application format which can be easily installed on IoT devices.

"This format will allow retailers to be informed of when and what the customer is browsing online, informing them that now might be the right time to send that offer or additional piece of information to ensure the conversion of that sale," Fowkes suggests.

Paul Winsor, director of market development for retail and services industries at Qlik, adds that retailers should have a picture of the entire customer journey – even before a transaction. "This includes catching them online, the way they interact on the website, social media engagement, sensors on doors of stores, all of these different channels," he says.

Loyalty card providers are aware they need to innovate in this space to keep up to date. For example, Nectar has worked on a new personalisation engine, which incorporates machine learning so that as customers engage with the technology, it keeps developing so that it can better personalise content and offers to that individual.

Putting the "loyal" back into the "card"

The Rare report found that 65 per cent of loyalty scheme members said they would still shop with the brand if the loyalty programme no longer existed, meaning that for the majority of people a loyalty proposition wouldn't affect their intention to purchase. However, on the flip side, a third of people think it's a vital component of their relationship with that brand.

In order to grow the proportion of people who find it a vital component, retailers need to look at new partnerships to provide consolidated loyalty programmes. They need to integrate all of their data touch points through a customer's journey, so that they can better interact with that customer and – most crucially perhaps – this could lead to an emotional response from that customer, which could push them to become more loyal to that brand. It's time that retailers started focusing on ensuring that their customers can indeed stay loyal by modernising their approach to loyalty schemes. ®

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