News & Views - Savantor

The death knell for loyalty cards?

Tuesday, 16 January 2018

Earlier this week Tesco announced immediate changes to its Clubcard loyalty scheme to 'simplify' the rewards available, which will result in many cases cutting back on its rewards, particularly for those such as restaurant chain meals and days out. Customers reacted angrily, particularly as there was no advance notice of the changes. A campaign to delay introduction of the changes was immediately started with such support that Tesco has now delayed implementation until June.

It has been reported in the media that the move by Tesco can be seen to be part of a trend to move away from loyalty programmes, as the days of shoppers using plastic loyalty cards and collecting supermarket reward vouchers are numbered and that customers' spending behaviour is no longer so influenced by their use. But is this really the case?

Go back a few years and there seemed to be loyalty cards available for all types of Retailer – supermarkets, coffee shops, airlines, retail chains. So many cards available posing the conundrum of how to carry them all and have them all available!

It could be said that generally people have now become more astute about rewards and benefits and are more likely to be driven by immediate benefit such as cheaper prices over accruing points towards rewards. For example, neither Lidl or Aldi offer a loyalty scheme, yet both are serious contenders for market share against the traditional supermarkets.

However, over the years many loyalty schemes have been integrated with other functions, for example the John Lewis Partnership credit card, the M&S Bank credit card and the Tesco Bank card. There are current accounts available where debit card usage enables customers to collect reward points which are converted to cashback on their account. The Nectar card, which can be used in multiple retailers, allows reward points to be converted into 'spend' in specific Retailers. These are just a few examples.

Other loyalty programmes are packaged in such a way that it is not immediately obvious that they are loyalty schemes – take Amazon's Prime for example, which allows free one-day delivery on Amazon purchases and various other benefits for a monthly fee.

It is also true that loyalty cards can now be loaded onto smart phone apps to be instantly available to the holder without the bother of having the physical plastic in hand.

So whilst loyalty plastic cards may have seen their heyday, loyalty schemes and programmes and the influencing of customer spending habits and behaviour are still very much a part of the retail landscape. The data collected by retailers as a result of these programmes is key to understanding their customer base. The use of loyalty is in the process of evolving, particularly with developing technologies, similar to many other aspects of life – the most obvious being mobile phones, which as smart phones can now have multiple uses including acting as a payment instrument.

Hence rather than sounding the death knell for loyalty plastics, the changes being introduced by Tesco can be seen to form part of the wider evolution of customer loyalty programmes.

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