| Research from online rewards community Pigsback.com and loyalty management company Reward says that, when it comes to loyalty cards, 56 per cent of consumers believe it takes too long to earn meaningful reward points and only 25 per cent think the redeemable items are worthwhile. The research, which surveyed over 2,000 Pigsback.com members, revealed that 98 per cent have a loyalty card while 65 per cent hold three cards or more, but many of these consumers are experiencing ‘loyalty card fatigue’, causing them to forget to collect and redeem loyalty points. Over a third of consumers are annoyed because they have too many cards to carry. This is reinforced by the fact that 36 per cent are forgetting to hand over cards at the counter. A further 27 per cent regularly have the wrong loyalty cards with them at the time of purchase suggesting that they don’t perceive the programmes as important enough to carry around.
“This backlash against loyalty is a real wake-up call to retailers. Forgetting to hand over loyalty cards is a symptom of two things: poor rewards meaning that many programmes simply aren’t important enough to remember and loyalty card fatigue meaning that people simply have too many to be bothered with or find them too much hassle,” says Gavin Dein, CEO at Reward, the developer of a programme for Pigsback.com that allows consumers to save with almost no effort and gives cash-back up to four pence in the pound. “The loyalty concept is extremely important, especially in a time of economic downturn, but retailers and rewards sites need to make sure that they get their programme right in order for their members to reap the benefits.”
But is this a major problem or one that can be sidestepped by managing and utilising loyalty cards/programmes strategically? These cards are, after all, about providing benefits – they go through a whole cycle to ensure that both consumers and retailers see these returns, observes Richard Mills, retail industry principal at SAP UK. “Whilst consumers feel they are still getting benefits from the cards, they will continue to carry and use them. Retailers collect consumer data from the use of the cards, which they can then segment and analyse to ensure they are focusing on the right customers with the right offers,” he says. “This means that the consumers will be getting the benefits that are right for them. Therefore, it’s not really about the card. It’s all about the data and what you do with it. SAP is still seeing retailers invest in this area and we don’t see any reason why this should change as long as a good system is in place to make the most of the data.”
It’s a view that is backed up by Merlin Stone, research director at WCL, specialists in change management and customer/stakeholder management, and author and co-author of several articles and books on transforming marketing, sales and customer service capabilities. He views the aforementioned backlash as an age old problem and says that the answer has always been the same. Put simply, if the card is worth it, people will carry it.
“But worth it is not the same thing as the effective discount you get on the individual purchase. It is wider than that – relating to the total set of benefits the customer gets from the relationship,” says Stone. “Tesco has no problem (because though the discount is small, the volume of purchases is large, and also other coupons come your way), nor does British Airways (because it is based on a service relationship – although carrying the card is less necessary than declaring one’s frequent flyer number). Nor does Homebase (partly because the effective size of their discount is larger because they have a higher gross margin on their product) or some department stores – particularly for their more loyal customers. The problem remains for customers who are least loyal but with the most potential value (and therefore whom suppliers would like to be influenced by carrying the card).”
Encouraging trends
Loyalty marketing agency, ICLP, meanwhile, stresses that the Pigsback.com/Reward survey results show some encouraging trends alongside the negative – namely that 44 per cent of consumers believe it is quick to earn meaningful reward points and 64 per cent are remembering to hand over their cards at the counter. “We shouldn’t be quick to call any negative research a loyalty backlash. From my experience, loyalty card fatigue is part of the natural customer life cycle and is to be expected with any scheme,” says Stuart Evans, general manager at ICLP.
According to Evans, the trick is to minimise this fatigue as much as possible by understanding customers and meeting their needs. A brand’s value proposition is also key to this and must reflect what the customer desires, the brand promise and the current market conditions. Furthermore retailers must ensure the communication channels are tailored to their target customer segment behaviours, so that they complement the customer’s preferences and provide maximum value from the brand. “I have also found that the most effective retail schemes are those that marry-up online and offline customer communications. In my experience, this can lead to a high level of customer engagement and interaction and by putting customer needs first the ultimate goal of increased customer value can be achieved,” he says.
Finally, the research touches upon the oft heard argument that the market is saturated. Shoppers are fed up of the frequently bewildering range of cards and programmes on offer. If that’s the case, does it spell the end of the loyalty concept? “I don’t think saturated is the right word. There are some sectors where there’s little room for new players, some where there is room. But generally, these cards work well with established players with established propositions which can get added value from a card and where the customer information produced by use of the card allows the company to target marketing better,” argues WCL’s Stone.
Privacy concerns
A backlash could also emerge over the privacy concerns that surround loyalty cards. Stone doesn’t see the ‘loyalty cards = invasion of privacy’ argument as a major problem. “Most customers know their data is collected when they use it, as this is reflected in the points they get. Only a few single issue fanatics seem uptight about this,” he says.
Vin Bange, associate at law firm Eversheds, puts forward the flipside of this argument. Data may have been collected for one purpose but over time there is the opportunity to consider using it for other purposes. “Expanding the use of data in this way carries the risk of stretching, if not piercing, the boundaries of permission and transparency under which the data was supplied. Large data bases such as those within loyalty schemes often fall under increasing pressure from marketeers to mine that data to exploit the revenue potential of such databases. Compliance with data protection legislation is crucial and should be built into the collection and use of the scheme data so that appropriate permissions and indications are adhered to with regards to such use, especially for marketing purposes,” he says.
“New and emerging technologies can also push the boundaries with regards to enhancing the use of the data. For example, the potential to use tracking technologies such as RFID chips embedded into scheme cards can significantly enhance the data available, especially within environments such as retail and transport,” he adds. “There is often a fine line between maximising the use of such technologies and the data collection becoming intrusive – again, questioning whether the boundaries of permission have been appropriately refreshed to ensure that the customer is fully aware of the data that is being collected about them and what impact it has on their privacy.”
Ultimately, retailers should not take a potential backlash lightly. But those who truly understand the purpose of their cards/programmes are well placed to stave off loyalty fatigue and, more importantly, enjoy the benefits of a comprehensive, smoothly run scheme.
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