Is 2015 the year of the decline of the traditional loyalty card?

04 January, 2016 by Gordon MacMillian | Retail

Our very own Deloitte Retail Trends for 2015 report identified that 2014 was the year of the Price War. The legacy of an economic recession has caused price, discounts and promotions to rise significantly up the agenda for most consumers, meaning we have seen the larger supermarkets such as Tesco, Asda and Sainsburys being forced into lowering prices to compete against discount grocers such as Aldi and Lidl.

The price war on discounters is dramatically reducing margins for the major players, causing them to think twice on running expensive points-based card schemes and instead look at more innovative ways to engage consumers. In 2014, we saw Sainsburys nearly halve the Nectar reward points and there are now rumours that Tesco will follow suit with a re-vamp of the Clubcard scheme.

The UK retail industry market has also become saturated with loyalty schemes. With over 10 years of the traditional points-based programmes dominating the market, over 85% of UK consumers belong to one or more loyalty programmes.  However there are signs that consumers are becoming fatigued with such schemes. Retailers are looking for a point of difference in the market with a drive towards more focus on experiential rewards like schemes such as at John Lewis or T.K.Maxx.

The digital explosion in the UK marketplace has meant that consumers are demanding more innovative, simple and personalised experiences with retailers. Our Digital Influence in UK Retail report identified that 56% of consumers that used digital devices before or during a shopping trip would shop at the retailer again; 93% higher than those consumers who had not. Consumers are now interacting across multiple touch points and channels throughout the path to purchase, from traditional ads to emails to call-centres. Customers who interact through multiple channels rather than single channel are known to shop three times more frequently and normally spend more. However, this increased interaction with brands has also increased consumer expectation for personalisation and relevancy with 23% of consumers complaining of a lack of personalisation. This has driven retailers to invest heavily in digital and analytics technologies to provide an omni-channel experience for their customers.

In conclusion, retailers are beginning to learn that membership doesn’t necessarily mean loyalty and providing a commoditised loyalty programme often leads to a purely transactional relationship with their customers, which is no longer good enough to drive true incremental value. Instead retailers are now looking at more innovative and cost-effective ways of gaining consumer loyalty. At the heart of this is still the phrase “data is king” and it is becoming increasingly more pertinent for retailers to drive personalised customer communications consistently across all touch points using better insight from the data. So the real question that retailers now face is: Is there a better way to gather customer data than a loyalty card and how do they optimise their interaction with a much more digital-driven customer?

If you want to know more about customer loyalty in Retail, get in touch with Gordon MacMillan or Will Pickard.