Loyalty schemes are everywhere. Now the Carlson Loyalty Monitor is here
to track their effectiveness, writes Robert Gray
There is a school of thought which says there are now so many customer
loyalty programmes in operation that they will cease to become
effective, that they will no longer offer any competitive advantage. It
is not a view that finds favour with David Perkins, executive vice-
president of marketing group Carlson.
‘I’m sick and tired of reading articles saying that if everyone has a
loyalty programme they will cancel each other out,’ says Perkins.
‘People don’t say companies that advertise cancel each other out. It’s
the quality of the programme that makes the difference.’
Carlson has more loyalty clients than any other agency in the UK -
British Airways (for which it runs Executive Club on a global basis),
SAS, BAA and Le Shuttle among them. Clearly it has a vested interest in
talking up the benefits of customer loyalty programmes.
But in June this year it commissioned some objective, quantitative
research into consumers’ perception of the 25 top loyalty schemes in the
UK. The findings - known as the Carlson Loyalty Monitor and published
here exclusively - provide perhaps the most enlightening comparisons yet
of the effectiveness of the different schemes.
Loyalty Monitor is based on omnibus interviews carried out using a
national representative sample of 1000 respondents questioned on their
awareness of and opinions on the 25 schemes used by companies in sectors
ranging from retail to credit/ charge cards, hotels and airlines.
It will come as little surprise that the loyalty programmes operated by
the large supermarket chains headed the list in terms of awareness.
Tesco’s Clubcard, launched back in February 1995 and now held by about
8.5 million consumers, topped the list with a recognition level of 66%,
followed by Sainsbury’s Reward Card (56%) and Safeway’s ABC (45%).
Next on the list were British Airways Air Miles (38%), Mobil/Argos
Premier Points (30%), Amex Membership Miles and Shell Smart Card (both
27%). At the bottom of the table was Holiday Inn Priority Club (3%),
just below Beefeater Emerald Club, Granada Card and Laura Ashley
Privilege (all 4%).
Responses to the second question posed were more of an eye-opener. Users
and non-users were asked to grade how ‘good’ they thought each loyalty
programme was on a four-point scale. Among users, BA Air Miles and Forte
Privileges tied for the top spot, followed by Beefeater Family Card,
Diners’ Club Rewards, BA Executive Club and Holiday Inn Priority.
The bottom five were Sainsbury’s Reward, Barclaycard Profiles, Do-It-All
Bonus, Texas Spend & Save and, at the foot of the table, Texaco All
Stars.
Texaco had the distinction of being the only one of the 25 schemes to be
scored more favourably by non-users than users, leading to the
conclusion that at least it has a reasonable image on which to build.
The three supermarket chains again led the way when the interviewees
were asked which of the schemes they participated in regularly. Tesco
(on 28%) had a significant advantage over Sainsbury’s (17%) and Safeway
(15%). Mobil/Argos, Homebase, Shell, Do-It-All, Barclaycard and Bhs
Choice occupied the next tier down.
It is at this point that the research starts to become really
interesting. Question four set about gauging the effect of the loyalty
programme on usage. The results (see table one) left the supermarkets in
the bottom half, with Forte, Diners’ Club and BA Executive Club holding
the top three spots.
The same three, but this time led by BA Executive Club, are the top trio
when it comes to assessing the influence of each scheme on purchasing
decisions (see table two). Beefeater Family, NatWest Air Miles, BA Air
Miles, Shell, Total Tops and Mobil/Argos all performed creditably
against this yardstick.
But for the others, all of which achieved less than 30%, the conclusion
must be that their schemes are not a major influence on the purchasing
decision for most users.
The final question (table three) sought to ascertain what would happen
if the customer loyalty schemes were terminated. Here, those schemes at
the bottom of the table are the ones which can be seen to be offering
the greatest inducements to loyalty.
Those at the top - particularly Diners’ Club and Laura Ashley, where
none of the respondents indicated they would switch should the programme
be brought to an end - had little bearing on purchasing choice.
‘One could question why retailers like Laura Ashley bother when their
loyalty scheme is not having much effect,’ says Perkins. ‘You could say
to Laura Ashley ‘you’d do better to go into somebody else’s scheme
rather than stand alone where you don’t have the critical mass’.’
Laura Ashley direct marketing manager Jillie Lyons retorts that its
Privilege Club account card is ‘extremely successful’ but concedes that
most of its users are already dyed in the wool, ‘brand loyal’ customers
who would carry on shopping at the stores regardless.
‘But I wouldn’t say they’d spend as much or as frequently without the
scheme,’ she adds.
Loyal following
Doubtless several marketers will harbour misgivings over the Loyalty
Monitor. The size of its sample, significant though it is, is still not
of an order where it would be free of all distortions and oddities.
Nevertheless, it is a statistically valid piece of research and at least
forms the basis for some sensible like-for-like comparisons. Carlson has
taken this a stage further by developing a new computer programme,
called Predator.
Using Predator, Carlson can analyse research data on different loyalty
schemes, breaking it down by geo-demographic groups. ‘It also enables us
sometimes to play God and simulate schemes,’ says Carlson head of
database marketing Roy Barker, whose team developed the software.
‘Predictive models’ can be created by changing the parameters of
existing schemes, such as the level of discounts and rewards offered,
the frequency with which they can be taken and the partners involved.
Changes may then be compared with the status quo to ascertain whether
they would be preferred by users.
‘We can actually work out a predictive model based on real people,’ says
Perkins. ‘We can, for example, look at Midland Bank versus Lloyds versus
NatWest using different parameters and model that out.’
Carlson has also been able to compare schemes in terms of the
attainability of the rewards they offer. In this way it can judge
whether high proportions of users are being put off because they believe
they will never accumulate enough points to acquire a reward they
consider worthwhile.
Barclaycard commercial director Shaun Powell agrees that getting the
balance right is vital.
‘We are very much a mass-market business with quite a wide variety of
customer types,’ he says. ‘And you’ve got to be able to offer a very
wide band of rewards.
‘With Profiles we have over 200 reward items. Some people want instant
gratification and go for small things. Others save up their points until
they can get pounds 1800 off a new Ford Fiesta through our partnership
with Ford.’
Powell believes that ‘reward scheme’ is a more appropriate name than
‘customer loyalty programme’ and commends Sainsbury’s for calling its
card Reward. He also thinks there will be a continuation of a trend
which has seen companies co-operate on schemes as a way of giving
consumers added value.
Bigger and better
‘The idea of large brands with large customer bases working together to
give their customers more is a good thing for the future. More of that
will happen. I can see a time where Barclaycard Profiles merges with
another reward currency or two to produce a sort of super currency,’
says Powell.
This process, involving as it does huge corporations, will not happen
overnight. But there are a number of good examples already.
Argos Business Solutions’ Premier Points, for instance, which allows
users to pick up points by spending at Argos, Mobil, Somerfield, Toby
Hotels, Graham’s Builders Merchants and, from January 1997, 2000 BP
service stations.
Shell, meanwhile, whose high-tech Smart card was launched in 1994 and
now has over four million users, has teamed up with Allied Domecq
Retailing, Cellnet, Ford, Next and Sainsbury’s to examine ways of
developing and expanding its already successful loyalty programme.
It is against this background that innovations like Predator and Loyalty
Monitor will become ever more important. Based on the data they throw
up, marketers will have to decide whether it would be preferable to
develop loyalty schemes of their own (and if so, how to attune them more
closely to consumers’ needs) or to join a ‘super currency’ such as Shell
Smart.
‘There’s lots of sophistication and developments in the US that haven’t
even started to come here yet,’ says Perkins.
Every indication is that they’ll soon be on their way.
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1. How does the loyalty programme affect your usage?
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Use more (%) Use the same (%) Use less (%)
Forte *55 34 11
Diners’ Club *43 57 -
BA Executive Club *42 58 -
Total Tops *31 60 9
American Express *31 69 -
Shell 30 37 13
Mobil 29 64 5
NatWest Air Miles *28 69 3
Beefeater Emerald Club *21 72 7
British Airways Air Miles *17 83 -
Source: Carlson (*Small sample)
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2. How important an influence on purchasing is the scheme?
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Main influence/Important influence (%)
BA Executive Club 74 GM Card 23
Forte 65 Barclaycard 21
Diners’ Club 47 Do-It-All 20
Beefeater Family Card 41 Homebase 19
NatWest Air Miles 41 Texas 18
British Airways Air Miles 40 Texaco 17
Shell Smart 40 Granada 17
Mobil 33 Bhs Choice 16
American Express 27 Tesco 16
Beefeater Emerald Club 25 Safeway 15
Source: Carlson
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3. What would you do if the loyalty scheme was stopped?
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Carry on using (%) Switch (%) Don’t know (%)
Diners’ Club 100 - -
Laura Ashley 100 - -
Bhs Choice 98 2 -
Safeway 96 4 -
Sainsbury’s 96 2 2
Midland 94 6 -
Homebase 94 4 2
Tesco 92 6 2
American Express 91 9 -
Barclaycard 90 9 1
Source: Carlson
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