The demise of shopping loyalty schemes?

There was an interesting article in the business section of the bbc website last week suggesting that shoppers are becoming less loyal and the potential demise in loyalty card schemes as a result.

In my opinion this demise is certainly not imminent. The true value of the loyalty scheme is in the data collected or more rather the subsequent analysis of it. Understanding consumer behaviour or most importantly changes in it is the key. The ultimate goal is in driving profitability. Obviously retaining customers is essential to this so the consumer wins too being rewarded with deals, some of which are more applicable to them than others. The applicability of offers is wholly dependent on the quality of the analytics employed so driving innovation in analytics is essential.

There’s a simple example of the power of analytics driving the need for more analytical innovation in the article itself: “the death of the weekly shop”. For years analysts have seen an increase in number of shops per individual with a lowering of spend per shop. Analysing basket content suggest more shopping on a meal by meal basis. This tracking of changing customer behaviour is only possible if you can consistently identify consumers through time, i.e through loyalty card data.

Major supermarkets reacted to this years ago by opening convenience style stores. These stores can only offer a more limited range of products. What products to stock where? Hmm, I know I’ll analyse my loyalty card data and devise a cunning product mix. So it goes on. Better analytics drives better insight drives the need for more analytical innovation.

Loyalty card schemes must remain until retailers acquire a better way to understand their customer’s behaviour or consumers stop using them neither of which will happen any time soon.

The promiscuous customer is not new either. Consumers have always been looking to exploit deals. Taking a completely subjective sample of one I clearly remember my mum visiting all the butchers on our local high street before sending me back to the one with the best priced sausages. Is this behaviour really any different from the guy getting his free coffee from Waitrose? It’s just the mechanism for obtaining the offer that’s changed : loyalty card versus moaning child. The consumer will evolve to take advantage of any new mechanisms that present themselves. So how has my sample of one’s behaviour changed over time? Well, my mum still shops at multiple retailers and has a loyalty card or two although she has not embraced Groupon, yet.

Dr. Sharon Kirkham
Director of KACE

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