Evolutionary Dear Consumer: The Future Face of Customer Loyalty

21st March 2019 16:38

Written by Gill Redfern, Research Director. Contact Gill here

According to recent research conducted by DJS Research, more than four in ten consumers say retailer loyalty schemes are a top three influence on where they choose to shop, with one in five stating loyalty schemes are their number one influence.

However, despite the British love affair with a purse or wallet full of loyalty cards, the future of loyalty schemes in their traditional sense is far from certain.

                                    

                                                                  

Some retailers made the bold decision last year to abandon their loyalty schemes altogether; ASOS cast off its A-List loyalty programme in in 2018 and Waitrose ‘pick your own offers’ scheme was scrapped last year after customers complained it was too confusing.

Meanwhile, the original retail loyalty scheme, Tesco Clubcard, ‘simplified’ its customer rewards last year by offering customers three times the value of their vouchers across all partners, not such great news for those who had previously enjoyed redeeming vouchers with partners at four times the face value. Having misjudged the customer mood, Tesco was forced to delay its changes to give customers the opportunity to redeem their existing vouchers at the higher rate.

In the same timeframe, Sainsburys spent £60m taking full ownership of Nectar from Canadian owners Aimia and announced a complete overhaul to reward loyalty through a system based on shopping frequency, tenure of their custom as well as spend. The revised scheme (currently being trialled on the Isle of Wight and in Wales) is intended to reward the most loyal high spending shoppers rather than those who spread their spend across a number of retailers.  Only time will tell if their strategy pays off!

Many other successful retailers don’t use traditional loyalty scheme mechanics to engage their customers, instead focusing on excellent customer experience and creating emotional connections with their customers. This approach seems particularly important for retailers with a younger customer portfolio, for whom a fun experience can be a determining factor in where they choose to shop. Notably, Amazon and ASOS take the number one and two ‘favourite retailers’ spots respectively for Gen Z shoppers’ in our DJS Research 2019 Retail survey.

Of course, pure play businesses capture vast amounts of customer data at point of purchase, so their needs for a traditional loyalty scheme are quite different to the bricks and mortar retailers. Rather than a points-based mechanism, pure play operators often favour schemes which encourage repeat visits and purchases rather than concern themselves with opportunities to capture customer data (which of course they are already collecting).  

Unlimited delivery/annual pass schemes (e.g. Amazon Prime, Hello Fresh, Boohoo Premier, Next Unlimited and ASOS Premier) emerge as a top three influencer of retailer choice for almost one in ten (9%) consumers according to our survey.

While, subscription-based services (e.g. Amazon subscribe & save) currently drives retailer choice for just 4% of consumers, but increasing to 10% amongst Gen Z shoppers.

So rather than a one-size fits all loyalty scheme, in the future retailers will perhaps need to think about tailoring their approach according to their customer profile, and their specific needs and expectations.

Moreover, the mechanics of the loyalty scheme; key fobs, cards, apps or subscription tools will of course also continue to evolve. Hopefully, this will mean in the future our purses and wallets won’t bulge too much under the weight of the endless loyalty cards we carried during the nineties and noughties! 

Sources:

DJS Research : Retail Insight Survey January 2019 (n=1002 Weighted to UK Nat Rep for Age, SEG & Region

To find out more, or to conduct your own research within the retail sector get in touch with one of our retail specialists: Gill RedfernRebecca Harris or Sharon Nichols.

 

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