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Loyalty schemes, in their current card-based format, made their debut in the UK marketplace in the early 90s. Although they took a long time to be widely adopted, perhaps it is not surprising to be questioning, a decade later, whether they have reached their peak. Have they reached the stage in their development when they are likely to be merged with other marketing and retailing systems, or will they simply fade away and join their precursors, the green shield stamps, in some far flung promotional graveyard?
Loyalty under attack
This year the fashionable stance on loyalty, certainly in much of the specialist media, has been to knock it, display cynicism about its effectiveness and longevity - and to rush headlong into anything prefixed by an ?e'. The case for loyalty has not been helped with some high profile retailers continuing to display reluctance to implement a scheme, whilst others have adopted and then exited - most notably Safeway, M&S, Asda, Esso and Morrisons.
As consumers open their purses to an array of loyalty cards, they too must be questioning the concept of loyalty, knowing that they hold cards from all the major stores in a single sector.
So, has loyalty had its day? Was it simply a passing fad or is it here to stay?
Assessing the facts
Putting aside the passions which discussions on loyalty schemes often seem to engender, it is worth taking a look at some facts and figures about the penetration of loyalty cards in the UK.
70 million cards have been issued. This compares with 120 million bank cards. Of the 70 million, 45 million are active in that they are used at least one a month. Three quarters of the adult population of the country has a card and more than 50% have more than one card. In fact, a complete new industry has emerged to deal with the loyalty sector in terms of hardware, software and card manufacturers, not to mention the specialist marketing and service agencies which support it. IT spend for loyalty is ?1 billion a year.
The figures are good and they are bad, dependent upon which side of the loyalty fence you sit. For those committed to loyalty, the size of the investment to date suggests that it will not be ditched overnight. For the cynics and the less than enthusiastic, the financial costs can be seen as an effective barrier to entry and a good reason to continue to just ?look into it'.
Turning to the consumers, what do they really think about loyalty schemes? A recent survey indicated that 70% believe that the purpose of a loyalty scheme is to make more money from each customer, rather than offering a better service. Since 50% of those with a card have more than one, customer retention purely by card ownership is clearly not guaranteed. But does it really matter how many cards they have and, in fact, is 100% loyalty a desirable aim? Checkout Magazine in their own survey -surely the number of recent surveys on loyalty indicates something! - reveal that 90% of cardholders deny that loyalty schemes influence their spending habits. A pretty emphatic finding.
And to continue with consumer surveys for a moment, Verdict's research confirmed (perhaps not too surprisingly) that consumers rate convenience and costs as the two most important factors in store selection. Marketing Week's survey brought in an additional dimension by indicating that 54% of consumers are more likely to become disloyal because of rude and unhelpful staff. The old adage of having the right product in the right place at the right time and at the right price clearly holds true, but service is also a clear factor in the consumer's decision on where to shop (and where to continue to shop).
What is the loyalty offer?
Where does this leave loyalty? Do retailers simply need to go back to the basics and forget about implementing high technology solutions? If consumers really are so little influenced by holding a loyalty card, why do so many have them? Do their views even count?
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