Loyalty cards are a staple part of the UK grocery scene, providing a way for shoppers to get extra value and a way for retailers to collect valuable data about their customers.
In the last year, we've seen some notable changes in the loyalty card landscape. I wanted to take a look back at how the UK's love of loyalty came about and share some of the tactics retailers are using to keep their loyalty cards relevant.
Supermarket loyalty schemes first made their way to the UK in 1958.
Taking a lesson from similar schemes in the US, Green Shield Stamps were launched in the UK in 1958.
Tesco became their biggest client, continuing to support the venture until 1977 when they moved their investment away from stamps and towards price-cutting. This was in order to compete with upcoming discounters such as Kwik Save… Sound familiar?
Green Shield Stamps were such an important part of the culture in the 60s and 70s that they were referenced in songs by multiple artists of the time including Genesis and Jethro Tull.
They were finally withdrawn in 1991, a mere 4 years before we saw the first loyalty cards as we know them today!
Tesco Clubcard was the first nationwide supermarket loyalty card
Tesco had been investigating loyalty cards since 1993. After partering with DunnHumby they were able to launch Clubcard in February 1995.
This was shortly followed by Safeway’s ABC Card which rolled out across the UK in October 1995.
At the time, Sainsbury’s were trialling a loyalty scheme across 200 of their stores but believed these programmes to be too expensive with no guarantee of sales growth. After their own card struggled to compete with the popularity of Clubcard, Sainsbury's joined forces with BP, Debenhams and Barclaycard in 2002, to create the Nectar card.
Today, a savvy shopper is likely to have multiple loyalty cards in their wallet for everywhere from Ikea to Costa Coffee. Counting my own, I have a whopping 12 (on my phone), though I've probably only used half of them in the last 6 months.
Pundits have claimed many times that loyalty cards are dying out, but we are seeing the space become more and more complex as retailers take various steps to stay relevant...
1. Continuing to give shoppers the opportunity to 'boost their points'
Getting money off in-store or online is the main way shoppers tend to redeem their points. However the ability to boost loyalty points is becoming an increasingly important factor for retailers with 44% of loyalty card holders preferring to save their points up for a higher value reward.
Tesco encountered backlash from its customers when they announced that they were cutting some of their Clubcard rewards. Despite this, Tesco's 'Reward Partners' remain important to the company. Clubcard continues to offer shoppers up to three times the value of their points with treats including restaurant vouchers and days out. For their 25th Anniversary, Tesco also ran an in-store double points event.
Nectar, who have been owned by Sainsbury's since 2018, have also reduced the number of opportunities for customers to boost their points. However, Sainsbury's occasionally run 'Double Up' events which offer shoppers the chance to swap up to 10,000 Nectar points (worth £50) for up to £100 worth of vouchers to spend on non-food items such as electricals and TU clothing.
Retailer credit cards are another way that savvy shoppers increase their rewards. Clubcard and Nectar credit cardholders can collect even more points from spending outside of the supermarket.
Even Asda, who are noticably quiet in the loyaly card space have a credit card which offers cardholders the chance to earn cashback to spend in its stores.
2. Exclusive deals just for cardholders
One of the key benefits of Superdrug's Health & Beauty card is the extra money off certain products for cardholders only. Whilst it's not always the primary reason to sign up, it does encourage beauty shoppers to buy into promotions they might not have considered otherwise.
Sainsbury's have applied this tactic in their short-term 'Nectar Prices' campaign, giving Nectar card-holders additional discounts on 266 items across the store.
Shoppers have told us that they can only really see the value if it applies to products they buy regularly.
3. Personalised offers based on shoppers' purchasing habits and needs
The Boots Advantage Card, which has been around since 1997, is held up by shoppers as one of the best loyalty schemes due to the simplicity of collecting and spending points with a higher value. One of the additional benefits is the personalised promotions offered to its users - shoppers get an extra buzz from knowing that they can get extra points or money off, especially if those offers aren't available to everyone.
Nectar's recent revamp also gives shoppers the opportunity to choose from personalised offers. Each Friday, cardholders can be sent a range of points-boosting offers based on their shopping habits and are allowed to choose which ones they want to use in their next Sainsbury's shop.
4. Letting shoppers get rid of the plastic and download an app
With the rise of smartphones, loyalty card providers have moved into apps, taking away the cumbersome barrier of a full purse.
Maintaining their place at the forefront, Tesco launched their Clubcard app in 2014. For iPhone users, many of the retailer apps still don't offer the option to add the card to your Apple Wallet, despite this being a common request in the App Store feedback.
Apps such as Sto Card have been developed to help shoppers keep all of their loyalty cards in one place.
Boots are one retailer actively driving shoppers towards their app, offering 200 bonus points (worth £2) to users who download the app and make a purchase in store.
5. Offering exclusive clubs to key shopper groups
Shopping behaviour is likely to change dramatically for new parents. Identifying this milestone, many retailers have clubs targeted at new parents including Boots' 'Parenting Club', Morrisons' 'Baby & More' and Sainbury's 'Little Ones Club'.
Other clubs to target specific shopper groups include Morrisons' 'More for Students' and Boots' 'More Treats for Over 60s'.
6. Tesco's Clubcard Plus subscription model
October 2019 saw Tesco launch their subscription model, Clubcard Plus. Shoppers pay £7.99 a month for benefits including 10% off two in-store shops per month, 10% off Tesco brands such as F&F, and Double Data from Tesco Mobile.
From talking to shoppers day-in-day-out, my impression is that those signing up to Clubcard Plus are already fairly loyal Tesco shoppers - and they claim to be shopping about the same as before.
Some shoppers who haven't signed up have told me that they would have been more interested if benefits included free online delivery, more points on their spend, money off petrol and freebies in store or the café.
Whilst the Clubcard Plus model doesn't appear to be perfect, I applaud Tesco for trying something different - just as they did in the early 90's. I'm hopeful that we will see the current model evolve and the balance adjusted to encourage more shoppers sign up.
Given that loyalty schemes have been around for over 60 years, I don't see them dying out anytime soon.
In the same way Tesco evolved from Green Shield Stamps to the Clubcard we know and love today, it seems there will always be a way for retailers to keep loyalty schemes relevant to shoppers.
There are so many ways to get to know the people who buy and use your products.
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