Loyalty Truth

Retail Wire ran an article last week highlighting British grocer Waitrose. According to reports, Managing Director Mark Price believed that the traditional customer loyalty model needed improvement to serve his audience of affluent shoppers at the upscale chain. His answer? Offer members of the grocer’s loyalty program a free cup of coffee or tea anytime they visit. Shoppers simply present their card to a store associate and are allowed to enjoy their beverage while shopping in-store or can take it out with them.

In addition, customer who spend 5 pound sterling or more can get a newspaper free. Mr Price believes that an increasing number of customers prefer an instant gift rather than collecting points for redemption of a freebie at some point in the future. “What is a point?” asked Mr. Price in one of the source articles on Retail Wire, “I think it’s meaningless…”

This very harsh critique was endorsed by many contributors of Retail Wire’s Brain Trust. Full disclosure is that I am a member of the Brain Trust. An instant poll taken among readers showed that 81% thought point system rewards programs are “somewhat or completely out of touch” with modern consumers. Go a little deeper into the stream of comments posted by Brain Trust members and you’ll see that opinions were more moderate than poll figures would seem to indicate.

Here is a highlight list of interesting comments from the Brain Trust on the subject. You can read the full article here to gain additional perspective:

• “We are now a sound bite culture. We are used to everything being immediate, if not faster. This is an issue with most loyalty programs as the time lag between collecting the points and redemption is too long” ….Steve Montgomery
• “While point system rewards are still an effective mechanism for building customer loyalty, Waitrose deserves mad props for this innovative strategy that feeds into the instant gratification mindset of Gen X,Y, and Z consumers” …. Eric Chester
• “A nice mix of immediate gratification rewards and occasional points or continuity programs make sense to both the retailer and the shopper, provided the reward is worthy of the consumer’s effort to earn it” …. Mark Heckman
• “it isn’t loyalty if you have to bribe/incentivize people to come back to your store!”….Ian Percy
• “Consumers are fed up with all the restrictions and issues with points” …. W. Frank Dell II
• “Retailers should look at using a hybrid form of loyalty that combines creative experiential mechanisms and loyalty to create great shopping experiences for their best customers” …Larry Negrich
• “Points are just a currency for measuring the investment in the relationship. So I don’t believe it is accurate to claim that points are irrelevant, rather what companies choose to do with those points has become irrelevant”….Justin Tidmarsh

If you were to tumble these comments like chits in a raffle bowl and pour out their essence into one winning ticket, you might conclude that loyalty programs aren’t out-of-touch with modern consumers, but that a new set of best practices needs to be defined for these currency based programs to be effective in the future.

Using points, miles or some other form of currency isn’t meaningless or a complete waste of time. The effectiveness of a points structure is dependent on what you do with those points and how friction-free you can design the loyalty program to work.

My thought shared on the article was to rethink exactly what Waitrose was doing with its coffee give-away:

• “Maybe we should think of the Waitrose tactic as an engagement tactic rather than a loyalty program. True customer loyalty would result from other interactions that take place while customers are in the store.”

To borrow an old school sports mantra, “don’t hate the player, hate the game”. Re-stated in loyalty marketing terms, I’d say “Don’t hate data – driven customer loyalty programs, hate the tired nature of what many brands offer and be part of the change”.