Loyalty schemes work for indies too

In these cash-strapped times customer loyalty has never been so important. But with the rise of promiscuous shoppers driven purely by price, it’s never been so hard to keep a loyal following.

Figures from the Centre for Retail Management (CRM) underline the importance of building a loyal customer base. According to CRM, only 12% to 15% of customers are loyal to a single retailer, yet those customers represent 55% to 70% of sales.

Large retailers with millions of pounds to spend on customer retention can simply throw their vast financial weight behind a loyalty card scheme and then inundate cardholders with money-off offers. But what about small stores operating on shoestring budgets? Is it possible for them to implement an effective loyalty card scheme at a relatively low cost? And if it is what information do they need to be armed with before they head down this road?

This is the conundrum that Andrew Jempson wrestled with in the mid-1990s. The owner of the eponymous Peasmarsh-based c-store Jempson’s wanted to reward his customers for their loyalty, but didn’t want to be laden with a cash-consuming monster. So Jempson turned to ICL, which helped it to develop SavaClub, one of the UK’s first independent food retailer loyalty card schemes.

Launched in 1998, SavaClub is a straightforward points-for-pounds-off-your-shopping scheme that is fully integrated into Jempson’s EPoS. SavaClub currently boasts more than 30,000 members and Jempson’s runs parallel schemes such as Cash for Schools, under which which it doubles the value of SavaClub points and the cash generated is sent to local schools. “Although this method of setup is more expensive in the first instance, it is far more worthwhile,” says Jempson. “It gives the opportunity to expand and develop other card schemes. For example, gift cards and Christmas clubs are now in development.

“The scheme requires regular maintenance - updating customer details etc - and some sound procedures, but the benefits far outweigh any of the apparent costs and data shows us over 42% of our customers regularly shop and use a loyalty card in our stores. Points are now given on petrol sales and in our coffee shops, which widens the net and brings in different customers who we target with vouchers to spend in the different stores in the group.”

Jempson isn’t the only independent retailer convinced of the benefits of a loyalty scheme. At the end of last month, three Budgens retailers started trialling a community-led loyalty programme, which benefits local community schemes and rewards shoppers at the same time. Love Local was set up in response to research that showed shoppers would prefer to help their local communities than just sign up to another loyalty scheme with personal benefits.

“Love Local combines a community-led loyalty scheme with offers or free products to thank shoppers,” says Michael Baker, owner of Love Local participant store Budgens of Holt. “It is a unique concept and enables me as an independent retailer to thank my loyal shoppers while also providing tangible support for causes in our local community.”

As these different strategies underline, there is no one-size-fits-all approach to loyalty marketing. The key to success is understanding what offer will truly add value to your customers without impacting too much on your bottom line, says Rob King, director at smartphone loyalty application Loyalli.

“The most effective loyalty schemes are simple and transparent,” says King. “If a customer is unsure how they will benefit from a loyalty scheme, they will stop using it. From this perspective, many find that a simple ‘buy nine get one free mechanism’ is preferred to a points accumulation model.”

As well as offering transparency and value-added benefits, a loyalty scheme should utilise the latest technology and the data gathered should be used to strategically improve the retailer’s business, adds King. However, retailers must never over-rely on it.

“Loyalty schemes are not the sole driver of success in your business,” he cautions. “Factors like customer service and product quality still need to be offered at the very highest level. In fact, finding other ways to engage customers outside of your loyalty scheme - for example, sending a message to customers on their birthday - will have significant positive effects on your loyalty scheme and on your business.”