Digital is the way forward for loyalty

The recent Big Interview with Tim Mason, along with news that Epoints is rolling out a loyalty system to retailers, made me consider loyalty applications for consumers in independent retailers. Lord MacLaurin transformed Tesco’s prospects and indeed business model when he realised the potential of the work done by Edwina Dunn & Clive Humby. The success depended on scale, though, and despite looking at several loyalty propositions over the years I have not found one yet that can be made to work in c-stores.

It will be intriguing to see if digital can change this. Barriers to entry for c-stores have been small basket size, meaning points are very slow to accumulate, and the set-up costs of providing traditional loyalty schemes. The advent of the Eagle Eye smartphone scheme and digitalisation generally might just be the opportunity for independents to leapfrog the pack already invested in card-based loyalty and make a solution work. However, someone would need to form a coalition of like-minded stores with the vision to work cooperatively.

Both card and coupon-based systems seem to me to be rapidly coming to a point where consumers are finding they are more trouble than they are worth in most cases. Wallets are straining at the seams with cards and there is nothing more annoying than finding you have missed out on benefits because you forgot the coupons in the drawer.

Telling M&S how to do things better is a national sport but to my mind it illustrates the point perfectly. Its system used to rely on points earned by using its credit card in store, supplemented by frequent points uplift opportunities based on coupons sent in the post.

When there were fewer such schemes around this worked well, but the ubiquity of coupons, together with the real frustration felt by customers when they realised they had forgotten to access the additional points available on a major shop, rapidly dated the system. As a shopper my preference would have been for a migration of the system on to a more convenient platform (mobile), together with a realisation that if you want people to value a points uplift it should automatically be applied if valid.

Instead it has a new scheme, Sparks, which I still don’t understand and find not only of no value but deeply annoying. At the same time the frequency of the traditional rewards has rapidly decreased. This, together with replacing successful lines of both food and non-food with inferior products to meet unnecessary price points, is a lesson in how not to run a successful customer focused business.

Let’s hope others can do a better job.

Steve Parfett is chairman of AG Parfett & Sons