Can coalition loyalty schemes guarantee loyalty?

WM Circle Logo

By: Wise Marketer Staff |

Posted on January 21, 2003

Coalition loyalty programmes - such as Nectar in the UK - certainly do provide valuable customer insight but they are no guarantee of loyalty, according to a survey of UK loyalty schemes conducted by NOP Financial.

Despite the mass of publicity surrounding Nectar's launch (Sept. 12, 2002), and the technical problems caused by high demand, the NOP study claims that over almost two thirds of consumers were not aware of the Nectar loyalty scheme a month after its launch, even when prompted.

The survey also suggests that, although Nectar has made a very promising start, it has considerable ground to gain before it threatens the apparent market domination of the Tesco Clubcard.

True value
Coalition programmes such as Nectar offer a win-win situation for both the provider and the consumer: Consumer transaction data generated from different spending sectors provides valuable insight for the scheme's sponsors, while customers can redeem points with a wide variety of suppliers.

However, NOP warns that the value to the customer of such loyalty programmes may be questionable, claiming that high set-up costs can result in increased prices in-store, and suggesting that rewards such as cinema tickets may not be enough to encourage true customer loyalty. The NOP research shows that 50% of consumers still shop at whichever outlet is most convenient, regardless of any loyalty scheme membership.

Credit card loyalty
The study highlights some of the key differences between retail loyalty schemes and those offered by credit card providers, with the latter enjoying a higher rate of success in engendering brand loyalty through higher spend and exclusive usage.

Some 49% of the survey's respondents who are credit card scheme members said they always use that credit card when shopping.

Retail loyalty
The high proportion of retail loyalty programme members is also underlined by the research, with membership of multiple loyalty schemes being prevalent. This suggests that coalition programmes are likely to generate further transactional data on the same customers, rather than always producing new leads to target as new customers.

At the other end of the scale, 35% of those interviewed were not attracted by any loyalty scheme, showing no inclination to collect reward points at all - which makes learning about this untapped segment very difficult for retail brands.

Just under 2000 consumers were interviewed by NOP Financial in October 2002, one month after the launch of Nectar. The survey will continue to be updated, monitoring the loyalty market from January 2003.

More Info: