How and why Barclaycard came back to loyalty

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By: Wise Marketer Staff |

Posted on March 17, 2010

How and why Barclaycard came back to loyalty

With the launch of the Barclaycard Freedom credit card-based reward programme in the UK, The Wise Marketer's European contributing editor, Peter Wray, interviewed Freedom's marketing director, Sarah Alspach, to find out how and why Barclaycard returned to loyalty.

Barclaycard Freedom marks the credit card giant's return to incentivising customers to choose their Barclaycard when choosing a retail payment method, following the company's withdrawal from the Nectar coalition programme in 2005.

Several national retail partners have already been confirmed for the programme's launch (17th March 2010), including Balls Brothers, BSM, F Hinds, Flight Centre, Gourmet Burger Kitchen, and Just Tyres (all of which will offer Reward Money - in case, not points - to Barclaycard's 8 million cardholders). Other participating retailers include LA Fitness, YO! Sushi, Goldsmiths, Pizza Express, Nationwide Autocentres and nPower.

In addition to the standard 1% worth of Reward Money earned for most transactions, some retailers will also offer cardholders various exclusive promotions, such as 15 worth of Reward Money for taking out car or personal accident insurance with Barclays Insurance.

Barclaycard Freedom's rewards have no value expiry date - a significant cardholder benefit compared to some other UK-based loyalty offerings. The programme offers immediate in-store redemption options, and the phrase "easy to use and easy to earn" was a recurring theme throughout.

When asked about the logic of auto-enrolling all Barclaycard customers in the programme, Alspach explained that the majority will have selected their choice of Barclaycard for other reasons and that "added value and simplicity" was a key consideration in the design brief for the programme.

Asked about the database of members' purchase history that would be created, Alspach was emphatic that data privacy regulations and best practice guidelines are a non-negotiable focus within the programme as Barclaycard balances the cardholder and retailer relationship.

The growth area of social media is being folded into the programme with Facebook and Twitter already being targeted as a communication channel for cardholders. Dynamic contact email technology (personalised for every cardholder) will also feature in the benefits offered by the programme.

Barclaycard Freedom was designed initially for the UK market, and Alspach confirmed that the UK will remain the focus for the time being.

Asked about her views on competitive pressures on the programme from other large scale players (such as the Nectar coalition programme, Tesco Clubcard, and the Boots Advantage card), Alspach confirmed that Barclaycard will be keeping a close eye on all potential competitors but Freedom is based on the company's "unique technology and the simplicity of the value offer".

"If cardholders and retailer partners see value in the programme then we will regard it as a success," said Alspach. "The 'value added' mantra came up several times during the interview and is clearly an area of great focus for the entire Barclaycard Freedom team.

Apart from automatically enrolling all of its 8 million cardholders, Barclaycard has also adopting the auto-enrollment approach with its 30,000 merchants (all of whom use payment terminals with Welcome Real-Time technology). Barclaycard has already written to its merchants to explain the programme and tell them that they must specifically opt-out if they do not want to participate.

It is an interesting point that Freedom offers cash rather than points, miles, vouchers, discounts, or rebates. Every time they use their Barclaycard in a participating store, a percentage (at least 1%) of the purchase price is automatically credited to the members' Reward Account as Reward Money. Reward Money can then be redeemed immediately at selected retailers, in payment for all or part of a purchase, and the choice of that balance is up up to the cardholder.

Barclaycard has a reputation for innovation with card products in the UK market, having launched the first credit card back in the 1960s, and having a long history of promotional incentives. Its 'Profiles' programme ran from the late 1980s until Barlcaycard joined the Nectar programme in 2002 as a founder partner. After three years with Nectar, Barclaycard left the programme in 2005 with the stated aim of "focusing on customer service and travel benefits".

Now Barclaycard has returned to customer loyalty after five years, with a programme that is clearly attractive to customers.

Freedom has been deliberately designed to be both simple and convenient for customers, which will almost certainly be the single most important factor in the success of the programme (provided that a critical mass of retailers signs up to participate in the programme).

The immediacy of the reward, whenever and wherever the customer dictates, and the fact that it is a cash reward rather than points, along with the transparency of the programme, are all strong positives that will appeal to the experienced consumer of the 21st century.

The flip side, of course, is that the merchants and retailers will be bearing the cost of the rewards, and this is generally the highest cost factor in running any customer loyalty programme. Also, while the programme will be appealing to smaller independent retailers (for whom Freedom is an opportunity to enter the customer loyalty game without development and running costs), larger retailers may prefer to run with their own loyalty offerings if they see a greater value in the exchange of rewards for in-depth customer data and insights.

But the main cardholder benefit is clearly the extreme convenience and simplicity of the programme. A July 2009 Harvard Business Review article by Paul Flatters and Michael Willmott studied the consumer's journey as they emerge from the global downturn, and post-recession consumer demand for sheer simplicity was a key factor. Consumers are now looking for uncomplicated, user-friendly products and services that simplify their lives. In this context, Barclaycard Freedom should resonate strongly with most cardholders.

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