/ Money

What’s the point of loyalty cards?

Loyalty cards are in the news again, this time over Boots announcing an ‘improvement’ to its over-60s reward scheme. Although Boots increased the amount of points given, it ended the scheme’s 10% discount.

This is just months after BA changed its reward scheme to Avios. Like Boots, BA increased the amount of points its card awarded, but in real monetary terms customers may actually be worse off.

Could changes like this herald the end of loyalty cards?

Are loyalty cards getting worse?

Once criticised for being Big Brother systems that spy on consumers, loyalty cards now seem to be getting their inspiration from 1984’s the Ministry of Plenty, where a reduction in chocolate rations was presented as an ‘improvement’. In the case of loyalty cards, you might be getting more points, but are you actually getting more real-world rewards in return?

Of BA’s change to Avios points, Which? Convo commenter Murk said:

‘The times by ten is a pure ploy so they can say “20 Avios” rather than “2 Airmiles” and have people think “Ooh, that’s more”. Are people really that stupid?’

As for Boots changing its over-60s scheme, Darren Baines (@dbaines84) told us on Twitter:

‘They were wrong to dress it up as something “better”. Especially considering the age group of the audience.’

Are reward cards worth it?

However, Nicola ‏(@NicolaLW) tweeted that Boots should be free to do what it likes:

‘I guess it’s their reward scheme to change isn’t it? If they lose customers then that’s the outcome of the change.’

I’m a card-carrying consumer – Nectar, American Express, TopTable, among others.

As Nicola alludes, shops don’t have to reward you for shopping with them, but one thing these reward schemes have in common is their Zimbabwean units. I have several hundred TopTable points; impressive? Not when the minimum credit is 200 points.

With AmEx, 10,000 points is a £50 M&S voucher. Not to be sniffed at, but that’s probably about £5,000 of spending, or 1% reward.

The other drawback is that points have a use-by date. Avios points have previously expired before I had next planned to fly. I’ve also lost my TopTable points for one free meal. Then again, this might not have been such a good deal anyway.

TopTable offers 50% off without any membership points – if there are two of you dining that’s the equivalent of one free meal, making TopTable’s reward points basically useless to me.

And as for Nectar – I joined when it was the Sainsbury’s scheme and around the turn of the millennium I had nearly enough points to go on the Eurostar. A decade or so of collecting and a new name later, I’m 20,000 points richer, which is about enough to go on the Eurostar…

End of loyalty cards in sight?

My hunch is that the future of loyalty cards will be more points but fewer prizes. Reward schemes must benefit both the consumer and the supplier – my suspicion is that suppliers are seeing fewer benefits and so they’re decreasing rewards accordingly.

But this may result in a death spiral, as more of us stop going out of our way to sign up for loyalty cards. These schemes need a critical mass of users to be of any value, meaning they might be scrapped altogether.

So, with reward cards seemingly becoming less rewarding, will you stop them from influencing your shopping behaviour? Would you be upset if retailers got rid of these loyalty schemes?

Comments
Guest
Sophie Gilbert says:
16 April 2012

My loyalty cards do not influence and never have influenced my shopping behaviour. I have them with shops where I would go anyway, eg Tesco and Boots, but if eg Superdrug has a better deal on one thing or another at some point or other, I’ll go with it. I’m sure I’m not the only one who does that, so maybe that why retailers don’t find the reward cards so rewarding to themselves?

It helps if I get a few bob off my shopping bills every now and then, and it’s better than nothing at all. If retailers get rid of loyalty cards, it will be an exaggeration to say I’ll be upset, but I’ll miss them.

Guest

So, with reward cards seemingly becoming less rewarding, will you
stop them from influencing your shopping behaviour? Would you be upset
if retailers got rid of these loyalty schemes?

Hardly use Tesco’s nowadays or for that matter Sainsburys’… matters not
one iota if their loyalty cards got withdrawn or cancelled. I only took out
Nectar when there was a 30 quid freebie (as it was then) thereon plus
cashback on purchases on my taking out AMEX that BTW I no longer use.

Guest

Loyalty cards were introduced by supermarkets for one purpose and one purpose only and that has been to enable them to track our spending and target us with what they think they can con us into buying next. If they were intended as a reward to the customer they’d give you money off there and then and not vouchers which you can use on your next shop. It’s all about conning you into keep going back. So I doubt we’ll ever see a campaign which will give you money off NOW and not next shop. 🙁 Think of how much paper they’d save if they did away from loyalty cards not forgetting the computer systems etc,.

Guest

As I always tell the Sainsbury’s checkout clerk, and especially the Boots clerk, when they ask if have a Nectar or Boots card, “It is none of their business what I buy.” If stores keep reducing the percentage reward offered or increasingly make it more difficult to redeem the points collected, in exchange for the privacy invasion, they are likely to lose customers, scheme users, … and certainly all that valuable data.

I have actually worked in this field for some years, and any loyalty scheme or other customer relationship management (CRM) programme that fails to truly RESPECT the customer is doomed to failure.

It is worth noting, however, that many retailers will want to reduce the rewards offered to reduce the size of their accounting liability and shorten the lifespan of points. In 2008, the IFRS also changed the rules (see IFRIC 13) to increase that liability to a consistent deferred revenue (what consumers might pay) as opposed to cost of supply (retailer’s cost) basis. Basically, the bean counters are winning the argument.

Guest

That’s interesting about the accountancy (?) change. By the way, I have heard rumours that loyalty card schemes generate more money by selling user data to third-parties than from any efficiencies gained or products better pushed at the consumer. Having worked in the area do you happen to know if this is true?

Guest
frances says:
17 April 2012

Only mousetraps have free cheese.

(Old Russian saying).

Guest

Hah! Sounds similar to “If you’re not paying for it then you are the product”.

The Russian one is snappier.

Guest
Mark Taylor says:
17 April 2012

I refuse to carry any loyalty points cards in my wallet which:
– Offer less than 4% back, and
– I wouldn’t accumulate enough ‘points’ to be able to make a purchase with them in 6-month.

As a result, I only have 2 in my wallet. Boots “Advantage Card” and Caffe Nero “10th Coffee free”

Tescos and Sainsburys are 1% so they don’t even get close to qualifying!

Guest

The mark-up on Boots merchandise in the shops is much too high but abt 10
% or so cheaper on their website when such identical merchandise can be had
much/cheaper elsewhere.

Hence they are able to offer a seemingly generous discount on their
“Advantage Card” with a 4% discount… when I want a higher-priced item
stocked at Boots, I generally order it online elsewhere.