Given Tesco's difficulties in selling Dunnhumby, it might be useful to assess loyalty cards' risk/reward relationship...
Retailers who expect loyalty cards to build consumer loyalty are missing an important trick. Loyalty cards simply provide access to possible consumer need via a record of purchasing behaviour, within a context of key data on the named cardholder. The gamble is not whether the retailer can cover the cost of maintaining the card, but rather whether the organisation can creatively drill into the resulting data, discovering and distinguishing real need from ‘want’ and then organising resources to manage and meet consumer expectations, cost effectively.
In fact, loyalty is the long-term result of meeting and exceeding consumer expectations consistently and to the satisfaction of named individuals, better than others. Whilst it can be safer for traditional marketers to conceal the consumer within the anonymous confines of a market segment, real-world marketing seeks out and responds directly to named individuals, actually welcomes the encounter with a real consumer, strives to establish an increasingly enriching dialogue, and thus provides a means of validating category assumptions, creatively.
The high cost of establishing and maintaining this level of interpersonal contact demands that the consumer be sufficiently satisfied to willingly come back for a repeat purchase, with minimal encouragement (i.e. cost).
In practice, the loyalty card completes the jigsaw of the consumer purchasing decision, helping the retailer to complete the full circle, back to the Mom’n’Pop grocer who stayed in the game by playing the loyalty card intuitively, limited only by personal memory capacity and being ‘open’ to consumer-need opportunities, 24/7. This flesh and blood family grocer earned and protected his access to 500 families via a keen sensitivity to total need, delivering a tailored response in a carefully monitored environment, resulting in a slow demise.
So too, loyalty cards provide a means of helping to restore the human touch at store level, helping to eliminate the anonymity of the shopping experience, and ensuring repeat visits by satisfied users, with minimal drift to other providers. Whilst a data-based retailer can attempt to meet consumer needs unilaterally, partnership with like-minded suppliers can help the customer capitalise on the combined equities of brand and store.
By definition, a supplier who enters such a relationship without full commitment, all the way to the point of purchase, contributes brand equity as a means of attracting consumers into the store, only to have them succumb to the attractions of store franchise in the aisle. In turn, the retailer is at risk from poor execution of the total store offering in that each time the consumer encounters the face of the retailer at checkout, any inconsistency in personal performance versus expectation is in danger of eroding that newly acquired store equity.
The supplier-partner can help by assisting the retailer in building a comprehensive picture of the brand’s named-consumer, combining consumption behaviour with the retailer’s knowledge of how that consumer behaves in store, monitoring in-home satisfaction and helping to encourage the resulting repeat visits to the store. Having cooperated in sharing experience within the supply-chain, it is time for both parties to repeat the process within the demand-chain.
In the meantime, this ‘useless piece of plastic’ can be a passport to the heart and mind of a named consumer and, carefully managed, can underwrite a long-term revenue stream.
Unless one is gambling everything on a quick win...............?
