Loyalty programmes remaining popular
Two-fifths of companies operate schemes
Over two fifths (41.2%) of top British companies now operate a loyalty scheme.
The number of schemes in the UK has increased two and a half times in the last ten years, according to a new survey by GI Insight.
The latest findings in its regular study of the current state of play and progress over the last decade found that there are more loyalty schemes now in operation than ever before. If growth continues at current rates, the analyst predicts that by 2013, an overall majority of top consumer companies will have a loyalty scheme. The survey was conducted amongst the 250 top firms (by turnover) in the retail, hotel, travel, credit card, mobile telecoms and catering sectors.
The Music/Entertainment sector showed the highest penetration of loyalty schemes, rather than the iconic grocery segment (although the large supermarket segment is also around the 90% mark). Other above-average sectors are Hotel Groups, Travel (transport), and Credit Card. At the other end of the scale Fashion/ Department Stores have the lowest penetration of loyalty schemes, with catering, travel agents and electronics not far behind.
The Mobile Phone sector is also below average in its loyalty activity (30% penetration). The sector has, until recently, been the victim of unwise price-based strategies, forcing down margins, and creating an incredibly mobile customer base. Andy Wood, MD of GI Insight, commented: “Loyalty went through a crisis of confidence in 1998-2000, with a significant level of scheme closure by well known brands: HSBC closed its credit card loyalty scheme; Asda pronounced its loyalty test a failure, and both Safeway and Do-it-All walked away from the technique. It has since recovered and now shows consistent year-on-year growth.
“This growth in loyalty activity is felt to be the result of increased competition as consumer marketplaces become more crowded and saturated. Successful companies over the next five years will be those that understand their customers better, and appeal to their real tastes and preferences. Loyalty schemes are now regarded by business as a strategic asset rather than a financial burden and companies have recognised the fundamental importance of information captured by loyalty schemes for business strategy and planning.” From the marketer’s viewpoint, Wood says these schemes help identify who their really valuable customers are, allowing the more thoughtful players to use that information to establish imaginative strategies that measurably help cement and increase customer value and satisfaction.
However, well-crafted loyalty activity – where customers are treated intelligently, appropriately and effectively – has yet to become the hallmark of the majority.