Over 20 years after Tesco launched its Clubcard, how are marketers keeping customers coming back time and again?
In the mid-1990s, when Tesco’s then-chairman Lord MacLaurin was given a presentation about the supermarket’s new loyalty card programme, he told the team working on it that “what scares me about this is that you know more about my customers after three months than I know after 30 years”. Officially launched in 1995, Tesco’s Clubcard was a game-changer when it came to customer loyalty and the use of data. Tracking how people shopped and giving them points in return gave the retailer an unprecedented level of customer insight, allowing Tesco to stay on top of consumer trends and become one of the dominant supermarkets. It knows its customers so well one Mumsnet user claimed the retailer would offer her discounts on tampons just days before her period arrived. But, over 20 years later, how have customer loyalty schemes evolved and how are franchises persuading buyers to return?
For one thing, the British public might be starting to become immune to the power of loyalty cards. A Nielsen study published in 2016 found that although British shoppers are the second most likely in the world to have a loyalty card – after Finland – they’re among the least likely to make use of the benefits. What’s more, only 51% of British loyalty card holders said they’d choose one retailer over another because of their loyalty scheme, all other factors being equal. For Jason De Winne, general manager at ICLP, the customer-loyalty agency, the basic philosophy behind the Tesco Clubcard – that customers are given something useful to reward their repeat custom – is still largely relevant. But he also thinks that today’s customer wants something more. “Loyalty programmes have moved on from being about earning points over time: these days retailers are using data to make the customer feel valued and appreciated,” he says. “That emotional feeling is what ultimately drives loyalty.”
As a result, retailers in the franchise world and beyond are scrambling to be more creative when it comes to rewards. Pizza franchise Domino’s Piece of the Pie campaign gave people the chance to get stocks in the company in return for showing their love for the brand on social media. And Waitrose offers all loyalty card holders a free cup of tea or coffee – although it recently reeled in the promotion slightly by stipulating that customers have to buy something to qualify. Meanwhile, doughnut franchise Dunkin’ Donuts recently announced a partnership with Waze, the community-based traffic and navigation app, to allow members of its loyalty programme in the US to place their order in advance and beat the queue. In a statement at the time, Scott Hudler, chief digital officer at Dunkin’ Brands, said using the latest technologies helps the brand “stand apart for valuing our loyal guests and providing them with exciting and innovative new ways to purchase Dunkin’ Donuts food and beverages as quickly and seamlessly as possible”.
De Winne welcomes these moves, so long as it’s what the customer wants. “Whether it’s a more seamless checkout process or a complimentary coffee, it has to be valuable to customers and make their experience better,” he says. “There are lots of examples of brands that use technology for its own sake.” This means that if a franchisor chooses to pilot a new loyalty-building initiative, the franchisee on the ground has a huge role to play when it comes to gathering feedback on how it’s actually being received by customers.
And thanks to the swathes of data available to franchises these days, delivering these kinds of experiences doesn’t necessarily have to be about solely rewarding top-tier customers. For a long time, loyalty schemes have been inspired by the idea that 80% of a successful company’s business comes from about 20% of its customers. So when it came to loyalty schemes, the more you shopped the more you were rewarded. But it can be a bit of a slog to earn enough points to benefit. “Thanks to advances in technology, retailers can offer customers perks sooner and they can offer them to even more people,” says De Winne. For example, restaurant chain Wagamama claimed to have “reassessed the whole notion of loyalty” with its loyalty app, Wagamamastars. The app rewards all diners, including first-timers, repeat customers and ad-hoc guests, with tailored rewards like a free dish next time they visit.
But it’s not just a matter of offering freebies: the reasons why somebody comes back to a brand are more complex. F45 Training, the fitness franchise, takes a very different approach to retaining customers and, unlike many gym chains, doesn’t even try to encourage people to commit to annual contracts. Instead, its focus is on creating a sense of community. “The fun, open, community feel is a very important part of what makes customers loyal to us,” says Andrew Mower, franchisee of F45 Farringdon. “Our flexible approach actually makes people more loyal and less fickle because they don’t feel pressured.” The franchise does encourage people to buy bundles but believes that the main reason people come back is the personal attention they get from trainers and the encouragement and support they get from other regulars.
Having a strong brand identity throughout your network that people can connect with can also be an important driver of loyalty. For Riverford, the organic fruit and veg delivery franchise, customer loyalty is intimately wrapped up with how people feel about its brand. “There’s a lot of pressure on marketers to give customers offers or discounts but that’s not what we’re about,” says Grace Carter-Cavalier, the franchise’s head of loyalty. “Our brand is perhaps what we’re strongest on and it’s important that customers see that we’re being true to our commitment to being a sustainable and fair business. That’s what creates loyalty.”
Instead of price incentives, Riverford aims to give people experiences that bring the brand to life and create a connection. It plans popup supper clubs, bringing together thousands of customers in various locations around the dining table. “It’s a great way to get to know our customers in person and allow them to enjoy chatting to each other,” says Carter-Cavalier. “People get a sense that they’re part of something.” Riverford has also found that these offline brand experiences pay off when it comes to retention rates: its analysis shows that not only are customers who attend a supper club more likely to shop with Riverford again but they also shop more frequently and spend more.
And franchises may be in a particularly good position to create experiences that delight and unite, given franchisees’ high level of local customer knowledge. While in the future technology might be able to arm offline shop assistants with data insights on a shopper’s preferences so they can deliver a more tailored service, many franchises are already able to develop that know-how naturally. “There’s no real substitute for having franchisees nurture personal relationships with customers and getting to know them over time,” says Carter-Cavalier. “Thoughtful things like knowing where a certain customer likes to have their box left and going above and beyond is what makes customers happy, which is what loyalty means to us. And other brands that aren’t using the franchise model aren’t always able to compete with that.”