Mindi Chahal explores whether brands can create their own customer loyalty programmes to compete effectively against the retailer-operated schemes.

Tesco Clubcard and Nectar are big; their size enables them to successfully capture a vast amount of consumer data to use towards shaping their loyalty and reward schemes.

Unfortunately, as Dr Alan Treadgold, head of retail strategy at Arc Worldwide, says, that represents a huge challenge for brands: “retailer-led programmes are not only very well-established, but they also deliver benefits across a wide range of product assortments. This is an offering which single brands simply cannot compete with.”

The sheer size of retailer loyalty programmes creates huge “economies of scale”, agrees John Holmes, director of client solutions at marketing solutions provider APS Group. He comments: “One of the key reasons that large retailers enjoy a level of dominance with customer loyalty schemes is an effect of their size and the fact that they can offer customers a choice of rewards in return for loyalty.”

It is not always the case in customer loyalty that the bigger the retailer the better the offer, however. Chris Ford, business development director at Grass Roots, argues: “Tesco struggles with the breadth of customer on their database and coalition based offers, such as Nectar, are closed environments, as you have to visit certain petrol stations and supermarkets. Individual brands are in control of more factors and loyalty can be created effectively as they understand and have a relationship with their shoppers.”

Arguably, the larger retailer operated schemes are completely different species to the brand loyalty programmes, which could present an opportunity for savvy brand owners, believes Daniel Nugent, head of P&MM’s Entice online affinity scheme. Nugent observes: “While retailer operated schemes may influence where the consumer shops, they have very limited influence on what product or brand is purchased once in store.” That means “any brand offering a compelling and captivating loyalty programme has a distinct advantage in competing for their business.”

Loyalty schemes all come down to the quality of the data and brands needs to develop how they collect in order to compete, Adrian Harris, sales director at promotional risk management company Opia, claims. “More careful consideration needs to be given to how purchases are recorded to a consumer’s loyalty account if a retailer does not cooperate with the scheme. The mechanics for registration, collecting points and making claims need to be straightforward, as well as ensuring the rewards are attractive enough to compensate for the effort.”

Data is key, agrees Mark Spicer, head of loyalty at Maximiles UK: “Tesco Clubcard describes its Clubcard as a “reward” scheme and not a loyalty scheme and the Nectar card has had challenges with the changes in strategic partners. It’s the CRM technology behind these well known programmes that retailers seek to replicate and it is perfectly possible for a brand to create a customer loyalty programme that entirely suits their needs.”

Brands can combine this data with their relationships with shopper to create a loyalty scheme which is more targeted than the bigger retailer schemes.

Simon Kent, managing director of Applied Intelligent Marketing lists three key things a successful customer loyalty programme has to deliver. It has to be delivered as immediately as possible after the act that has earned the reward has taken place; it must offer real value and not just a small discount; and it must be relevant to that person.

Kent comments: “This is where sophisticated and efficient CRM technology comes to the fore. From analysing a customer’s response to previous offers, we can pinpoint a reward that will appeal to them and further engage them with the brand.”

Fenella Rogers, senior account director at Pulse Group agrees that “brands that know their customers can succeed with their own loyalty programmes by ensuring that they are offering value to their customers and are building real emotional connections with them to increase loyalty over the long term - rather than simply using price-motivated tactics.”

Indeed, as Christine Givens, business director at Ogilvy Action, concludes: “Brands can be intimidated by the Tesco and Nectar models. My advice to brands is not to be intimidated. Loyalty is actually fairly simple. Do something that works for your brand, make it scalable, mine the data and use insights where you can. After all, you know your product and your customer best.”