The news that Morrisons is set to launch a new loyalty scheme adds an interesting dynamic to what is currently a vicious retail race of survival. While I think it’s about time that the supermarket has finally joined the loyalty age, I do wonder if they might be missing a trick. The “Match & More” scheme seems to be another generic points-based initiative, offering ten points for every one penny spent. And it certainly doesn’t add anything ‘more’ as suggested in the name. Although this kind of quick payout may appeal in the short-term, it won’t do much to drive the customer longevity Morrisons is looking for. So the question we should be asking is why hasn’t Morrisons done something more innovative? Lidl has already highlighted the weaknesses of the scheme, so the pressure is on for Morrisons to show the extra value the scheme offers.
Today’s retail market is more competitive than it’s ever been and the growing momentum behind discount retailers like Aldi and Lidl, who through being privately-owned don’t need to answer to the Board or City in the same way as other retailers, are able to maintain low prices, only amplifies the price-focused nature of this competition. Obviously this is the primary reason for Morrisons introducing a loyalty programme – the need to keep up with these two German competitors. However, with competition so fierce and consumers increasingly fickle it is more important than ever for other brands to look for ways to connect with customers on a personal and individual level. Only through building these relationships will they manage to differentiate themselves on context and connection rather than solely through price. This is where emotionally led loyalty programmes will play an essential role.
Despite the fact that many of today’s loyalty programmes are focused almost solely on earning points through purchases, the reality is that we have started to see a movement towards schemes based on ‘emotional loyalty’. This kind of approach focuses more heavily on how a consumer connects with a brand on an emotive level. But doing this requires brands to understand what’s going on in a consumer’s life from a situational, emotional and transactional perspective and then tailor their communications accordingly.
Doing so allows brands to offer content and rewards that connect and resonate with the interests and needs of each customer. By harnessing the data available brands are increasingly able to provide context for customers which will deepen relationships in a meaningful way. For retail, this could mean being helpful at a time of change in someone’s life, surprising them with some free, unexpected, or exclusive content that has direct relevance and value to their circumstances. One scheme that has effectively done this is VIP (Very Important Pets) for Pets at Home. The VIP club offers its members the usual loyalty rewards but also delivers rewards to their nominated animal charities. While Waitrose’s scheme offers its card holders free coffee, discounted newspapers and special prices on everyday products. Ultimately getting people to sign up requires giving something of real value, not just price matching competitors and this is something that Pets at Home has delivered successfully.
This does not mean that the points based loyalty scheme is dead. Rather, it highlights the need for these schemes to evolve and offer customers a channel to combine a points-based rewards system with something of true personal value. Tesco for instance has already made a positive step in this direction by using its wealth of customer insight to personalise its offers and incentives. Others will need to follow suit. The evolution of a points based scheme through the data that brands have accumulated over time is where the future of loyalty programmes lies. Moving forward, it will be how this data is used that will define future success.
With the market forever changing and consumers expecting more and more from brands, Morrisons’ new loyalty scheme, whilst a big step in the right direction, has only taken them part of the way there. In theory, its introduction of the scheme makes complete sense – brands should all be encouraging deeper engagement with their consumers. However, I don’t think that Morrisons’ offering is stronger than anything else on the market. Will it be enough to stop consumers flocking to the price disrupters that are Aldi and Lidl? Until Morrisons and other brands start thinking more emotively I fear that customers’ loyalty will continue to waver.