Loyalty schemes gain in importance across Europe

Loyalty schemes are rising in importance across Europe as retailers attempt to gain and retain shoppers in a post-recessionary environment. Next month, Italy’s first coalition loyalty programme will be launched by Groupe Areoplan - the group behind Sainsbury’s Nectar card, which is used by more than half of all households in the UK.

Nectar Italia will be a similar scheme, enabling Italian consumers to earn points at more than 5,000 retail stores, including over 50 Auchan hypermarkets across the country.

Despite competition from existing loyalty schemes such as market leader Coop Italia’s Carta Coop loyalty card, the Nectar programme should prove successful with Italian consumers, who are already among the most active loyalty card users in Europe.

Italy’s second largest food retailer Auchan will especially benefit from the partnership as it tries to generate shopper loyalty without the continual and unsustainable investment in price. In fact, an initial return on investment in a loyalty scheme can be more than 200% as a result of the increased retention of shoppers, the ability to turn secondary shoppers into primary ones, and the attraction of new customers thanks to an overlap in rewards.

What is more, loyalty card usage is expected to rise in Europe and other developed markets thanks to a combination of technological advances, retail investment and the adoption of smartphones by mainstream consumers. For example, Tesco recently launched an iPhone application that allows shoppers to load a virtual Clubcard onto their phone that is then scanned at the till, eliminating the need to carry a key fob or physical card.

In the US, coupon cutting is becoming a thing of the past as shoppers scour the internet for digital coupons that are then loaded onto their loyalty cards. And just last week, Nectar in the UK announced a partnership with Yahoo that will allow online advertisers to target Nectar card users based on shopper data.

While these schemes may drive short-term loyalty based on the shopper rewards, retailers must ultimately be able to tap into point-of-sale data to drive insights, with the end goal of increasing the relevance of their offer.

Tesco has had unparalleled success in this field by using Dunnhumby data, and now other retailers want to emulate this by becoming more insight-driven and data-led in their everyday decision making. And this of course is where loyalty cards come in.

Natalie Berg is research director of Planet Retail.

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