Hello Haim,
Thank you for your question.
Tuscon Citizen
"Discount cards have pros, cons"
http://www.tucsoncitizen.com/news/business/090204d1_storecards
"More than half of food retailers offer loyalty programs, according to
the Food Marketing Institute, based in Washington D.C., and about 75
percent of participants use their cards at least weekly."
Here are some stores that use programs such as this:
Safeway (Nectar)
General Nutrition Center (GNC) Gold Card
Kroger
Hallmark Gold Crown
Marsh
Food Lion MVP card
Harris Teeter VIC card
Tesco Clubcard
County Market
Boots Advantage
WH Smith Clubcard
Borders Rewards
Nectar card (Sainsbury's)
Co-op Card
BP
Shell
Barclaycard
Winn-Dixie
Albertsons
Shaw's
Stop & Shop
Price Chopper
PetsMart
Petco
Ingles
Giant Eagle
Tops
Staples
Office Depot
Exxon Mobil Speedpass
Pathmark
CVS--
CVS ExtraCare
----------
Market leaders--
There are up to 50 million Americans using loyalty cards. CVS alone
has 30 million signed for its ExtraCare card.
(UK)
Tesco-- 10 million customers
Sainsbury's (Nectar card)-- more than 11 million households out of 22 million
Boots-- 15 million members
The overall UK loyalty market is worth £65bn a year. Around 85% of UK
households have at least one loyalty card.
Tesco is the third-largest retailer in the world after Walmart and
Carrefour and has the largest loyalty card program.
Kroger is the largest supermarket in the US and has a loyalty program.
The Exxon Mobil Speedpass has 7 million customers worldwide.
"Loyalty Cards: Reward or Threat?"
http://www.consumeraffairs.com/news04/2005/loyalty_cards.html
"CVS' ExtraCare program netted it an extra 30 million shoppers and $12
billion a year in revenue across its 4,000 stores, but the extensive
hardware and software implementation necessary to run such a program
has kept other major drug store chains from introducing similar
programs."
"Getting loyalty programs right"
http://searchcrm.techtarget.com/originalContent/0,289142,sid11_gci992695,00.html
"Loyalty programs are an expensive proposition. In the supermarket
industry, where loyalty programs are relatively mature, they cost from
1% to 1.5% of revenue, and in other industries they cost between 2%
and 5%, Wreden said."
"The value of loyalty programs also becomes more difficult to identify
as they reach a saturation point. In the '80s and '90s, spending on
loyalty programs was increasing 30% a year, but that flow of spending
has slowed to a trickle. Last year, spending was only up 1.5%, Wreden
said. Additionally, the number of loyalty programs in existence far
outweighs the percentage of people enrolled in them."
30% of customers make up the greatest amount of spending in a store,
so loyalty cards can pinpoint those few and reward them for their
loyal dollars.
---------------------
"When Tesco?s innovative Clubcard hit Britain in 1995, it marked the
start of a small retailing revolution as millions of Clubcard holders
spent more in Tesco every week. Supermarket rivals hit back, and other
loyalty cards quickly followed, though Tesco retained first-mover
advantage."
"Market analyst Mintel estimates there are now some 25 million loyalty
cards, with schemes run by Tesco, Sainsbury?s and Boots as the market
leaders."
Tesco's revenues for 2005 were £38.259 billion. This would mean that,
at 1% of revenue, the loyalty program cost Tesco £380 million to
implement.
"The Price of Loyalty"
http://www.amaphoenix.org/jun05_priceloyalty.htm
"Tesco, the UK grocery retailer, solved the cost problem differently
by deploying a two-tier Clubcard program. The first tier is a
straightforward effort to gather data, though it does give points (one
for every pound sterling customers spend) that can be redeemed for
vouchers once 150 points have been accumulated. The second tier,
targeted at frequent spenders, is more innovative. Customers earn a
"key" when they spend $38 in a single transaction. Fifty keys make the
customer a "keyholder," 100 keys a "premium keyholder." Besides
earning vouchers, keyholders get discounts on top leisure attractions,
theater tickets, sporting events, hotel stays, and other activities.
The key program seeks to change the behavior of heavy spenders by
encouraging them to spend their money more often at Tesco. In the four
years since starting Clubcard, Tesco has raised its market share from
13 percent to more than 17 percent, and about 75 percent of its sales
now come through the program. The successful design of the program is
evident, as customers spend on average $38.70 per trip. To make it
past the threshold, many of them are clearly spending more than they
otherwise would."
The Guardian UK
"The card up their sleeve"
http://www.guardian.co.uk/weekend/story/0,3605,999866,00.html
'Enter the loyalty scheme, beginning with the Tesco Clubcard
introduced in 1995. One year later, Clubcard holders were spending 28%
more at Tesco and 16% less in arch-rival Sainsbury's. The latter soon
followed suit with its Reward card, launched the same year and with a
membership of 10m by 1998.'
'Tesco issues vouchers worth £200m each year, spends 11p on each
physical card and sends loyalty letters to 10m Clubcard homes four
times a year, with no subsidies from Royal Mail. Loyalty retailers
don't talk specific costs, but it is clear from this information alone
that running such schemes involves large sums of money.'
'"Most retailers who have launched a loyalty scheme experience a 1-4%
sales uplift. The more common ones... are around 2%," says Crawford
Davidson, marketing director of Tesco Personal Finance. When you
consider Tesco's UK sales grew to £23.4bn in the year ending February
2003, that small percentage represents one hell of a consolidation.'
Right now, the market is saturated with loyalty cards. The world's
top retailers (with the exception of Walmart) offer loyalty cards
already and already have customers signed up. That does not mean that
they are not successful or will be discontinued, it simply means that
there will not be the massive growth that the cards saw in their first
years. If Walmart decided to offer cards, there would be a large
number of sign-ups, but there are no signs that Walmart plans to add
this component, even in Asda, its UK store chain.
------------------------
"what benefits do members gain from joining these clubs?"
Members feel that they are getting a discount and earning rewards even
if they never do-- and many never cash in the rewards due to them.
MSN Money
"At what price loyalty?"
http://msn.pfmagazine.co.uk/msnpf92.htm
"While 60 per cent of British consumers now have a loyalty card, a
quarter fail to claim the benefits earned. Some £413 million of
unclaimed benefits is now held on loyalty cards, which consumers
simply lose or abandon."
In America, many stores such as Food Lion and Harris Teeter mark up
the price on an item and only give a discount (what the item would
normally cost) with the use of the store's card. Many feel that this
is not just rewarding those with the card, but penalizing those who
want to pay without it.
"Loyalty that comes at a price"
http://icwales.icnetwork.co.uk/0300business/bizcolumnists/content_objectid=13954925_method=full_siteid=50082_headline=--Loyalty-that-comes-at-a-price-name_page.html
"In 2003, a study by strategy consultants Cims found that only 35% of
shoppers believed enough was being done by supermarkets operating high
profile loyalty schemes to adequately reward customers.
Research by NOP found 67% of shoppers visit a store based on
convenience, regardless of any loyalty scheme.
Research last month by industry think-tank IGD found only 8% of
shoppers would change stores to take advantage of a loyalty card, but
58% would happily change shopping habits for lower prices."
------------------------
"what infomation/member data does the retailer keep on club members?"
Stores using the cards record who the customer is, their address, how
much they bought, how much they paid, and what types of items they
bought. Ads for similar products can be targeted to them through the
mail.
"Details of loyalty points and the point-gaining transactions are
being captured by a stand-alone card terminal and transferred to a PC
or a back-end server for further analysis. The loyalty software
maintains a complete database of all customer rewards and reward
suppliers."
The companies can also take their lists and information and sell them
at a premium to other businesses.
Safeway's terms and conditions read:
"We collect and store your name, address, home telephone number, and
birth date if provided by you. If you are in an area where we offer
electronic checking and apply for this service, we also ask for
information such as your driver's license number and bank and credit
card account numbers. When you make purchases, we record data about
the transaction, including the amount and content of your purchases
and the time and place these purchases are made."
In one notable case, Safeway provided a list of customers who had
bought a certain fire extinguisher to Seattle police after a case of
arson.
In another case, GNC Gold Card members' information was being sold by
the GNC CEO through a loophole in the original agreement.
MSN Money
"At what price loyalty?"
http://msn.pfmagazine.co.uk/msnpf92.htm
'But although a loyalty card scheme can increase a retailer?s profits,
the real value is in the data they provide, say observers. ?Loyalty
cards offer an excellent source of data for providers, allowing them
to gain an insight into spending patterns as well as addresses and
personal information,? says Mintel.'
'Helen Dickinson, retail partner at KPMG, puts it more succinctly:
?Supermarkets send you coupons based on what you like to buy, and
encourage you to trade up and increase your spend.?
?Our customers love the vouchers, and they don?t see them as junk
mail,? confirms the Tesco spokeswoman. ?Obviously we can tailor it to
the consumer ? we wouldn?t, say, send a vegetarian a voucher giving
20p off the price of meat. We put all the information together, and
can use certain details to ensure that we don?t send people junk
mail.?'
The Guardian UK
"The card up their sleeve"
http://www.guardian.co.uk/weekend/story/0,3605,999866,00.html
'Consider the detailed information that every loyalty card user
volunteers to the store. Each swipe of the card sends your spend -
what you bought, where and how you paid for it - into a databank
profile of your purchase history, along with the personal information
you gave when you signed up for the card. A Boots Advantage card
application form will have asked you for your employment status,
number of children, spectacles or contact lens usage and, if you are
pregnant, when your baby is due. The Nectar card, meanwhile, asks how
many people live in your house, the ages of those under 18, the number
of cars you have and your total household mileage. The Clubcard form
at least puts its questions about dietary preferences and who you live
with in an "optional" information box, but the chances are you'll have
filled it in, anyway.'
'Edwina Dunn, CEO of Dunnhumby, data analysts for Tesco, says, "You
can find people interested in cooking from scratch, or people who shop
with distinct flavours in mind, or where convenience is key. We are
trying to track lifestyles in terms of what is in the basket."
Studying till receipts will show whether you use a grocery store for a
main shop or for a specific menu, or the number of people in your
house, signalled by how much toilet roll you get through. If you've
just had a child, your loyalty card retailer will be among the first
to know; if you're about to go on holiday, they can tell that, too.'
'Nectar firms - currently Sainsbury's, Barclaycard, BP, Debenhams
Vodafone, Adams, Thresher and Ford - do not share each other's
database information, but they do share the analysis of it, undertaken
by Nectar card operators Loyalty Management UK. The company's CEO, Rob
Gierkink, says that, "without question", the combined effect is more
powerful, and he goes on to give an illuminating example of how.
Sainsbury's very best customers, he says, tend to be families, who can
be spotted in other Nectar stores by, for example, high mobile phone
or petrol usage. "Now we can take that information and project it
across the rest of our database. We can see what looks like a big
family, but who may not be going to Sainsbury's. For the first time,
retailers can say not just, 'Who are my best customers?' but, 'Who
look like they could be really good customers?' "'
--------------
"what methods of communication does the supermarkets use to reach these
customers (email, direct mail, telemarketing)."
All loyalty programs are backed by mailers, offers, fliers and coupons
offering the loyal customer rewards for shopping at the particular
store concerned.
The UK goes a bit further, however.
Customers using their Nectar card (which spans more than half of all
UK households) at Sainsbury's, Boots, Debenhams or other outlets can
earn theme park tickets. Nectar card users can even win flights to
other European countries if they spend enough on their card.
"How to create a loyalty program your customers really love"
http://www.microsoft.com/midsizebusiness/businessvalue/loyalty.mspx
'The scale of Tesco's program is awe-inspiring. "The regular mailing
goes out to 12 million people in 5 million different versions," Rogers
says. "It's mind-boggling. You only get stuff that is relevant to
you."'
Sources:
The Economist
"This sceptered aisle"
http://www.economist.com/world/europe/displayStory.cfm?story_id=4247169
Wikipedia Entry-- Loyalty Card
http://en.wikipedia.org/wiki/Loyalty_card
Wikipedia Entry-- Tesco
http://en.wikipedia.org/wiki/Tesco
Boston Globe
"`Loyalty cards' mean no privacy in store"
http://tomkeane.com/archives/2004/03122004.htm
Search terms:
supermarket loyalty programs total numbers
kroger loyalty program
tesco cost loyalty program
tesco revenues
If you need any additional information or anything is not clear, let
me know and I'll certainly be glad to assist you.
--keystroke-ga |
