Loyalty points, loyalty schemes, loyalty rewards. That word ’loyalty’ really is an interesting one. We use it all the time but what does it mean for a retailer? In its true sense ’loyalty’ is a devotion and/or commitment to someone or something come what may. Despite everything that may happen and whatever inducements may be offered to the contrary, you continue to keep faith with the object of your loyalty. Doesn’t exactly ring true for a retailer, does it?
Have you ever come across a customer who says "I know that I can get my petrol down the road at 10p-a-litre cheaper but I want to stay loyal to you". I don’t think so! Then again, what is the foundation of that feeling of loyalty? Why would you feel such a duty? In the world outside retailing it is usually due to either an accident of birth (loyalty to family, country, region or sovereign) or a religious conviction; or from a feeling of obligation due to some great kindness that has been shown to you. I guess that doesn’t ring true for retailers either, does it?
You can forget the birth bit and the religious conviction, so that just leaves the kindness angle. Other than maybe helping someone out who’s broken down or who doesn’t feel well, there aren’t that many opportunities for a retailer to go that extra mile.
Of course, in the old days there were always the biennial tanker driver strikes. Recognising someone as a regular and letting them fill up while refusing strangers did induce some loyalty from your customers - mind you, in truth, that probably only lasted a couple of months at most. These days the average site would be hard pushed to even know more than 50 of its regular customers. By the time you’ve dealt with the petrol sales, the shop sales, the car wash tickets, the lottery tickets, the payments on the electric cards and the mobile phone top-ups, it’s a miracle that the average cashier hasn’t suffered a nervous breakdown by the end of a busy shift. So it’s hardly a surprise to learn that to them a large number of customers are just a blur.
So what does all that investment in loyalty schemes actually buy you? For the great majority of your customers I would suggest that the answer is absolutely nothing. Most of your regulars use you because you’re convenient. They consider that the overall package you offer is reasonably priced and that you or your staff haven’t done anything to upset them. Yes they will collect your points - why shouldn’t they? And yes, when they redeem their ’gift’ they may think "not bad for doing nothing extra" but are they coming to you just for your points? I would suggest not.
In truth I reckon that the whole loyalty jamboree only influences a very small minority of your punters. Firstly there are those for whom there are actually two sites that would be equally convenient to use, but they choose you because they perceive your points scheme is better than the other site or because your points scheme links up with other purchases they make elsewhere. And secondly there are the ’strangers’ who have pulled onto your forecourt while away from home because they want to collect their points. So if you’re a neighbourhood site with not much passing trade, and where the nearest competitor is a few miles away, I reckon you’re getting a very poor return for all that investment in an oil company loyalty scheme.
On the other hand, if you’re on a major trunk route, and your points scheme links with purchases at other retailers, it’s quite possible that the loyalty scheme you offer has influenced the purchasing decision of a reasonable proportion of your customers. Which is why, despite the protestations of so many of my fellow retailers over how much the promotion costs, I actually believe that Nectar, in combination with the very strong charge card offer, plays a significant part in keeping BP at the top of the pile - despite its usually higher pole price and arrogant attitude!