The news that Marks & Spencer looks set to break cover with its own loyalty programme this autumn is further proof of how tough things are on the high street. Possibly called Sparks, the card-based scheme aims to help M&S stay more in touch with its customers, something it has highlighted as a priority following recent disappointing results.
M&S isn’t alone. June saw price deflation of 1.3 per cent and the 26th consecutive month of price drops, which is great news for consumers, but tough for brands, and increasingly for retailers. In the past, brand-funded deals gave stores the opportunity to bask in the reflected glory of being customer champions.
However, the reliance on price as a lever to affect consumer behaviour is subject to the law of diminishing returns, and after years of pulling it, the response is less obvious than before.
Price is the background noise in retail that is hard to overcome. It’s now a badge of honour, even among better off groups to find a bargain, hence the seemingly irresistible rise of the discounters. For retailers, running endless short term promotional deals is no longer a guarantee of loyalty to their brands. A recent survey found that 40 per cent of families with children under 10 had switched their main supermarket in the past year, with 42 per cent of those surveyed citing price as the main reason.
Couple the short-term gloom of recent trading figures on the high street, with fears around the longer term prospects of the big four supermarkets, and the fact that an investigation by the Competition and Markets Authority’s has concluded that there is evidence that customers are being misled with confusing pricing promotions, and it’s hardly surprising that some retailers are looking for a way to break free of the vicious circle of price cuts.
Although it’s news that one of the UK’s best loved retailers is going down the loyalty route, there seems nothing that could be classed as fresh thinking in what M&S is trying. For that, you should look to Waitrose.
The posh folks’ supermarket has never had a reputation for low prices, but it has to show that it is competitive. Its response has been the ground-breaking Pick Your Own Offers campaign through its My Waitrose card. The scheme turns existing loyalty thinking on its head by empowering customers to pick deals with the surety of a fixed price discount at 20 per cent for 10 items every time they shop. It’s like a mini EDLP strategy and complements the existing tangible customer benefits the card offers. Waitrose also claims the scheme will create supplier loyalty and champion brands as customers select their favourites, so it’s a win-win all round.
In the online world, Harvey Nichols is trying a pure digital approach with its new Rewards app, promoted by the ‘Shoplifting’ campaign. It has taken a single-minded approach, to be lean and agile and play in a very targeted digital space. It simplifies the offer and will save money by not having to appear in multiple channels.
Meanwhile, there is something of a resurgence of added value promotions in supermarkets. Worn down by constantly chasing a moving target, some big retailers are again talking to brands about offers beyond the functional reward of price, to drive longer term brand engagement and convert to preference.
Such campaigns are successful when they offer emotional benefits and rewards. When Life Agency ran Kitchen Collectables for Cravendale, it elevated the brand in an own label dominated category by bringing assets like the Cow, Pirate and Cyclist to life and gave shoppers a reason to keep buying. It was so successful that it ran for three years.
So which of these approaches will bear most fruit? There is no easy answer. Picking the right approach is becoming more complex as brands have to realise that every action they take will have a consequence. Creating the right consequence will henceforth involve a great deal more consideration for brands and their agencies.
Professor Leslie de Chernatony is board director at Life Agency