Loyalty programmes are so misunderstood

Loyalty programmes have been around for many years, with the Tesco Clubcard launching way back in 1994, but they still remain a greatly misunderstood tool.

Research from YouGov released this week highlighted this very fact as it trumpted its key finding under the headline 'Loyalty card schemes not creating wide-spread customer loyalty for retailers'.

Tesco Clubcard: Both misunderstood and vastly successful

The survey found that only 17% of shoppers choose where to shop based on their participation in loyatly card schemes. At first sight this appears to be a very small number and casts real doubt on the validity of such schemes.
But this could be a mistake because all loyatly programmes are not made the same. If well designed then they are a tool to reward a retailers' most loyal shoppers and not those who are promiscuous or deal-driven.

The reality is that retailers do not typically have many truly loyal customers (if any, for that matter). Many people would change shop for a few pence less price. So if loyalty cards are able to keep these most loyal shoppers coming back to a specific retailer's stores then they have achieved their primary objective.

At Tesco one of the most interesting insights from analysis of the Clubcard (undertaken by dunnhumby) was that the most loyal shoppers account for a massive 50% to 60% of its profits and that these people represent a mere 20% of Tesco’s total customer base.

This figure is pretty close to the 17% quoted by YouGov as the number of shoppers who choose where to shop based on their participation in loyatly card schemes. So if Tesco has sucessfully targeted its 20% most loyal customers, as its primary aim is, and it retains 17% of them then its Clubcard is achieving exactly what it is designed for.

For other loyalty schemes not focused on loyal customers then it is probably a whole different result. There is no doubt, poorly designed programmes are what have made loyalty schemes so misunderstood. 

Tesco fills Dobbies shelves with food

Having largely appeared to sit on its hands since strangely buying the Dobbies Garden centre chain in 2007, Tesco has finally started to put some food into the business.

Unlike the usual garden centre fare of the odd jars of jam and chutney and a so-so cafe, the new Dobbies outlet in Aberdeen has a much more chunky upmarket food offer. Thanks to the efforts of stores journalist John Ryan who trecked up to Scotland the place now has a whole foodhall no less (read his experience here).

Pastries: not actually in Dobbies but they look the same 

This includes a butcher, lots of local produce to get the foodies excited, whole rows of bakery products and a swish cafe that ensures visitors can spend-away while not even having to catch sight of a plant or getting their fingers green in any way.  
 
Not only is this a quantum leap away from Dobbies' former food offer but it also represents an early move of the garden centre format onto a much broader leisure-destination footing. Although the food offer is very different to that of Tesco, there is no escapting the fact the food retailer has started to move the Dobbies garden centres to a food store variant.

This in no way suggests that they have any intention of going the whole hog and turning the existing estate of 25 outlets into Tesco stores, or even to an upmarket Dobbies Food Market for that matter, but we are seeing the first of what was an  inevitable move to closer aligning the chain with that of the mother ship.

DSGi delivering the goods online - at last

After years of duff performance the websites of the DSGi group are finally being turned around under the control of the group's new director of e-commerce.

For the past couple of years the automated testing of Sitemorse has placed the group's websites PC World, Dixons and Currys well down the table of best-performing retail sites in the UK. But not any more as the most recent Top 50 retail website rankings shows impressive moves up the table for all three sites.

Under David Walmsley, who joined in October, the online operations have been given a full overhaul. He told me that online is the latest piece of the Transformation Programme initiated at DSGi by chief executive John Browett.

Walmsley: having big impact on DSGi websites 

The three sites have been re-designed, new order processing systems introduced, and a new trading platform went live in February. The results have been dramatic (take a look at the table on the above link) - Curry's moved up 36 places, PC World up 28 places, and Dixons advanced 19 places, which puts all three in the top 11.

Despite this succces, Walmsley says the changes have merely "brought us up to the starting line". He reckons all he's done is introduce "good shop keeping practices" to online - which simply means an end to broken links, checkouts that don't work, poor accessibility, and an overall weak shopping experience.

The fact he understands that these sorts of things need to be addressed bodes well for DSGi because it shows the group has somebody running its online operation who knows what they are doing. Too many retailers continue to fail on these very basic aspects of online retailing and fail their customers badly.

Group buying set to excite online shoppers

Has online shopping ever been interesting, exciting and fun? Probably not that much. That's certainly the view of a couple of online price comparison pioneers who helped develop Kelkoo and have just launched Keynoir to address this problem.

Each day an offer appears on the site that requires a minimum number of people to make a purchase before it is 'tipped' and the offer is unlocked. On the first day it got off to a flying start with an offer of a £150 meal at Michelin-starred restaurant Tom Aikens for a bargain £79 that needed 50 takers to be tipped but such was demand that the full 100 available were sold.

Michelin stars and group buying come together at Tom Aikens restaurant

Day three saw £57 of upmarket chocolate from Melt on offer for £39 but this failed to excite enough members and was not tripped. Such a failure makes no money for Keynoir while a sell-out is good business as it charges its clients for the advertising value that they accrue from an offer being emailed to its members.

These members can be any Tom, Dick or Harriet admits Glen Drury, co-founder of Keynoir, but he reckons they will be a self-selecting bunch (being tempted by the relevancy of the offers) and therefore have a big value to brands. These brands can be retailers, restaurants, bars etc...with the key aspect being the quality of the deal they are able to put forward to Keynoir's members.

This sort of one-offer-per-day, first-come-first-served mechanic looks set to become increasingly popular as social networking enables such group buying-type operators to quickly build-up memberships, and people today want a bit more excitement when buying things online. This model provides a 'game' element to purchasing over the internet.

It's unlikely that Dixons and Keynoir will get into bed anytime soon but more exclusive retailers looking to expose their brand to new customers, or restaurants looking to flog those final 20% of seats that are the hardest to fill, might find some mileage in Keynoir and other such me-too operators that are likely to emerge in its wake.

Ocado's flotation far from certain

The long-rumoured flotation of online food retailer Ocado continues to rumble on and advisors are supposedly due to be hired after Easter.

The road to a stock market listing took an interesting turn with an article in the Sunday Telegraph that reported an unnamed analyst from an "expert retail analyst firm" had handed over a detailed research note highlighting the quality of the Ocado business and how it was misunderstood.

Ocado van clearly lost - hope its float is still intact

This individual chose not to disclose their identity because of the "sensitivity of the pre-float" period, which I take to mean they are probably involved in the float in some way or are in the process of getting involved. If this is true then they are on the sell-side of this deal and it's therefore in their interest to sell the Ocado story.

Such an intervention highlights that this deal needs a lot more selling to institutional investors and the media. The fact that it is proving such a hard task convincing the latter of its merits leads me to believe that the former will hardly be rushing to commit to buying stock in the float.

The problem with Ocado is that this unnamed analyst is wrong - we do understand Ocado. We know it's a superb business run by sharp operators who provide a superior service to their customers, but we also recognise that this does not necessarily make it a great long-term investment. Ocado has yet to convince many peope that its model of delivering groceries nationwide from dedicated warehouses can generate meaningful profits.