Guest Slot – Recruitment Insider-Nigel Sapsed

Managing relationships with customers is absolutely crucial, which is why leisure operators and retailers are increasingly turning to loyalty programmes to give them greater relevance to their customers.

One area of the leisure industry that does not rely on such technology-led initiatives to help drive its business, but provides a great example of skilful managing of the crucial customer relationship, is rather surprisingly – static caravan parks.

Caravan parks: not always arty but revenues can be scientific.

Agreed, they may not be perceived as exactly cutting-edge or exciting. But although they are more likely to throw up connotations of wet weekends than sunny breaks in the Mediterranean they have a much more interesting story to tell than you’d imagine.

If you don’t believe me then please stick with it. What they have is that dream ingredient for all businesses: predictable incomes. For this they partly rely on churning their customer base, which sounds rather counter-intuitive when we are talking about generating stronger relationships.

For industry leaders like Bourne Leisure the trick is to maintain the relationship for 14 years and during this time pro-actively ensure each customer upgrades their caravan (or ‘pitch’) twice, following their initial purchase.

The operators are likely to make over 40% profit on the sale of the first caravan to new customers, who might spend around £20,000, and then at opportune times they’ll convince the customer to buy a better pitch at maybe £35,000 and this will then be followed some time later by another proposed move to an even more preferential spot in the park. Each upgrade represents a 40+% profit banked.

Their ability to time the recommendations is based on their in-depth knowledge of their customers’ incomes and financial situations as the purchase of most caravans is financed by loans from the park operators.

Meanwhile, the caravan owners will also be contributing a rental charge of between £4,000 and £6,000 per year for their pitch and if they want to rent them out to other holidaymakers at any point then the operator can handle this – for a fee of course.

The caravans might be static but the income streams aren't.

On top of this the operators also make a decent return from food and beverages sold on their parks. At the parks of 34-site strong Bourne the Burger King’s are among the best franchises in the country with queues snaking around the block during the peak season.

By the time you’ve totted this lot up the bigger parks – with up to 2,000 static caravans - can be turning over between £20 million and £30 million each year.

The reason for the divorce after 14 years is that often the family involved will by that point consist of only the parents - since the children will have left home. It’s unlikely they will need any further upgrades to bigger and better pitches and without their kids demanding burgers constantly their expenditure on food and beverages falls dramatically.

The caravan operators recognise this and proactively suggest selling-up – ‘we can offer you a nice price on your lovely van sir’. Managing this 14-year relationship are the sales managers at the caravan parks who are revered as they own this crucial link to the customer.

It all adds up to an interesting business model and although caravan parks will never have the sexiness of Disneyland or Center Parcs their owners certainly know how to maximise their relationship with customers.

Nigel Sapsed is director of executive search specialist Sapsed Stevens

Tesco Bank in Disarray

Tesco has great hopes for its Banking division but right now things are going badly, with the company scrapping its Tesco World MasterCard credit card to new applicants.

Things are not going so well at the self-styled People's Bank.

This withdrawal of the card comes after the grocer only recently upgraded upwards of one million Tesco Visa cardholders onto the new card in a shambolic move that coincided with many of its cardholders applying for Olympic tickets.

Although this move rankled with consumers who have had to amend their applications, as their card numbers have changed, the big issue for Tesco - and the reason for the axing of the card - is the high transaction charges attached to the new card.

Retailinsider.com highlighted the high fees faced by retailers when they accept the Tesco credit cards in a previous post (in March) and how the World MasterCard variant was especially onerous to merchants. But what we hadn't foreseen was the impact these charges would have on Tesco's own business.

Getting Olympics tickets proves even harder for Tesco cardholders.

Purchases made in Tesco's stores by customers using the grocer's own World MasterCard have eaten into the profitability of the group's core supermarkets business. Meanwhile these profits have shifted across the group's balance sheet into Tesco Bank.

This has gone down very badly in the company and done the reputation of the head of Tesco Services division Andy Higginson no favours whatsoever.

Higginson: Loss of credibility.

It is understood that senior Tesco directors were less than impressed with the impact the new premium cards (with their higher transaction charges) were having on the UK supermarkets' performance. It looks to have been a case of them demanding the money back from the banking division.

The news that Tesco has scrapped its World MasterCard and is now restricting new applicants for a Tesco credit card to just the standard MasterCard will have come as a big relief to many other retailers who have been affected badly by the emergence of these higher transaction charge cards.

These retailers must now be thanking Tesco for its change in policy and hope that other store groups like Marks & Spencer who are issuing World MasterCard's will see sense and follow suit.

Insight from footfall figures as opaque as ever

Fooftall data from Experian showed a year-on-year decline of 4% for the recent double Bank Holiday weekend that was much worse than the 2.1% experienced in April and the preceeding two months.

Measuring their actions is easy, explaining them is hard.

This heavier drop was apparently explained away by the fact that the weather was very good. To quote Experian: "If the weather is good, it will lure shoppers towards the shopping centres, but it can also increase the amount of short breaks especially around Easter and Bank Holidays."

This seems to say that the weather could have had a good or a bad effect on footfall! But what really adds to the confusion with explaining the latest footfall figures are some stats from Synovate.

For April it found traffic down 2.6%, however, London bucked the trend with tourists driving footfall up by 3.9%. This was in contrast to average declines around the rest of the country of 5%.

The rest of the country stays at home but London goes shopping.

So this means that visitors boosted footfall in London. But how do you therefore explain the decline attributed to the short breaks scenario put forward by Experian?

Surely many of these people would have taken their breaks in the UK and are therefore tourists to the locations they've visited and they pop into stores and spend in a manner akin to those people who visited London.

Certainly when I take a break I find I'm in more shops than usual and my spending goes through the roof in comparison to when I'm at home.

Amid this confusion, there is only one real conclusion to be drawn and that is the continued declines that are being experienced in most of the UK, which is in stark contrast to the continued buoyancy seen in the capital.

Only this weekend Mothercare distributed a list of 121 stores that it wants to offload, which includes the 30-plus outlets that remain loss-making. My guess is that few of these are in London.

The silver lining of this desperate situation is that it is giving some independent retailers a chance to take units on the high street.

It came to my attention this week that bespoke tailoring firm Norton & Townsend has taken on a three-month lease in Birmingham for a mere £1 and is looking at lots more units around the country for a similar rock bottom price.

Regardless of what we are to make of the conflicting  footfall explanations, this certainly brings a whole new meaning to the term pound shops.