Retailers missing out on influence of rewards/loyalty programmes

Retail rewards and loyalty programmes influence a mighty near-￡75 billion of consumer spending but it could be so much more because the majority of retailers have yet to implement such tools and are missing out on attracting additional sales.

In a new report?‘The Constrained Consumer’ from Webloyalty and Cebr?involving a survey of retailers and consumers it was found that ￡74.9 billion of customer spending was impacted by reward-type programmes, equivalent to 4.9% of overall consumer expenditure, with the supermarkets accounting for ￡34.1 billion of this figure.

Although this is an impressive amount Dominic West, Managing Director of?Webloyalty?Northern Europe, suggests: “It’s a surprisingly huge number but in a way I’m surprised it’s not even bigger. It’s not so much the absolute amount but the 4.9% of spend that’s a surprise. I’d have thought this would be higher, especially as the report also found that only 31.3% of retailers have a rewards programme. This is a missed opportunity.”

When you consider that the major supermarkets represent almost half of the amount being influenced then non-food retailers are “punching well below their weight”. “The rest of the retail sector is definitely lagging behind the food retailers. They should be investigating the potential opportunities of using rewards and loyalty programmes in their businesses,” he says.

In addition to the 31.3% of retailers with rewards programmes a further 20.5% have considered implementing one over the past year and West predicts this figure is likely to increase as retailers increasingly recognise the potential value of such solutions. “We expect this to go up. It’s not been high enough up the agenda of retailers but this will change,” suggests West.

Sitting atop the agenda of retailers right now, according to the survey, is dealing with the industry’s key challenge – price. Competing on price was cited by 40.9% of retailers as their main challenge and was followed by overhead costs (38.2%), supply chain issues (35.2%) and squeezed margins (25.9%).

“Retailers have been hit with a steady stream of cost and supply issues affecting their businesses since the start of the pandemic, and any post-lockdown optimism has now given way to concerns over rising costs, inflation and cost-of-living pressures.”

Dominic West

This is very much affecting the behaviour of consumers who have adopted price-conscious manoeuvres to fend of the pressures on their budgets. As many as 58% of the adult population have changed their shopping behaviour as a direct result of the present price pressures. Within this 62% of shoppers are comparing the prices of different retailers more often and 44% have become more promiscuous shopping across different retailers.

Younger shoppers have made the most striking changes, according to the survey, with 60.7% stating they are more likely to use online resources such as price comparison sites, versus 48.1% of older shoppers. The younger cohort are also more likely to shop for second-hand goods (46.8%) compared with the older grouping (32.9%).

What is especially interesting is the widespread view among consumers that their shifts in behaviour over the past year will become long-term changes. A significant 84.3% of the population stated that at least one of the shifts they made will become long-term. Of these 39% are likely to continue to seek out the best deals and 13.9% will sign up to rewards/loyalty programmes more frequently, while 13.5% will be more loyal to those brands offering such initiatives.

Despite this increased intent of consumers to adopt loyalty and reward programmes there has been some historical barriers to retailers using such solutions. Among those retailers that do not use them 37.1% cited set-up costs. However, West argues the benefits of such programmes in terms of attracting and retaining customers could outweigh these costs over a period of time, leading to a positive return on investment (ROI) in the medium term.

“The reality is, ROI on customer acquisition is easier to gauge than retention where there are various variables involved and it’s far more sophisticated to measure. But retailers need to investigate this because retention is becoming ever more important.”

Dominic west

This is certainly the case for those categories where shoppers intend to reduce their spending. Retaining existing customers will be critical when considering the survey found 36.3% of people are to cut back on clothing and footwear over the next 12 months, 29.5% on technology/appliances, 25% on homeware products, and 20.6% on department store products.

Against this tough price-conscious backdrop where margins are squeezed, and shoppers have constrained budgets, retailers need to consider all the options available for competing effectively and one of the most proven tools continues to be rewards/loyalty programmes.

Glynn Davis, editor, Retail Insider