Is Your Loyalty Card Really Worth It?

The UK is one of the world's most important loyalty card markets, with most retail outlets having some form of loyalty card. Recent research shows that 85% of UK consumers have a loyalty card. A loyalty card (also called a clubcard, a points card or a reward card) is a card issued to a consumer by a retail outlet. This card entitles the consumer to discounts or points or both. But do loyalty credit cards really help today's shoppers?

How Loyalty Cards Started

Cashback reward cards started in the mid-1990s in the United States, driven by the introduction of e-commerce.  They were a way of bringing customers into the stores rather than losing them to the online shopping market.

Tesco started a similar scheme in the UK in 1995 and other retail outlets soon followed suit. Loyalty cards are important to retail outlets because they are supposed to ensure repeat business. Discounts off in-store products and vouchers means that customers have to come back to the retail outlet to take advantage of the rewards they have gained.

• The Value Of Having Branded UK Credit Card Loyalty Programs
  Anyone who has taken even the briefest of looks at the UK credit card industry will immediately notice that there are well over a thousand credit card providers. However, even in this hugely competitive industry, there are still only two main types of card available – the Visa card and the MasterCard.

How To Get A Loyalty Card

Getting a loyalty card is as simple as picking up a form in a retail outlet. Consumers have to give basic information about their name and address. In most cases, they can pick up the loyalty card immediately, but in a few it is sent by post. Once consumers have the loyalty card, all they have to do is start shopping.

How Loyalty Cards Work For Consumers

Loyalty cards are promoted to the public as free money for doing what they already do - shop. There are several kinds of loyalty cards. The most common ones, such as the ones issued by supermarkets and petrol stations, offer a set number of points for every pound the customer spends. This can vary from a penny to more than 4 pence. These points are then converted into vouchers to be spent in the retail outlet. In addition, owning a loyalty card permits card holders to get additional discounts or to benefit from multi-point days.

How Loyalty Cards Work For Retail Outlets

Loyalty cards are a great tool for retail outlets. First of all, they collect data on their customers which can then be shared with their trading partners. This gives the potential for even more sales. Second, they collect data on what people are buying in their stores. They can then target offers to people's interests. For example, mothers often get offers relating to nappies and baby bath products. Finally, since points and discounts can only be used within the chain, they keep customers coming back to spend more money and gain more points in a continuous circle.

• Should You Be Loyal To Your Loyalty Card?
  Loyalty cards have been around for a long time. Tesco pioneered loyalty cards in the UK, which is one of the world's largest loyalty card markets, in 1995.
  

Getting The Best From Loyalty Cards

To get the best from loyalty cards, consumers need to assess the offers they are taking up. They need to look at:

• the retail price of the item

• the discount being offered and the value of the points gained

• whether there is a better price available elsewhere.

This will help consumers to establish whether 'spending' their points is the best way to pay for an item.

Tom Smith
31st May 2007