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The term ‘loyalty card’ is a misnomer. The sort of cut-price promotions offered by such schemes are just as likely to alienate shoppers as engender their trust. As are promotions in general, according to an exclusive study into shopper loyalty for The Grocer by customer experience consultancy Satmetrix.
The survey’s findings present a fascinating insight into the impact of what former Asda boss Andy Bond so memorably described as “weapons of mass distraction” on customer loyalty - and will certainly raise a few eyebrows.
While it’s not particularly surprising that Waitrose tops the loyalty league, it will come as a shock to many that it’s not Ocado, M&S or one of the big four in second place, but discounter Aldi - and not by much. Another perhaps unlikely outcome is that at the opposite end of the spectrum, The Co-operative Group, pioneer of one of the country’s first loyalty schemes, the Divi (launched in 1965), has the least loyal customers, while M&S has the second least loyal and Tesco - operator of Clubcard, the mother of all loyalty schemes - the third least (see table overleaf).
The irony won’t be lost on those at the bottom that while they often have long-standing loyalty schemes, the strongest performers have no scheme or have only launched one recently. Low prices and promotions aren’t necessarily the differentiating factors either - or why would Waitrose have scored so well? So if not card schemes or promotions, what does instil loyalty in the nation’s shoppers? And more importantly, what bearing - if any - does loyalty have on company performance?
Promoters and promotions
Aside from intrinsic brand equity, there are a whole host of reasons a shopper will show loyalty to a particular retailer and price is just one tiny part of the equation, reveals the Satmetrix poll of 1,200 consumers. Shoppers were asked how likely they would be to recommend their supermarket of choice to a friend and what factors they would base this decision on primarily. They were then divided into: ‘promoters’ - loyal enthusiasts who will keep buying and refer others: ‘passives’ - satisfied but unenthusiastic customers who are vulnerable to competitive offerings and ‘detractors’ - unhappy customers who can damage a brand and impede growth through negative word of mouth.
By subtracting the number of detractors from the number of promoters, Satmetrix then calculated a ‘net promoter’ score, a crude but effective measure of loyalty that an independent study by the London School of Economics (LSE) in 2005 found “may be useful not only in predicting sales growth but also predicting share performance and employee productivity”.
Judging by the recent performance of the supermarkets, the link between net promoter scores and company performance might not be as far fetched as it sounds. The Co-op, which scored a dismal minus 14 in our poll, was forced last week to axe hundreds of head office jobs. In the same week, shares of M&S, which scored minus 10 in our ranking, had 53 points wiped off its value. Tesco’s poor score of minus 8 reflects the supermarket’s lacklustre Christmas performance and subsequent profits warning - its first in 20 years... READ THE FULL ARTICLE.
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