Retail marketers are fighting a continuous battle to win over and retain consumers. The questionable loyalty of shoppers has been highlighted in the supermarket arena in the past few years as the big names rushed to introduce loyalty card and point schemes and most customers simply ended up with a portfolio of cards.
The validity of loyalty schemes was further debated in May when Safeway scrapped its ABC card. By promising to plough cash saved from running the scheme into lower prices, the country's fourth-largest supermarket chain had apparently hoped to sound the death knell for all supermarket loyalty card schemes. But its rivals simply took up the slack and began printing more of their own cards in an attempt to fill the wallet space left by the ABC card.
Engendering customer loyalty is not simple. The 'points mean prizes' approach can still work, but only when it's used along with a range of other tools.
To explore this theory, Carlson Marketing Group, a specialist in 'frequent flyer' and similar programmes, widened the scope of its annual study into customer loyalty which has been carried for the past four years. Its research previously tracked the penetration of such schemes and their impact on behaviour and attitudes.
Now called the Relationship Builder, this year's research is based on four elements to gauge drivers of loyalty: characteristics - important factors in the consumer's relationship with the retailer; core drivers - the characteristics that are most important and have most effect; commitment - a rational factor, based for example on the location of a branch; and emotional closeness to the brand.
For the first time, the survey has included consumer attitudes toward department stores as well as supermarkets, and Carlson has also widened its study of the banking sector. The results of the research, which involves qualitative and quantitative interviews with 3000 adults, are revealed exclusively here.
Do loyalty cards work?
'It's no longer just down to the four p's - product, price, place and promotion, but how strong the consumer's relationship is with your brand and its performance compared with rivals,' says David Perkins, Carlson's chief executive officer. 'If you have good staff and trust, the brand will live as much by walking into a store as by going to its web site.
It's not just the loyalty programme, but all customer-interactive elements.'
In a climate saturated with enticing promotions, the consumer has less reason than ever to stay loyal to a single retailer. But Carlson's research shows that loyalty programmes do still influence consumer behaviour. More than one-quarter of consumers say they use a retailer more often since joining its loyalty programme, 32% say they spend more and 35% say they feel more favourable toward the organisation since signing up.
The supermarket sector has become one of the most active in the loyalty arena and Safeway may regret its decision to ditch its ABC card.
According to Carlson's research, 28% of consumers had returned to Safeway because of its loyalty scheme, compared with 24% for Sainsbury's and Tesco's 21%.
Kevin Hawkins, communications director at Safeway, says: 'Loyalty is not synonymous with having a loyalty card. Since we scrapped our ABC card we have gone on gaining customers - one million more have come to us over the past year. You can give them a point for every penny spent, but it doesn't buy you loyalty. It's the fulfilment of the offer that transcends everything.'
The 'good stuff' factor
Indeed, while supermarkets have on the whole embraced loyalty cards as strategic parts of their marketing activity, Carlson's study shows that the most important factor in consumer supermarket choice is not its loyalty programme but its staff, closely followed by its prices.
Safeway came top of the list for its 'good staff', matched by Asda, picked by 59% of those surveyed. The second most important factor in selecting a supermarket, 'price', saw Asda coming in well ahead of Tesco, Safeway and Sainsbury's. Some 70% say the main reason they shop at Asda is because it has 'better prices'.
But while Asda may be winning the price perception war, it emerged as the second-least trusted of the supermarkets, trailing behind Tesco and Sainsbury's, with only Safeway doing worse.
Perkins says: 'Tesco and Sainsbury's touch the customer by offering credit cards, banking and loyalty programmes, whereas Asda is driven by price.
Trust is an emotional thing, and the relationship goes beyond a simple transaction.'
Hawkins agrees. 'Trust is something that builds over time; it's not something you can build in five minutes or even months,' he says, before defending Safeway's poor showing in this arena. 'Historically we've had a problem with having popular products on-shelf all the time, but we've been working to improve that and we have over 98% availability now.'
Half of all customers are both rationally and emotionally close to their supermarket, although higher-spending customers tend to be the least committed, with ABC1s showing only a slight preference.
Those in the West Midlands and East Anglia and women aged over 45 are more emotionally attached to their supermarket of choice.
When it comes to department stores, they have a higher level of commitment and closeness among women aged 55-plus, and from consumers in London, the West Midlands and East Anglia, where shoppers have a strong preference.
Once again, the key reason for preferring a certain department store is its staff, who it seems, can make or break the experience.
John Lewis topped the list, with 74% of customers saying they chose the store because it has 'good staff'. The surprise in this category was that C&A, rather than 'never knowingly undersold' John Lewis, came out on top on price, the second most important reason for staying loyal to a store.
It left rivals Bhs, Debenhams, John Lewis and M&S (non-foods), standing, which, as Chris Williams, the store's head of corporate communications, says: 'It's pretty good going for a company that's closing down in six months.'
Competing on price
Since C&A announced its closure in June, most of its stores' sales have risen by about 30% to 40%, with some even recording a 100% increase.
Prior to the announcement of the closure, the C&A marketing team had decided on a new bulk-buying strategy that would lower its prices.
'We were competing against the top- and the bottom-end of the market, and since we had our plan in place to fight the Primarks and the Matalans, we thought we may as well go out with a bang,' says Williams. Its campaign, carrying the slogan, 'Good bye, good buy', began in the national press in early-September.
While C&A is definitely on its way out, M&S is facing its own struggle to hold on to customers. But M&S (non-foods) emerged as the most trusted department store, which Carlson's Perkins believes could be residual.
'The company is part of the retail landscape,' Williams says. 'People think: 'We'll let them off and maybe they'll sort themselves out.'' The store's TV ads, launched last week, are expected to build on this image and re-establish the brand. But it has a lot of ground to gain - just 20% of those surveyed said they chose M&S because of its 'positive image', compared with 26% for C&A.
Williams claims this is because C&A holds a place in the hearts of the nation. 'It does strike a memory in most people's minds; everyone has been brought into C&A at one point or another,' he says. C&A currently has 109 outlets across the UK, but most are expected to close by January 2001. Several of its sites, many of which are in prime high-street locations, have been bought by competing retail chains, including Littlewoods, Next and Woolworths.
Banks have lost a lot of consumer trust over the years and cashpoint charges and closures haven't helped their cause this year. Barclays has had a particularly turbulent time. The bank outraged customers with its programme of local branch closures in an unpopular move toward banking by phone or internet.
NatWest, which had originally planned to reduce its high street presence, took up the customer service baton, with a TV ad campaign showing competitors' customers saying that their local branch had now been 'turned into a trendy wine bar'.
But Barclays must be doing something right, because 59% of those surveyed by Carlson said they choose Barclays above Lloyds TSB, NatWest and HSBC because it has good staff, the most important reason for staying loyal to a bank.
Malcolm Hewitt, Barclays UK sales and service director, who is responsible for the bank's branches and call centres, says: 'My experience of Barclays staff is that they are extremely loyal. The cashiers are the bedrock of the bank.'
Accessibility is the second most important reason for selecting a bank, and HSBC topped the list here, with 45% saying the key reason they preferred it was because it is 'easy to contact'. Yvonne Bear, head of customer marketing at HSBC, says: 'The branch network is still very important, so we've been expanding it. We bought a branch from Barclays in Reepham, Norfolk, we've opened 36 branches inside Morrison's supermarkets, and we've linked up with Waitrose.
'We're also concentrating on the remote side, so we're building our call centres and TV banking and we've launched an online service.'
Trust emerged as third on the list of key influences driving consumer banking preferences. HSBC also topped this category, with 45% of its customers saying they stayed loyal because they trusted it.
Bear says the bank has been guided by a major stocktake of what really mattered in the banking relationship, carried out in 1997. 'We were one of the first banks to pull out of endowment mortgages as we could see they weren't working. We have put every member of staff through customer service training, and we've had the least number of complaints to the ombudsman for the past year,' she adds.
Barclays came second, with 42% saying they trusted it most, while NatWest and Lloyds TSB scored 32% and 31% respectively. Barclays' Hewitt says: 'Our own research tells us customers think we're dependable. We're great at the service thing, but I think we'd do better if we could offer more solutions that maybe customers go elsewhere for at the moment.'
Those with the most money, ABC1s, are the least likely to be committed or emotionally attached to their bank, while men aged over 55 are the most committed.
What customers want
The common recurring factor across supermarkets, department stores and banks is that the most important influence on consumer loyalty is 'good staff', cited by 49% of those surveyed. 'Prices', cited by 31%, and 'accessibility', cited by 23%, come further down the lists, and just 9% say that loyalty schemes or rewards have any influence on their relationship with a retailer.
Perkins believes that despite good staff being the key driver for loyalty, companies are failing on this aspect. 'Just looking at the customer's chequebook and saying their name is not enough for banks; people need customised services,' he says. 'Personalisation simply means the store will address any contact to you. But customisation means that they should start to tailor products to you.'
So, says Perkins, the relationship between retailers and customers has to be a two-way street, with retailers responding to consumer needs.
'People give in to thinking the store will do something with the information, such as reacting to what they buy on their loyalty card.
But many customers complain that the information is used for nothing more than blanket direct mailings. Users today expect stores to do something more with that information.'
With the rise of permission marketing, if retailers do not begin to use data gleaned from loyalty schemes to the advantage of the consumer, their customers will stop providing them with information.
'It means asking how much contact you as a customer actually want. Companies need to build databases of these requirements and refer to them constantly,' says Perkins.
Barclays % Lloyds TSB % HSBC % NatWest % Total %
Good staff 59 51 41 43 51
Easy to contact 31 31 40 26 35
Trust 42 31 45 32 34
Recognise needs 17 20 20 16 18
Good communication 21 19 15 17 18
Positive image 10 13 22 13 13
Base: All adults with a ''most often'' choice of bank
DEPARTMENT STORE PREFERENCES
Bhs % C&A % Debenhams % John M&S (non- Total %
Lewis % foods) %
Good staff 57 46 61 74 49 52
Better price 44 57 33 46 13 32
Superior product 18 11 29 27 30 24
Positive image 23 26 17 24 20 22
Trust 14 15 23 21 26 20
Recognise needs 6 8 9 12 14 11
Base: All adults with a ''most often'' choice of department store
Asda % Safeway % Sainsbury''s % Tesco % Total %
Good staff 59 59 49 58 56
Better prices 70 36 34 54 50
Easy to contact 18 23 19 15 19
Superior products 15 17 32 11 19
Trust 13 8 15 22 17
Good LP/Rewards N/A 28 24 21 16
Base: All adults with a ''most often'' choice of supermarket
HOW CONSUMERS ARE
Good staff 49%
Better price 31%
Easy to contact 23%
Positive image 15%
Superior product 14%
Recognise needs 10%
Good LP/rewards 9%
Go extra mile 4%
CUSTOMERS ON BRAND
Only consider using one outlet 14%
Clearly prefer one outlet 28%
Have slight preference 26%
Use one outlet most often,
but have no real preference 31%
HOW LOYALTY SCHEMES
Use more 26%
Spend more 32%
Feel more favourable 35%
MKT # 14:09:00
Sales promotion: Can net music help sell your products? - MP3 is
creating new opportunities for sales promotion. Tom Dunmore
By TOM DUNMORE, deputy editor of Stuff
Last year, it overtook 'sex' as the most searched-for word on the web. But digital distribution of music over the internet also offers huge promotional opportunities, both within the music industry and in the wider, wired marketplace.
The success of sites such as MP3.com and Vitaminic have shown some of the possibilities of digital audio promotions. These sites offer free sample tracks to download as an encouragement for people to buy further download tracks or specially-produced CDs, thereby circumventing the thorny issue of security.
'We're not competing against the major labels, we're just providing a platform for musicians,' says Nick Field, Vitaminic's head of marketing.
'It's up to the artists and labels what they want to sell. Security is important, but we suggest they use the free facility as a sales promotion tool.
By offering free tracks in return for e-mail addresses, more people are likely to enjoy the music and ultimately purchase it, and artists and labels can build communities of listeners.'
Hardly an appealing offer
The established music industry has not been as quick to exploit digital delivery of music as the internet start-ups. EMI was one of the first major labels to dip its toe into the digital distribution waters, but the 100 albums offered for download through retailers' web sites such as HMV.com since July are priced the same as retail CDs. With long download times and no tangible product, few consumers are going to find the offer tempting.
Meanwhile, the Recording Industry Association of America (RIAA) has waged a vigorous campaign against those associated with the dissemination of pirate MP3 files, such as the controversial Napster web site. With ongoing legal warfare, few music promoters - let alone brand managers - have been willing to enter into the digital music arena.
There are, however, signs the situation may be stabilising. The internet's biggest music service provider, MP3.com, came under fire from the music industry when it launched My.MP3.com, which allows users to access a massive database of copyrighted MP3 files if they can prove they own the original CD.
Yet, after months of legal wrangling, EMI entered into a non-exclusive licensing deal with MP3.com, in which royalties are paid for every download.
Other majors quickly followed suit. 'EMI's internet strategy is to create innovative, convenient and attractive ways for fans to access their favourite artists' music,' says Jay Samit, senior vice-president of new media at EMI. 'This settlement ensures that copyright owners and creators are compensated fairly.'
A desire for secure technology
Copyright security is the key to the success of digital music. And the drive for protection has led to the establishment of the Secure Digital Music Initiative (SDMI) forum, comprising over 180 companies from the worlds of IT, consumer electronics and the recording industry. The SDMI has a remit to develop a secure technology to protect the playing, storing and distributing of digital music, with a view to developing the market.
One member of the SDMI is Magex, a digital commerce company set up by NatWest, which offers the sort of service that could finally see digital music becoming a viable sales promotion tool.
'The music is provided in what we call a digibox,' explains Caroline Horner, Magex's head of brand and communications. 'One of the main benefits is that the business rules are associated with the digibox itself; wherever the box goes, the rules go. I can potentially have the box with three free plays, after which I pay for the track. I can forward it to my friends, and they also get the three free plays. We call it superdistribution, and for the smaller artists, that's perceived as a definite revenue channel because they don't have to spend huge amounts on marketing.'
Superdistribution between friends offers an opportunity for promoters to build viral marketing campaigns - a cheap promotional tool that is likely to succeed when the recipients perceive the content to be free.
Magex been also been involved in the production of enhanced CDs, which offer a more complete experience than eminently disposable cover-mounted compilations. Two million enhanced CDs were dist-ributed to Iron Maiden fans at concerts throughout the world this summer. Seven exclusive tracks were accessed via the Magex software included on the disc, which also contained promotional material and links to the Metal-is.com music site, where further tracks are available for download.
Similar CDs will be used to promote Channel 4's forthcoming Barfly Sessions music series and the War Child charity single Them Belly Full, which users must pay pounds 1 to unlock. All tracks are protected from digital piracy, making rights management a far less daunting process.
'With secure formats, there are huge opportunities,' says Mat Morrisroe, marketing manager at the Music and Media Partnership. 'And it's not just limited to young audiences. You only have to look at the success of Cliff Richard's Millennium Prayer, which was downloaded by thousands of churchgoers in middle America, to realise that.'
'Brands have got a misconception about what music promotion should do,' says Neil Jenkinson, director at The Marketing Store. 'They're nervous because it's a property they don't understand. We're trying to move people away from 'here's a compilation CD brought to you by whoever', to something that is a lot more integrated and makes a more emotional connection with consumers.
'Pepsi is one of the few brands to have managed this with Robbie Williams (see page 39), but they have a history in the area.'
Jenkinson is also clear that music downloads and enhanced CDs are not the only ways digital music can be used in promotions. 'A retailer could create an internet radio station that responds to the different places people browse. The browsing can take place on a home PC, in-store, on your WAP phone, your digital radio; they can all be tailored to suit the customer. If you also have pods in-store where consumers can access clips of music and then buy that music, you have a powerful product. At the moment not many promotional tools can be so flexible. '
Developments in telecommunications technology mean that super-fast broadband internet access will be available in the UK within months. This will get rid of download times that compromise even 'free' offers. At present it can take up to ten minutes to download one MP3 file, and thus a 'free song' suddenly involves a significant investment of time and money.
At the same time, the technology used to connect to the internet is also changing. At present, consumers require a PC to use MP3 files. However, entertainment consoles such as PlayStation2 and Microsoft's X-Box will provide a point of access in homes previously untouched by the net revolution.
This puts Sony and Microsoft in a strong position, and both have been busy developing secure file formats.
As wireless technology comes of age, brands will look to reinvigorated music hardware, as well as software, for promotions. Indeed, Nike has recently struck a deal with Diamond Multimedia to produce a branded version of its popular Diamond Rio MP3 player.
Levi's, meanwhile, has linked up with Philips to produce the ICD+ jackets, featuring integrated MP3 player and mobile phone. Retailing in exclusive locations at around pounds 1000, the ICD+ is likely to generate little revenue, but has already garnered the two companies significant coverage in the national press.
'I can see FMCG brands wanting to get involved in cheap hardware,' says Jenkinson. 'It's more appealing and less limiting than music itself. The idea is to make the internet a toy that you can brand.'
PEPSI: ADVERTISING FOR A NEW GENERATION?
Pepsi has a long history of music promotions and pop-chart sponsorship, but its latest advertising campaign, starring Robbie Williams, is one of the most ambitious music promotions ever seen.
At its heart is the Ask For More TV ad, directed by David Kellog (Inspector Gadget), which features footage of the track United that Williams wrote specifically for the campaign. The sales promotion, run by Claydon Heeley International, requires consumers to collect 25 ring-pulls for a CD-ROM of the exclusive track, which includes backstage footage from the ad, an interview with Robbie Williams and a screensaver. The ring-pulls are redeemable at HMV stores, as well as by mail order.
'HMV has told us that so far, if it'd been selling this, it would be number eight in the charts, which is unbelievable considering it's a promotion,' says Andrew Marsden, marketing director for Britvic.
But the most exciting part of the promotion is the way it uses new media.
The Pepsi web site features audio and video clips of the ad, alongside a chance to win Robbie Williams concert tickets in exchange for an e-mail address and personal details.
'This campaign is at the edge of what is technically available and legally solid,' says Marsden. 'The vast majority of our consumers heard about the Robbie Williams promotion by e-mail. The internet is a major part of our sales promotion and communication strategy and we will move on to greater things as the technology emerges.'
WHAT IS MP3?
- When audio is stored digitally, such as on a computer or CD, it takes up a great amount of space - a computer file containing one minute of stereo music will take up about 10Mb. To download such a file from the internet with a standard modem would take over 30 minutes.
- MPEG Audio Layer 3 (MP3) is an international standard compression/decompression format that reduces the size of an audio file by 90% while losing little sound quality, enabling internet distribution to be viable even with slow download speeds.
- There are a number of PC software packages that will 'rip' songs off an audio CD and compress them into MP3 format, which can then be stored on a computer's hard disk. These can be played directly from the PC, transmitted over the internet or downloaded onto a personal MP3 player.
- Most personal MP3 players storing music on a memory card can contain only an hour's worth of music. However, new hard disk-based players, such as Creative Lab's Digital Audio Player, can store 100 albums in a unit the size of a portable CD player.
This article was first published on Marketing