THE CLARUS Blog

What You Need to Know About Premium Loyalty in the UK

I’d love to be able to say that Loyalty Programmes (like all great inventions and brilliant ideas) are a British invention like the lightbulb, telephone or even the humble chocolate bar, but unfortunately that’s not entirely the case.

They have been around since the 1700’s when, sadly in the US and not in the UK, US retailers were beginning to give their customers copper tokens that could be later redeemed for products on future purchases.

As you can imagine, copper tokens become rather costly and tricky to manage. However, they soon paved the way for the next stage of the Customer Loyalty Programme – “stamps” – which were given to customers that paid for their goods in cash, rather in credit.

Pretty much all retailers jumped on the bandwagon by rewarding their most loyal customers with stamps that could be redeemed for merchandise in any of their stores, with the most famous one being Sperry & Hutchinson (S&H Green Stamps).

Now, there’s a new type of loyalty programme in the US that UK retailers need to take note of.

 

A Loyalty Stamp War Breaks out in Britain

As the saying goes “when the U.S. sneezes the UK catches a cold”, so it wasn’t long before Richard Tomkins, a British entrepreneur and founder of UK giant retailer Argos, founded the UK’s Green Shield Stamp Trading Company.

Several other stamp schemes swiftly sprung up, with the largest being S&H Pink Stamps. A “stamp war” broke out in the 1960s after retailing giant Tesco started producing not only the aforementioned Green Shield, but also the S&H Pink Stamps.

The UK Loyalty Programme landscape broadly remained the same until the mid-1990s when Tesco, engaged DunnHumby to build The Tesco Clubcard.

This went onto become the world’s most successful retail loyalty scheme. It helped Tesco analyse its customers’ purchasing activity and what was essentially in their “weekly baskets”, therefore quickly understanding their customers shopping habits.

Most importantly it ensured that customers returned to Tesco to shop, as they were being rewarded. Retailing guru and ex-Tesco CEO at the time said to DunnHumbby after the three-month trial, “You guys know more about our customers after three months than we do after 30 years”.

Fast forward to today and pretty much all UK retailers made the decision to launch Loyalty Programmes of their own.

But just like in the U.S., most are likely launched out of the fear of competitive parity over anything else. And just like in the U.S., these traditional loyalty programmes don’t offer much to differentiate each brand from the competition.

 

Premium Loyalty in the UK

UK consumers are on average signed up to 7.2 traditional loyalty programmes.

It costs retailers millions to launch and maintain these programmes with them fast becoming a financial liability. One survey said that there remains over 6 Billion £’s of points from the top 10 Loyalty Programmes uncollected.

What have retailers in the U.S. been doing about this?

We’re seeing more and more U.S. Companies launch their own Premium Loyalty Programmes – which is really a Loyalty Programme that members pay a recurring fee for a suite of benefits that they can immediately use. It provides the consumer all the benefits upfront, as opposed to earning rewards as you transact with the retailer.

Learn more about premium loyalty programs here.

 

Amazon is a Prime Example of Premium Loyalty in the UK

Amazon Prime launched in the UK in 2007 and really was the game-changing catalyst for the UK Loyalty Programme market. It was the start of a new type of Loyalty Programme, The Premium Loyalty Programme.

Amazon understood that your most loyal customers are also your most profitable. Prime members spend on average £1400 per year, as opposed to £600 to that of Non-Prime members.

Add into the mix that Members pay £89 per year and your Loyalty Programme fast becomes a Profit Centre not a Cost Centre. At the last estimate there are over 100 million worldwide Prime members – This is a tribe and the ultimate dream for any Retailing CEO.

The Prime model proves that if the benefit configuration models your customers’ behaviour, needs and wants – they will pay that monthly fee.

 

Getting Started with a Premium Loyalty Programme in the UK

But where do UK Retailers start?

“We don’t have the product team, the creative team, the accounting team, the data team, the customer service team or even the bandwidth to run a fee-based Premium Loyalty Programme.”

This is where Clarus Commerce comes into its own. We help retailers build and manage premium loyalty programmes from start to finish and beyond.

We don’t charge our partners any upfront fees to service the above pain points. We simply share the revenue stream from programme members with the retailer. Simply, if the program is doing well, we all do well. As they say in the U.S., we have “skin in the game”.

Retailers can leverage not only our loyalty platform, but also our knowledge within the space. We’ve built over 50.

We’ve always believed that the UK is underserved when it comes to Premium Loyalty. What proves that point is that Amazon Prime is the only real key player in this space. What retailer can honestly say that they haven’t lost market share to Amazon? And this is down to their Prime Programme.

Who in the UK is ready to follow in the footsteps of Richard Tomkins and the Green Shield Stamp Trading Company and pioneer premium loyalty programmes in the UK?

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