I’m just coming to the end of another week of meetings with UK retailers of all different sizes. Whatever the size of the business, the conversation often turns to the subject of loyalty programmes as that’s where I’ve spent much of the last decade. And again, whatever the size of the business, paper stamp cards are brought up as a potential mechanism for rewarding and influencing customers. Stamp cards have been a subject much discussed in the office and I thought it time to share our thoughts.
Declaring my hand
Anyone who knows me will probably agree that I’m a loyalty junkie. I have a full deck of loyalty cards from retailers worldwide that could almost be described as a definitive collection. I love exploring the features and benefits of each programme and watching each brand try to influence my behaviour.
I’m also a major shareholder in Visible Results UK, a loyalty marketing agency who have some neat loyalty technology of their own. It’s difficult to be impartial when considering other technology platforms, but I’m probably far enough removed from stamp cards to give a balanced view.
What are we talking about?
If you’re unclear what I mean by paper stamp cards, these are the cards that are handed out with a purchase by many high street shops. The card is stamped by staff according to your spend and once the card is full, you’ll receive a reward.
The qualifying criteria vary; I’ll take a quick look at a few:
Caffe Nero: Perhaps the best known stamp card in the UK. Caffe Nero probably issue more than any other brand. One stamp is given for every coffee purchased. Once you have collected nine stamps, the tenth coffee is yours for free.
Giraffe: Not the best-known brand on the high street, but this restaurant chain has an offer that is pretty typical: buy seven takeout coffees and the eighth is yours for free.
Nandos: This is one of the only cards that offers an alternative to the “me-too” coffee stamps. Spend more than £6 on a visit and get a stamp. Collect three stamps and get a free ¼ chicken on the same visit. Six stamps will earn you a ½ chicken and for the patient ones, nine stamps will be traded in for a whole chicken.
The case for
Let’s make a start on considering all the benefits for a retailer in using these cards:
1. They’re cheap:
Other than email, there can be no other marketing promotion as cheap to run as the cards. Even for smaller retailers with less than ten sites, like Crepe Affaire or Belgo, can run a low volume print order and still not worry too much about the unit costs.
2. Easy to be on brand:
The flexibility for the cards to maintain brand essence is only down to the versatility of the design team. I like the look of the Apostrophe loyalty card, which shows some of their unique sandwiches minimized into icons. It also provides a list of all the outlets, but I can’t see when I’d use it. Given that all their outsets are inside the M25, would a map make more sense?
I also rate the Nando’s card. It manages to communicate the passion and share their enthusiasm for Peri-Peri chicken, without complicating the offer.
3. Low level data capture.
We’re not breaking new ground in social media here, but retailers mustn’t forget that completed cards could be handed in with an email address or perhaps the answer to a ‘commercial question’ such as how often the customer visits the store. This data can be used to help understand customer behaviour better.
4. Barista affinity.
There has been much talk this year about retailers encouraging their staff to build an emotional bond with their customers, however brief the purchase. Pret a Manger have achieved this exceptionally well through a careful recruitment programme and impressive training. Pizza Express came under some criticism in October when it emerged that they had recruited a classically trained actor to teach flirting and the art of chit-chat. Stamp cards can build this bond too; in their book ‘Yes! 50 secrets from the science of persuasion’ Noah Goldstein and Steve Martin (not that Steve Martin) suggest that a barista might like to stamp a new customer’s card a couple of extra times to get them started. They demonstrated through research that customers are 15% more likely to complete their card (and therefore demonstrate loyalty) if they’ve been given a head start. They also have a shorter time between visits.
5. Partner opportunity on reverse
Other brands might like to connect with the same consumer. UK retailers have experimented with offering media space to like-minded brands. Caffe Nero often show details of exhibitions at galleries and museums. This can supplement income without compromising brand values, and in Caffe Nero’s case, help differentiate the brand from the competition through ‘strength by association’.
6. Better than doing nothing
Given all the clear benefits I’ve already shared for implementing a stamp card, I’m amazed that this is the argument I’m given 90% of the time. “Our marketing budget is limited and we thought ‘Others are doing it, so why don’t we?’”
The case against
1. Better than doing nothing
I’m not entirely convinced that offering a stamp card is better than doing nothing. Let’s go back to my collection and dig out some of my cards. I have a Krispy Kreme card, which is only stamped every time I happen to be taking a train and fancy a doughnut and a coffee to take with me. Now I believe I, like other customers, are probably going to go back for doughnuts anyway. I only take a train about once a month and it will therefore take me a year to fill my Krispy Kreme Rewards Card with stamps. I’m therefore being given my 7th doughnut and coffee for free when I’d be happy to pay. For Krispy Kreme, that means their simple paper cards are impacting profit margins.
2. Should these customers receive the same?
When I visit one of my local coffee shops, I hand over my stamp card. I can see others are doing the same. It is clear from the conversations that the other customers visit at least once a day. Now, if I visit once a month, should I receive the same reward as the daily customers once I’ve filled my card with stamps? I would argue that daily customers have a greater lifetime value for the coffee shops, and therefore should receive more benefits than me.
3. No email address
Some of the cards encourage customers to complete their email addresses before receiving their rewards. I wonder how many of these addresses, given the busy retail environment (especially this month) are checked. I heard of a cinema chain recently who had collected some rather interesting email addresses in their promotions; is there really a Mr Clint Eastwood living in Basingstoke? I suggest that if you intend to collect email addresses, deliver the reward via the address so you can guarantee it will be correct.
4. No basket analysis: no cross selling opportunities
One of the great benefits of running a loyalty programme is the cross selling opportunity from understanding your customers’ basket of goods purchased and applying these to particular profile of customer. This understanding can then be used to influence customer behaviour in the future. For example, “We notice that you like low calorie products, so here’s an offer for our new low calorie beer.” Any offers, such as this one can be highly targeted and therefore only delivered to customers who might be interested in them. Tesco, through the agency Dunn Humby, have a reputation for being ahead of the game in this area. You can read more about it in their book “Scoring Points” Amazon has achieved similar success online. None of this can be achieved with the stamp card.
5. No influencing behaviour
So I mentioned the lack of cross selling opportunities, but perhaps more important is that there are no opportunities to influence behaviour with the stamp card. If a customer hasn’t visited, we can’t get them back. If a customer always buys a coffee but never any food, we can’t tempt them with a trial offer for muffins. Subway were running a stamp card programme for many years but have recently moved to a CR code application on mobile phones. Their change in ability to influence their customers’ behaviour from the development of this neat app is exponential.
6. No security controls
When retailers start to give goods away, there is always a tiny element of risk that some customers or staff may look for ways to abuse the system. I know of a case with a client some years ago that a card was registering spend of, say, £50 at the same time, every night. Fortunately, we had controls in place and the card was traced back to a retail staff member who had registered the card in his own name, and at his home address…
There was a case with one retailer a few years ago that found that staff members were selling completed cards on ebay. A quick search on ebay today shows that completed McDonalds cards entitling you to a free coffee are available for as little as 40p.
7. No gift card functionality
Over the last few years, there has been an increasing convergence between the gift card (or stored value card) and the loyalty card. This has been primarily a result of the simplicity of the technology requiring in adding a gift card to a retailers EPOS systems and the business model of businesses such as Givex who enable the launch of a gift card solution with little upfront investment. UK retailers such as Costa Coffee and others with a low transaction value such as Starbucks and Pret a Manger have followed suit. The ability to complete a cashless payment without entering a pin code is an attractive offering and must influence customers to visit more frequently.
8. No reactivation
What’s reactivation? It’s probably one of the most important tools in a loyalty marketer’s toolkit. Taking the understanding of a customer through the profile of their activity in your store and then combining it with the knowledge of their last visit, gives a retailer real power. If they have access to this data, generated through a fully functioning loyalty/ CRM system, they can contact all customers who haven’t visited for a while and tempt them back into store. The impact is easily measurable and can quickly add up to a major boost in revenue.
9. No understanding of cross site- geography vs brand
It’s good to know where your customers shop. I was working recently with a retailer who told me that opening a new store within a few hundred metres of an older store was having no impact on revenue for the existing store. A quick look at the loyalty programme data and we were able to prove whether that was the case. Yes, he was right, very few customers for the new store had ever been to the previous one around the corner. It’s this kind of data that can be so valuable when planning the expansion of a business and gives a competitive edge. Is it the brand that is the reason for a customer’s loyalty or is it simply the location? Perhaps less expensive store locations would have little impact on turnover and a huge impact on the bottom line.
10. VIP customers are treated the same
With almost every loyalty programme I’ve been involved in, a group of VIP customers emerges. These aren’t the 20% of customers responsible for 80% of revenue (Grazie ancora, Signore Pareto) but the 1% who are probably responsible for 5% of turnover. Like all customers these ones must be nurtured. The first challenge with no loyalty programme in place is how to identify them in the first place. It would be difficult to do this, without tracking date of visit, total spend and email address and then entering all these onto the stamp cards! Once these customers have been identified, the retailer should find a way of rewarding them that goes beyond the standard loyalty programme. Any programme a marketer launches for typical customers is quickly outgrown by the VIP’s. Stamp cards are a perfect example of how to not recognise their additional loyalty. I recommend something extra for the best customers and it isn’t made of paper.
So to conclude. A quick look at the numbers and it’s 10 to 6 against the humble stamp card. However, I’d say if you explore each of these reasons above and calculate the economic value behind each point, I’d say a retailer running a stamp card programme as an alternative to a more comprehensive CRM system is probably saving a little bit on costs, but missing out on somewhere between 2% and 10% of additional revenue. Every year.