Are paper vouchers and loyalty cards a thing of the past?

Consumers love a bargain, and respond to feeling valued as customers.

It's why discount vouchers and loyalty schemes have long played a key part in retailers’ strategies, even as technology continues to change the face of retail.

Indeed, more than two thirds of shoppers will buy a product only if they have a coupon for it (2K17 Valassis Coupon Intelligence Report).

Yet as smartphones become ubiquitous, are paper vouchers and loyalty cards a thing of the past, usurped by apps, or do they still have a role to play?

How Caffè Nero introduced digital loyalty

Caffè Nero is one of the latest brands to replace paper with digital, announcing in April 2017 that its 20 year old paper stamp loyalty cards would be replaced by a mobile app.

The app allows customers to collect stamps and receive tailored offers, as well as paying directly by scanning a QR code generated on their phone.

It is designed to be more convenient for consumers, eliminating the need to carry yet another physical loyalty card in their purse or wallet. But there are clear benefits for the retailer too, and it comes in the form of data.

As Caffè Nero’s Head of Marketing, Marcus Denison-Smith told The Grocer in April 2017:

“We will be able to use the app to recognise someone who is coming in less frequently than they used to and incentivise them with free stamps. We’ll also be able to spot if a customer has never bought any food products and we can incentivise them with free stamps if they try a panini or cake.” 

It allows Caffè Nero to discreetly target certain customer groups with specific offers. A modern take on a well established idea!

Tesco led the way…

Loyalty programmes have long been at the heart of gathering customer data.Tesco led the way when it launched its Tesco Clubcard in 1995.

The loyalty card - and the Dunnhumby database behind it - gave Tesco an unprecedented insight into who its shoppers were and how they shopped.

Clubcard data enabled Tesco to predict consumer trends and prepare for them, as well as issuing personalised vouchers to introduce customers to new brands, creating better opportunities for up-selling and cross-selling.

Sainsbury’s Nectar loyalty scheme, launched in 2002, applied a similar logic, with customers also able to turn their accumulation of points into cash off their next shop.

Smartphones have enabled data capture…

Today, brands have never had access to so much customer intelligence, and the rise in smartphone ownership has provided retailers with a golden opportunity to digitise both vouchers and loyalty schemes, taking Tesco’s pioneering concept one step further.

This move facilitates the shopper experience and captures data in a way that paper vouchers and loyalty schemes never could.

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…and location-based targeting

Location based targeting is one burgeoning area of opportunity, enabling retailers to combine customer data with location data to deliver customised incentives to people’s smartphones at timely moments - such as when a shopper is in the vicinity of a specific store.

When Tesco opened a new store in Villiers Street, London in 2015, it worked with 02 to set up geo-fencing to identify 40,000 shoppers who had opted in to marketing and had walked past the store six times over two weeks.

Tesco sent money off coupons to the shoppers’ smartphones, and in April last year 02’s Managing Director of Commerce, Robert Franks told Marketing Week that it was the company’s most successful location-based coupon to date.

DID YOu know?

  1. 75% of 253 global marketers, including Starbucks, BMW, and Coca-Cola, believed that location-based marketing would play a crucial role in their businesses last year.

  2. Location technologies, including beacons, wifi and GPS, were set to grow by double digits in 2016, with 63% of marketers planning to invest in wifi, 57% in GPS, and 41% in beacons.

    The Global Location Trends Report, 2016

Digital can overcome other retailer challenges too…

There are other advantages to digital incentives too. Research from iVend Retail in 2015 suggested that 15% of shoppers forget to take their loyalty cards with them, resulting in lost opportunities for both shopper and brand.

Another report from mobile retail specialists, Apadmi, in November 2015, revealed that 97% of British people who own a smartphone “usually” take it shopping with them, presenting a clear opportunity.

As Chris Bates, Head of Customer Marketing at John Lewis told Marketing Week, “A lot of feedback we get from members is around the hassle of remembering a plastic card. Digital is a win-win all round, it costs less to produce and it’s easier for the customer because there’s one less thing to carry round. Everyone carries their phone around.”

John Lewis seems to have cracked digital loyalty

John Lewis’ added loyalty functionality to its mobile app in August 2015. It was developed directly in response to staff insight that customers frequently forgot to bring their loyalty cards or found it difficult to find them at the till, as well as feedback that people often lost or forgot their receipts, making it difficult to return items.

The app automatically stores digital receipts to the virtual ‘Kitchen Drawer’, as well as rewarding customers with prize draws and event invites.

Within two weeks of the digital loyalty element launching, 20,000 of John Lewis’ customers linked their physical membership to the loyalty scheme’s app, showing a clear appetite for the initiative.

And by including the digital receipt functionality, customers have a genuinely useful reason to scan their cards and engage with the scheme on an ongoing basis.

But paper can’t be dismissed…

The business case for digital is clear, but that is not to say that paper vouchers or loyalty cards are breathing their last breath. While some retailers are enjoying success, digital loyalty schemes and vouchers as a whole remain in their infancy.

Many companies are still trialling different ways to stand out from competitors and create a smartphone app which adds genuine value, while smartphone adoption is also a key consideration. While over nine in 10 16-44 year olds own a smartphone, this drops to just over seven in 10 for 55-64s (source: GWI, July 2016).

The stats certainly suggest that paper still has a place.

According to eMarketer, the use of paper coupons increased 58% in 2016, while mobile coupon usage grew by 38%.

As usual, it is down to offering customer choice, something Caffè Nero has recognised. The cafe chain has said it will continue to accept paper loyalty cards, with its spokesperson telling The Grocer, “Our paper card is much loved and used by millions of our customers worldwide; it will continue to be available in all stores…We feel choice is important when it comes to customer loyalty.”

Customer choice is paramount

It is a sentiment supported by Curtis Tingle, Chief Marketing Officer at UK coupon and voucher solutions provider, Valassis:

“Our research indicates that there is an opportunity for brands to influence how shoppers plan, where they shop and the products they buy – which can be achieved by dynamically targeting the right audiences with a strategic combination of print and digital incentives.”

It isn't about digital versus paper, but providing a seamless, multi-channel experience. Ring any bells?




*2K17 Valassis Coupon Intelligence Report