Loyalty Programmes: A Powerful Tool for Retail
When Tesco unveiled its Clubcard loyalty programme to the British public back in 1995 I attended the media launch and thought it sounded interesting but did not initially grasp the revolutionary aspects of the initiative that at a base level rewarded shoppers with points for buying their groceries at the supermarket.
What it really achieved was tying them into spending much more of their money at Tesco – through supplier-funded discounts – and also generating an incredibly rich data set on its customers that directly helped the grocer determine its future strategic moves. It provided the platform from which Tesco was able to power ahead of its rivals. Needless to say, it prompted lots of reactionary activity from its rivals and the broader retail industry too.
What was surprising was the lack of activity it drove in the hospitality industry with most companies continuing on the traditional, and very much flawed, the path of focusing their marketing budgets solely on acquiring new customers rather than looking after their existing shopper base and enticing them to increase their spending and frequency of visits.
The Impact of Pret A Manger’s Subscription Scheme
Loyalty programmes have appeared from various hospitality operators over the intervening years but nothing particularly earth-shattering. Certainly nothing with the same sort of impact as Tesco’s Clubcard. That changed, in my opinion, with the launch of the Pret A Manger subscription scheme during Covid-19.
Admittedly it is not technically a loyalty programme but in terms of generating loyalty among customers it has had a dramatic effect on the business. In fact, senior management at Pret has suggested that it likely saved the company during the worst of the pandemic when its central London sites were either closed or serving virtually no customers because the capital suffered much worse than more provincial locations.
Learning from Successful Subscription Initiatives
The £20 (subsequently increased to £25) monthly fee gives subscribers the ability to order up to five barista-made drinks each day. Needless to say, it has driven incredible footfall into Pret outlets. As well as banking the £25 the company no doubt looks to these subscribers to also sometimes purchase additional products while on the premises in order that Pret can gain the most value from the initiative. The company has been guarded about revealing the metrics around its subscription but it seems to have become a core part of the business and management has only given out positive messages about it so we must assume it is working very well.
The Potential of Subscription Models for the Hospitality Industry
Against this backdrop, it has been interesting to note that other operators have failed to launch their own subscription-type initiatives in the market. In the US we’ve had Panera Bread offer a coffee subscription. Its parent company is JAB Holdings which also owns Pret so there have clearly been important shared learnings between them. Another initiative involves Taco Bell which has occasionally played around with a Taco Lover’s Pass that gives subscribers a taco per day for a month for a mere $10 but the company seems to have lacked the conviction to create a permanent workable economic model.
Marks & Spencer’s Sparks Plus: A Multi-Faceted Subscription Program
While the hospitality operators have failed to so far commit to subscription-type models a major retailer has moved in with its own initiative. Marks & Spencer has just launched Sparks Plus, which it describes as a paid-for loyalty tier for its Sparks loyalty programme. For £120 per year, subscribers receive a monthly £10 voucher, unlimited next-day delivery, and a free monthly hot drink in any M&S Café. This clearly all adds up to a lot more than £120 so M&S is obviously using it as a driver to boost the frequency of visits to its stores and also online in order that it will generate extra sales.
Experimenting with Subscription Models to Drive Loyalty and Sales
The interesting aspect of Sparks Plus is that it comprises a variety of components, unlike the more one-dimensional Pret coffee subscription, which should prompt hospitality companies to certainly take note. Subscription programmes can clearly take any form and include various ingredients on the menu. It just needs companies to investigate the mechanics and maybe experiment on small segments of their customer bases to see what works.
Surely with the clever marketing know-how within the country’s many restaurants, pubs, bars, QSR outlets and takeaway operators, the industry must be able to rustle up some workable subscription models that will drive loyalty and ultimately boost sales.
Glynn Davis, founder, Retail Insider