Will Boots' loyalty programme changes prove popular with customers?by
High Street retailer Boots has announced it is overhauling its popular customer loyalty programme. So how is the Advantage Card changing and how will customers respond?
For a quarter of a century, Boots has been a customer loyalty programme pioneer via its renowned Advantage Card. But now a big shake-up is coming.
The High Street giant is changing how its loyalty card works, cutting the amount of points that customers will earn - from 4p worth of points for every £1 spent to 3p - but offering more discounts on its own-brand products.
In a recent interview on MyCustomer, Boots CMO Pete Markey spoke of the need for the loyalty programme to continue to evolve, acknowledging that since its launch in 1997 it had worked to stay abreast of trends - including economic - to stay relevant to its 15 million customers.
“The Boots Advantage Card has evolved to be about more than points and saving in the everyday,” explained Markey. “The immediacy of earning and spending points still fulfils our customers’ need for ‘jam today’, which is especially important in the current cost-of-living crisis.
“Not forgetting the need for ‘jam tomorrow’, we also understand that highly customised rewards are powerful for customer retention. The roll-out of our monthly Price Advantage discounts and more personalised offers and benefits through our app, as well as our clubs and discounts all help to keep customers interested, engaged and connected.”
Customers certainly seem to be wanting change. In a recent study of 2,000 UK shoppers by Emarsys, it was revealed that while 71% are loyal to retailers that provide personalised discounts, incentives and rewards, 19% feel that "they can no longer afford to be loyal", and 56% of UK consumers have changed their loyalty to a brand due to the cost-of-living crisis.
The same study found that 33% of consumers want brands to invest in rewarding loyalty in 2023. So will customers feel like the changes will help them as they migrate to cheaper own-brand items, or feel short-changed by the point cuts?
Sensible strategic financial decisions
Martyn Cole, director of commercial operations at Retail Directions, believes that Boots' transparency over the changes will be appreciated.
“Boots probably has one of the longest-standing loyalty schemes around, so the decision to shake up its Advantage Card scheme shouldn’t come as a surprise. Retailers are battling rising costs from inflation, increasing energy bills, and higher wages, and any responsible retailer must make sensible strategic financial decisions to ensure the longevity of the business.
“Boots itself has admitted that more customers are looking to access instant savings and its offer to Advantage cardholders of 10% off its own range provides the ‘on-the-spot’ lower prices and instant value customers are seeking.
“I, for one, applaud the transparency Boots has taken in announcing changes to its loyalty scheme. It hasn’t tried to hide the reduction of customer value behind any smoke and mirrors like some retailers have done – ‘shrinkflation’ being an example.”
More ways to benefit?
Chris Whitson, global head of strategy at Iris, believes that while the retailer’s decision to cut points from its lauded loyalty programme may be headline-grabbing, customers will warm to the new model - eventually.
“Whilst decisions like this make for great headlines, what Boots has done reflects what we are seeing across the retail loyalty landscape now, and indeed, it is something customers’ themselves have craved for quite a while,” he explains.
“When we speak to consumers in our own research, one of the most consistent reasons respondents give for programme dissatisfaction is how long it takes to save a meaningful amount of points. This loyalty apathy almost certainly impacts participation and what every retailer needs from their loyalty proposition is mass participation. That is where the data they collect becomes most valuable. To overcome this challenge, it makes sense to blend a long-term points mechanic with more immediate cost-saving benefits for a cardholder.”
This is something that Sainsbury’s does with ‘Nectar Prices’, Tesco does with ‘Clubcard Prices’ and Boots does with ‘Price Advantage’.
There may be initial outrage, but I would suspect that the fact there are now many more ways they can benefit will be viewed positively.
“When a customer can see an immediate saving on a product, they can access simply the benefits of being a loyalty programme member, which undoubtedly has a positive impact on scheme participation,” continues Whitson.
“Clearly the costs of implementing a reduced price programme are high and Boots are offsetting that increased cost by making points worth less. As loyalty programmes continue to digitise the offer, it makes it much easier to blend various different loyalty mechanics so that customers benefit in both the long-term and the short-term. There may be initial outrage, but I would suspect that, for a large proportion of Boots customers, the fact there are now many more ways they can benefit will be viewed positively.”
Will it lose the wow factor?
But there is without question an element of risk involved in this move.
Helen Godley, loyalty & retail strategy director at Go Inspire CX, suggests that changing the loyalty scheme to offer discounts on its own-label products instead of points may reduce the power of the Advantage Card, as the ‘wow factor’ was in the generous points earnings and the 'Redemption Moment'.
“The strategy will be good in the short- to medium-term as it will help people’s budgets go further and increase immediate customer satisfaction. However, with fewer redemptions and wow moments due to fewer points being issued – there could be a longer-term detrimental impact on customer satisfaction and loyalty.”
She continues: “With this move, Boots hopes to retain footfall and see retention levels remain stable as customers will still redeem their points for own-label products. It might also be trying to drive customers to its own-brand products where it will operate at a higher margin and have more control over the supply chain/stock levels.
“If it manages to achieve the halo effect/benefit of customers coming in-store and making discretionary purchases across complementary categories, customer satisfaction will be restored.”
Will Boots' plan backfire?
Cole also acknowledges that the success of the new model also rests upon the quality and popularity of its own-brand products. “One question arises as Boots turns the spotlight onto its own brand products - does its own range have a strong enough brand identity to hit the mark with discerning consumers given the diverse choice available? Only time will tell.”
Less positive about the change in strategy is Nick Drewe, retail and trends expert at online discounts platform Wethrift.
“As Britons continue to navigate through the ongoing cost-of-living crisis, many consumers have decided to cut costs where possible. This has involved switching from branded products to their own brand equivalents, and it seems clear that Boots shoppers are feeling the pinch and doing the same,” he says.
“It is certainly admirable that the decision-makers at Boots sensed the urgency for more instant savings for its customers, and have acted on feedback to make their 6,000+ own-brand products cheaper for the card holders. That being said, the fact this coincides with the reduction in Advantage points value does seem a little contradictory, and - dare I say it - unnecessary for such a huge brand, owned by US-based Walgreens, estimated to be worth almost $98 billion.”
With fewer redemptions and wow moments due to fewer points being issued – there could be a longer-term detrimental impact on customer satisfaction and loyalty.
And while the programme has traditionally been regarded as one of the most generous in the UK, Drewe believes that the new system could backfire.
“One annual perk of collecting the advantage points is being able to use them at Christmas, on the ever-popular ‘three for two’ gift deal that many rely on for reducing their festive outgoings year after year,” he says.
“However, with the value of any new points totalling 25% less come December 2023, will consumers instead turn their attention to the cheaper High Street alternatives like Home Bargains, Savers or Superdrug in order to source the items previously bought at Boots?”
Overall, what Boots' decision proves is that retailers are under pressure to find ways to keep their loyal customers satisfied while improving their revenues.
Zsuzsa Kecsmar, co-founder and chief strategy officer of Antavo, believes that companies can respond better than Boots.
“I believe this could have been handled more effectively - such as increasing all prices by 1% to improve profitability while avoiding the need to target only loyal, existing shoppers," she explains.
“The cost-of-living crisis continues to put a squeeze on consumers and highlights the need for retailers to be smarter about how they deliver loyalty programmes. The traditional schemes are no longer fit for purpose - it’s time to think long-term and adapt to evolving consumer behaviour. Successful companies are thinking outside the box to ensure loyalty resonates with their audience - such as KFC introducing gamification or Ripcurl rewarding shoppers for the time they spend surfing. It’s paying off and brands could gain a lot from this more intuitive, creative approach.”
Neil Davey is the managing editor of MyCustomer. An experienced business journalist and editor, Neil has worked on a variety of newspapers, magazines and websites over the past 20 years, including Internet Works, CXO magazine and Business Management. He joined MyCustomer in 2007.
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