The Power of Loyalty Cards

Boots launched its Advantage card loyalty scheme in 2001. Customers sign up for the card and collect points for each purchase that they make at Boots which can then be redeemed against future purchases. Each £1 purchase generates four points for the customer but all sorts of additional activities such as special promotions and in-store events garner additional ‘bonus’ points – an approach which subtly creates a focus on points collection and consequently more purchases. It has extended its scheme to allow customers to collect points at other retailers such as Thomas Cook, ToysRUs and Asos.com which can be redeemed at Boots. Most retailers operate similar schemes but the key to successful loyalty programs rests on the company’s ability to use the information it is collecting on its customers and their buying habits to target them more effectively.

For example, Boots ran a special Christmas promotion in 2009 with the aim of showing customers that they could get gifts for everyone under one roof and at the same time collect bonus points for themselves. It sent a direct mail package to 6 million of its customers to drive them to special in-store events and this effort was complemented by press and TV promotions. But its customer knowledge meant that it was able to send out 400,000 different versions of the mailing tailored to a customer’s previous purchasing patterns. This deep customer knowledge enabled the promotion to be highly successful at a time of year when all retailers are marketing very aggressively. Coupon redemption rates, which are generally very low, rose by 25 percent because customers were receiving more relevant offers. Incremental sales from the in-store events rose by 90 percent year-on-year and incremental profits rose by 60 percent.