Loyalty cards and customer behaviour
Has the loyalty card had its day in European retailing?
oyalty cards have become an increasingly sophisticated marketing strategy in recent
years. These bits of plastic that most of us have in our wallets serve three basic
functions: identiﬁcation, memory and reward. As technological advances have
enabled increasingly sophisticated databases, retailers have gained the ability to target
customers with frightening accuracy. Do you have sophisticated tastes? Your supermarket
loyalty card will reward you with money-off coupons for French cheese and ﬁne wine. Have you
recently succumbed to the joys of dog ownership? Coupons for essential pet care products
will soon be dropping through the letterbox. However, the important question is: do loyalty
cards actually work? That is, do they encourage customers to spend more money with the
shop offering this incentive and are customers thus rewarded less likely to shop elsewhere?
Do loyalty cards work?
Retailers certainly seem to believe that loyalty cards are an effective marketing strategy. In
recent years the top sixteen European retailers have spent over $1 billion annually on loyalty
cards and similar initiatives. However, despite the vast sums of money being spent on
customer loyalty, there is little hard evidence about whether such strategies actually work.
Even less information is available about how they work. However, Nordhoff et al. (2004) think
they might have some insights into the question of ‘‘how’’ loyalty cards work. They propose
that store loyalty actually exists in two different forms: attitudinal and behavioral. Behavioral
loyalty probably represents more of what retailers are aiming for, as it has to do with
customer habits. Customers exhibiting behavioral loyalty spend more of their shopping
budget at stores whose loyalty cards they hold. Attitudinal loyalty represents a psychological
disposition toward a certain retailer. It does not necessarily translate into hard cash.
Targeting Asian markets
Despite that the effectiveness of loyalty cards has not been established, they are ubiquitous in
European retailing. But does this strategy translate well into the expanding Asian retail sector?
With static retail markets in the USA and Europe, retailers have targeted Asia where markets
are growing twice as fast as at home. One advantage in the Asian market may be that
customers have not had the opportunity to acquire loyalty card fatigue. In fact, this is one
argument against the effectiveness of loyalty cards in the European market. Saturation may
decrease the efﬁcacy of loyalty initiatives with customers losing interest, or manipulating the
system. One way to do this is by holding multiple loyalty cards so that advantages can be
gained wherever a customer chooses to shop. Another important factor in the equation is
culture. Loyalty may be perceived differently in Asia than it is in Europe and this could impact
on the success of any loyalty initiative transposed from Europe. However, the Asian economic
crisis in the late 1990s may have predisposed Asians to be ‘‘bargain hunters’’ who will afford
loyalty to retailers offering value for money, particularly in the form of targeted savings.
VOL. 21 NO. 7 2005, pp. 18-20, Q Emerald Group Publishing Limited, ISSN 0258-0543 DOI 10.1108/02580540510598990