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29 March 2024

Can customer loyalty be bought?

(LIZ RAMOS)

Published
By Carli Smithers

It's often an offer too good to refuse – one that entitles us to freebies or cash simply for shopping at our local supermarket, fashion outlet, coffee shop or airline. For doing nothing more than we always did – shop – a rising numbers of stores in the UAE seem willing to throw money at us. And it's all in the name of the loyalty card.

Whether it's an espresso-coloured piece of cardboard that will earn you a free skinny latte from Costa Coffee or the sky blue piece of plastic that offers you free flights, spa days or mere toasters from Air Miles, points mean prizes. And prizes are just what everyone needs in these straitened times.

The Park Hyatt offers customers a free meal if they notch up enough points; the Centrepoint Privilege Club card turns points into shopping vouchers; Emirates' Skywards scheme rewards customers with flights and gifts; and Air Miles promises to pay your weekly shopping bill at Spinneys.

But it's not all about cashing in points to redeem prizes. There are also the innocent-looking retailers who give you an even more tempting offer: You show us some loyalty and we'll give you some nice bonuses in return. Mercato Mall's Privilege Plus card, for instance, brings in shoppers by the A360-load with offers of instant discounts and prizes. The La Senza Club card, which gives away one free bra for every nine you buy, and the Coffee Bean and Tea Leaf Pink Drink card, which puts the 13th coffee you buy on the house.

However they work, loyalty cards certainly get customers excited. Tara Bonner, a 42-year-old mother from the UK, who admits to having six loyalty cards weighing down her purse, says, "I was addicted to loyalty cards in the UK, and as more and more appear here in Dubai's shops I feel compelled to sign up. I just can't refuse that offer of discounts and points – I guess it makes me feel a little less guilty about shopping when I should be saving!"

More fool those retailers, you might think, as you pocket that 20 per cent discount or cash in points to redeem all manner of tempting handouts. But far from this being an act of kindness, retailers are obviously looking for something in return.

In today's fierce – and more recently challenging – climate, retailers are searching for smart weapons to gain an edge on the competition. Enter the loyalty scheme, which not only encourages repeat custom, but gets shoppers to increase their spend in one store. Given the choice between two stores, we are more likely to shop at the one where we earn rewards.

So choosing to be loyal is actually synonymous with opening your wallet to one coffee shop, airline or hotel over another.

For the past 10 years, shoppers in the UK and the US have been bombarded with the question, "do you have a loyalty card?" every time they reach the checkout. In the UAE – a shopping paradise that attracts more than two million visitors during Dubai Shopping Festival and Dubai Summer Surprises alone – the loyalty card is still a new phenomenon. However, with more tourists each year than the number of residents, and with new outlets such as the Dubai Mall and Marina Mall, the need to stand out in the retail sector has become more pressing.

In more established markets such as the UK, retailers have developed various concepts to gain that competitive edge. For example, since Tesco introduced its Clubcard loyalty programme in the UK, its customers are spending 28 per cent more at its supermarkets and 16 per cent less at its competitor Sainsbury's. Research for the Middle East is harder to come by.

Fiona Leslie, Head of Marketing & Public Relations, Air Miles Middle East, says: "Loyalty is a recent development in the Middle East, but with increasing competition all the time, it is becoming more and more essential for retailers to use loyalty initiatives such as Air Miles as a way to retain and lift spend of existing customers as well as acquire new customers, which can be done most effectively using a coalition programme, instead of a stand alone programme."

Air Miles was the first loyalty scheme to reward UAE shoppers and, since its launch in 2001, more than 1.4 million members have enrolled from over 700,000 households in the UAE, Qatar and Bahrain. Members can collect Air Miles from over 120 market-leading companies to claim rewards and experiences. While originally set up as a frequent flyer programme for British Airways, Air Miles has diversified to offer a variety of rewards; in fact the most requested reward is now for shopping vouchers.

When we look at the loyalty schemes set up by Etihad and Emirates, miles are no longer simply currency for flying. Both companies operate a tiered system offering anything from an ipod nano to tickets for the Big Bus tour. While Etihad Guest offers immediate rewards and a miles-plus cash-option of claiming rewards, Emirates' Skywards offers benefits such as waitlist priority, priority check-in and exclusive lounge access for frequent travellers.

Similarly, hotels, which once just offered a free room upgrade to loyal customers, are now branching out. Among the best deals available is Rotana Rewards, which combines discounts, points and alliances with frequent flyer schemes. Its three-tier programme includes an exclusive card designed primarily to encourage and reward customers' spending in food and beverage outlets by offering members complimentary dining when accompanied by at least one other person – as well as beverage discounts.

Elie Saliba, Rotana Loyalty Programme Director, says: "The benefits are designed to meet members' needs such as guaranteed late check out, discounts in F&B and accommodation, members recognition and personalised service, in addition to over 900 rewards prizes."

One reason the programme has members choosing Rotana over other hotel outlets is because of its annual summer promotion, where members exclusively get 50 per cent cash back vouchers on their food and beverage spending on top of regular discounts.

And Dubai, which has experienced a retail boom in recent years, is the ideal place for such schemes to flourish.

"We had 2000 Wafa cardholders three weeks after opening this store, with the demand for the flexible card to collect points, receive discounts and load with cash surpassing our expectations," says Eric Poiret, COO, Aswaaq, which recently opened its first UAE supermarket in Nad al Hamar along with a Wafa loyalty card.

And Eric Hughes, General Manager for ELR Costa believes the Costa Coffee loyalty card is critical. "As the coffee shop sector becomes increasingly competitive, improving loyalty and retention will be fundamental. During these uncertain times we believe customers would appreciate the offer of free coffee with the new loyalty card," he said.

But shoppers must tread with caution. All these schemes come with a hidden agenda – to track customer shopping behaviour and acquire as much information about us as possible. As we sign up to Dine In By Hyatt or Skywards we gladly hand over information about our family, home and leisure interests that retailers use in highly targeted promotions. Do companies in the UAE actually use this information? According to Fiona Leslie, the answer is slowly but surely, yes.

She said: "We've done a lot of successful campaigns already. With Damas we used SMS and HTML to target existing and potential customers and the response rate was 20 per cent, which was brilliant.

"We look at people's nationality, their age, their shopping behaviour and so on, and we target them accordingly. So, instead of receiving junk mail, people are getting something they can benefit from."

Instances of this data being sold or leaked or personal gain are not unknown, either.

So, are loyalty schemes worth the plastic they're printed on? According to a recent study by moneysavingexpert.com in the UK – which valued one Air Mile at just 7.9 pence (less than 20fils) – the answer is a resounding "no". If you are going to regularly buy goods or use the services of a company that already has an established reward scheme, it does make financial sense to join up. Indian national Prachi Parihar, 36, puts it plainly: "If swiping a loyalty card every time I shop gets me something I wouldn't have got otherwise, well, why not?"

That may be so, but she and others like her should expect to pay the prices for the rewards they reap. Need proof? Well, you need 40,000 Skywards miles before you can claim a free one-way flight from Dubai to London – that means paying for six return flights. You have to eat and drink your way through Dh10,000 to receive a 1,000 dining voucher through Dine In By Hyatt; spend Dh500 to claim a Dh50 voucher at Centrepoint; and you need to collect 36,000 Air Miles to claim a toaster – that means spending Dh36,000!

In these difficult times we should be looking for making savings wherever possible. This is at the cost of having Big Brother watching our every shopping move though – and possibly worse still adds another four or five cards to our already burgeoning purse or wallet. But, maybe that's just the price we have to pay for being loyal.

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