The announcement that, as an integral part of their rebrand, John Lewis and Waitrose are launching a joint loyalty programme is welcome news to those in the loyalty world, not only because it's genuinely a fantastic idea – more on that later – but also because loyalty can often be considered the ugly stepchild of marketing.
This tendency can be very frustrating, because by not tying loyalty into the wider strategy retailers are missing out on significant growth opportunities.
For John Lewis and Waitrose, this tie-up provides real opportunities for the two programmes to share strengths and resources, and build a single, stronger customer experience for every member, rather than two smaller, weaker, disparate experiences.
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Aside from these positives, there is also a real opportunity to build cross-brand loyalty and drive incremental brand value – both are critical in these challenging times. Contrary to what you might think – and to what I first thought – the actual cross-pollination of customers between the two brands is actually quite low.
According to YouGov data, only 40% of John Lewis customers are Waitrose shoppers, while only 34% of Waitrose shoppers also shop at John Lewis. This presents a massive commercial opportunity: a small increase in cross-pollination could help the group return to healthy profits.
These are reward savvy and hungry customers. They will respond very well to a joint programme.
For Waitrose in particular, the opportunity is significant. Only 11% of John Lewis customers shop in Waitrose as their main supermarket (vs 23% at Tesco and 21% at Sainsbury’s). In fact, 69% of John Lewis customers have a Nectar card, while 67% have a Tesco Clubcard.
The two customer bases have very similar desires from loyalty programmes and their spend is positively impacted by being a member of one. And both sets of customers are major fans of them, with 75% of John Lewis customers considering loyalty programmes a great way for brands to reward customers, while 76% of Waitrose customers also felt that way.
Indeed, 55% of John Lewis shoppers spend more when they are a member of a loyalty programme and 52% of Waitrose customers do the same, while those who shop at both retailers are even more positively impacted, with 60% spending more.
And they like the same kinds of rewards and benefits: 47% of John Lewis customers and 48% of Waitrose customers save up their benefits to get higher-value rewards.
They are both more responsive to rewards than the national average population: 76% of John Lewis and 78% of Waitrose customers want online and in-store discounts and offers. These are reward-savvy customers and will respond very well to a joint programme.
The opportunity for the two brands is huge. But they need to develop a new loyalty experience that's based on a deep understanding of the joint brand opportunity, using real and robust customer insight.
There are strong precedents in the market for this kind of activity, big and small. At the biggest and most old school end, we have the shared airline and hotel loyalty programmes, which see huge benefits from sharing schemes that enable them to offer members better and bigger rewards with more choice and flexibility at lower shared cost.
There are also examples from smaller retailers. For instance, TK Maxx and Homesense share Treasure, while Monsoon and Accessorize also have a combined scheme.
The opportunity for John Lewis and Waitrose is huge. But they need to develop a new experience that's based on a deep understanding of the joint brand opportunity, using real and robust customer insight about what people want from a joint programme.
The big risk here is if, instead of this, they merge the two existing programmes without thinking about what needs to change to make a joint proposition work.
If they get it right, it will be fantastic. If they get it wrong, they risk watering down what people love about the two programmes and these loyalty-loving customers won’t hesitate to make their feelings known. There is precedent for this – earlier this year, when Waitrose replaced its "Pick your own offers scheme" with one that's based on user data, customers were quick to criticise the company.
Charlie Hills is managing director of Mando-Connect