EMV cards have been in the spotlight this year, with JP Morgan Chase, U.S. Bank, and Wells Fargo making announcements of portfolio migration from magnetic stripe cards to plastic that carries both mag stripe and a “chip”.

Market leading loyalty researchers, Colloquy, featured chip cards in the U.S. in their most recent issue, interviewing Randy Vanderhoof, the long time leader of the Smart Card Alliance, for insight into the wave of change hitting American shores.

Emerging from the smart card discussion, there are two key topics for debate.

1. Over what time period will U.S. migration to EMV take place and at what cost?

2. Will the widespread adoption of EMV cards by U.S. issuers represent a launching pad for loyalty program innovation?

Funny thing how history repeats itself:

• In 1996, Geno Pandolfi, a brilliant creator of payment and loyalty solutions who operated well ahead of his time, developed a smart card interface for his loyalty software, Cobrasys. The solution became part of the many smart card pilots trialed by Visa in Latin America during the late 90’s, and was the operating platform for the Bonus coalition loyalty program in Peru.
• During a 5-6 year stretch between 1998 – 2004, I attended the annual Smart Card Forum which brought together vendors and solutions providers focusing on bringing innovation to the payments business. Randy Vanderhoof was a prominent part of those discussions – most of which were addressing the same questions I have noted above. During those events, I tried on George Jettson-like Java-enabled rings that could be passed before chip enabled readers at POS and bought sodas at the conference events with my smart card loaded with a prepaid purse.
• During my years with Frequency Marketing through 2005, Jim Kuschill, the “godfather” of loyalty processing software technology (in my book at least) invested countless hours to understand what marketers could deliver to consumers in the way of loyalty via Chip that couldn’t be done with a mag stripe. The answer – not much.

Now, it seems, we’ve gone “back to the future” and are opening a similar debate once again. If you’re interested in a “Loyalty Lifehack”, I’ve got one for you:

• EMV cards are being introduced in the U.S. because the case to reduce fraud is so overwhelming that card issuers have no choice
• Trying to create buzz about EMV from a loyalty standpoint is peripheral to the discussion as the real debate is about cardholder protection and payment card utility.

You see, as the U.S. is the last significant nation in the world to adopt the EMV standard, the fraudsters have come to our shores to take advantage of the easiest mark on the globe. Add to that Americans traveling abroad are increasingly targets of fraud as they have only mag stripes cards to use, and the utility issue comes center stage.

Richard Sanders sounded this alarm in 2006 at the last Smart Card Forum which I attended. Richard is a globally recognized payments and loyalty expert, having run the credit card centre of excellence at Visa EU, launching the first “chip and pin” card program in the UK with Abbey (now part of Santander) and now sharing his wisdom with clients of ACI Worldwide, where he serves as a Solution Consultant. ACI recently published a comprehensive loyalty survey based on the retail field which garnered much attention in the press.

During a talk about loyalty and chip cards, Richard told a packed room that “whether they liked it or not” chip cards would come to the U.S. sooner than later. Richard predicted the timing of the introduction would correspond with the migration of other nations to the EMV standard, leaving the U.S. alone as the world’s “fraud magnet”. Some delegates listening scoffed at the idea, responding that our low-cost, always-on communication systems negated any benefits from EMV.

It took a few years for the prediction to come true, but Sir Richard was right. EMV is coming soon, and with the current legislative pressure on swipe fees, we may well see a Chip and PIN model taking hold just as it did in European markets. Whether the eventual form factor is based on contact or contactless acceptance at POS is another subject for debate.

To the question of whether EMV will spell differentiation for loyalty marketers, please don’t bet the farm on it just yet. One reasonably successful example that I have seen is BBVA Bancomer’s migration of its Puntos Bancomer program to Vida Bancomer circa 2006. That program used its new EMV capable cards to carry a purse of loyalty points which could be redeemed with merchants as part of a purchase transaction.

The success of that program was largely made possible through the fact that Bancomer not only was one of the largest issuers in Mexico but also a leading card acquiring organization. With the entire processing, authorization, and settlement lifecycle under its roof, Bancomer was able to recruit merchants to participate, and added some zip to a program originally motivated by the EMV migration.

What’s ahead? Maybe you should have Richard Sanders on speed-dial as he has been living with EMV and Loyalty for the past 10 years.

My guess is this:

For Payments: Count on the mag stripe co-existing with chip for the next 3-5 years and then gradually phasing-out. The speed at which terminal conversation can take place and the determination of “fallback” policies will dictate the horizon.

For Loyalty: Some loyalty programs will use available real-estate on the chip to facilitate instant redemption and other “in the moment” rewards, but look for more powerful innovation through mobile, social, and location enabled paths.

Feeling “chippy” about the subject? It’s a complex subject, so drop a comment and spark the debate!

Here in Orlando, enjoying the best Loyalty Expo to date, I can tell that change is in the wind. Today’s sessions covered future visions of how loyalty is evolving to drive results for brands across vertical industries. Loyalty 360’s chief, Mark Johnson provided a keynote documenting  changes in consumer behaviors that are compelling loyalty marketers to adopt new perspectives on program execution.

Barry Kirk, Maritz led a panel of practitioners from Gamestop, SAP and others who talked about the holes in current loyalty models and predicted that cross channel marketing and better use of data collected on loyalty program members will lead to breakthroughs in loyalty ROI.

Jonathan Silver, Affinity Solutions shared how Sony is using an innovative approach to retain viewership and support advertising revenues for Wheel of Fortune, America’s most watched game show.

Peter Oxley, RewardStream and Kiwi Collection shared insights into how referral and recommendation marketing leverages human behavior to create loyalty without a formal program construct.

Tomorrow, BJ Emerson, Tasti D Lite, will talk about the frozen desert chain’s use of passive check-in to accelerate the rewards earned by members of its Tasti Rewards program. More great content is sure to complete Day Two in Orlando.

Meanwhile, I received notice from Mike Atkin, a well regarded UK based loyalty consultant, that he was featured on New Zealand TV to share his views on the state of the industry in that country with comparisons drawn  to leading UK programs including Tescos. You can watch the video here.

In 2005, Mike Atkin and I founded the Customer Strategy Network as a global association of independent loyalty marketing practitioners. At that time, we were surprised that the 25 year old relationship and loyalty marketing industry did not have a professional organization where ideas and best practice could be exchanged in a non-competitive environment. That simple observation led to the establishment of this group, signifying a new model of cross-border collaboration among leading marketing experts.

CSN was founded on the pillars of solution independence and cross-border understanding, and its members deliver strategies for clients worldwide. CSN will have a new web site available shortly, so please watch this space for announcements.

It seems that Loyalty Marketing is truly entering a new phase of development. I’ve been encouraged by new ideas shared by delegates at Loyalty Expo and Mike’s appearance on NZ TV tells me that Loyalty never sleeps!

The proven model worldwide to form a multi-partner Coalition loyalty program is essentially the same, regardless of the local language.

Operators normally chase down the one or two leaders in each high frequency category (retail, grocery, fuel, banking) to form the foundations of their value proposition. With regional coalitions easier to launch than ones of national stature, consider a new path to partner identification and recruitment, one that is practical to execute and could lead to big results.

What if marketers started the identification process with the consumer, not the partner? Imagine if they paused to understand the way consumers feel about individual brands and which ones fit together best to achieve a partner network that connected with large consumer groups on an emotional level?

A conversation with a friend provided me an example of how bundled preferences become a purchase-decision reality. My friend will remain unnamed, but the complexity of his purchase decision making process is worth some server space.

After bragging a bit on his country’s Olympic Hockey Gold medal, he shared an unsolicited opinion about his favorite Canadian rewards program. His description was transparent and blended logic, emotion, and value.

After ticking off  his range of choices for loyalty programs in his market – AirMiles,  Canadian Tire Dollars, Esso Extras, HBC Rewards, Petro Canada’s Petro Points and Shopper’s Drug Mart, he surprised me by saying “I collect everything through my Aeroplan card“.

Why? Not for just one reason, but several:

• He likes the speed and convenience of paying at the pump with a RFID device and chose Speedpass for its ubiquity over Shell’s Easy Pay device.
• He’s a big Tim Horton fan, which has lots of stores within the Esso C-store footprint.
• He’s an RBC loyalist, having banked there since a young age, and Esso tends to have RBC branded ATM machines at their sites.
• His family has always considered Esso to be their “family brand” of retail fuel.
• And, the more he sticks with Aeroplan, he finds he can accelerate his collecting through his Elite status that triggers partner offers.

Through my quick conversation, I found that it was the combination of brands assembled by Aeroplan that made the difference. I realize that my conversation constitutes a “focus group of one” but it is illustrative of how we can re-engineer partner selection processes to launch and operate multi-partner loyalty programs that are more effective.

This little tale provide evidence into why coalitions work but also points to the reality that even individual loyalty program sponsors should consider the power of developing partnerships in the future.

Either way, it is clear that consumer loyalty is not triggered solely by the collecting activity itself but by brand affinities and the customer experience taken as a whole.

The beauty of business travel has to be the opportunity to see life through a different lens. At least I am claiming this as a benefit as there has to be an offset to long airport security lines, expensive food, and uncomfortable airline seats that compose the rest of the experience!

When we remain sequestered in the US, we tend to believe that the way we do things is the “only” way. But while we naval-gaze on how we can leverage the continual wave of innovative technology to add efficiency and cost savings to our business, we miss the bigger point. There are still lots of gaps to be closed in markets outside the US and quite a few of them can be closed with minimal effort or thought. For example, when I find reward program operators hoping to add online rewards redemption or upgrade technology, I can confidently provide advice without stretching the limits of imagination.

On the other hand, I often encounter situations where technology is more advanced or a business model different enough that loyalty program operations are enabled well beyond what we can execute within our borders. The fact that many banks are both issuers and acquirers of cards opens up all sorts of possibilities for POS messaging and reward redemption that is a much bigger challenge to implement in the US.

At the end of a busy day in Toronto this week, I was seeking a little caffeine boost and stopped into Tim Hortons, Canada’s favorite coffee and donut provider. Waiting to pay, I saw a sign on the counter informing me that Debit cards were not accepted at Tim Horton’s “to maintain our high speed of service“. I posted the photo on my Pikcur account and share it with you here just in case you don’t believe me.

I’m really not sure how to interpret Tim Hortons’ policy on Debit Cards. Visa had a long running campaign illustrating how debit cards bring speed and convenience to daily shopping experiences and the launch of contactless debit cards several years ago raised the ante on moving the “Q” through check out.

Maybe its really not speed that Tim Horton is worried about. In fact maybe their policy is less about adding convenience to the customer experience and more about reducing processing costs. Even that argument falls short as the cost of cash-handling has been proven to be significant in the QSR world.

Sometimes we don’t have all the answers, but we can observe and document for the moment, hoping that the dots are connected somewhere down the road. For now, I’ll just put Tim Horton in my “Questions about Debit Cards” file.

The beauty of business travel has to be the opportunity to see life through a different lens. At least I am claiming this as a benefit as there has to be an offset to long airport security lines, expensive food, and uncomfortable airline seats that compose the rest of the experience!

When we remain sequestered in the US, we tend to believe that the way we do things is the “only” way. But while we naval-gaze on how we can leverage the continual wave of innovative technology to add efficiency and cost savings to our business, we miss the bigger point. There are still lots of gaps to be closed in markets outside the US and quite a few of them can be closed with minimal effort or thought. For example, when I find reward program operators hoping to add online rewards redemption or upgrade technology, I can confidently provide advice without stretching the limits of imagination.

On the other hand, I often encounter situations where technology is more advanced or a business model different enough that loyalty program operations are enabled well beyond what we can execute within our borders. The fact that many banks are both issuers and acquirers of cards opens up all sorts of possibilities for POS messaging and reward redemption that is a much bigger challenge to implement in the US.

At the end of a busy day in Toronto this week, I was seeking a little caffeine boost and stopped into Tim Hortons, Canada’s favorite coffee and donut provider. Waiting to pay, I saw a sign on the counter informing me that Debit cards were not accepted at Tim Horton’s “to maintain our high speed of service“. I posted the photo on my Pikcur account and share it with you here just in case you don’t believe me.

I’m really not sure how to interpret Tim Hortons’ policy on Debit Cards. Visa had a long running campaign illustrating how debit cards bring speed and convenience to daily shopping experiences and the launch of contactless debit cards several years ago raised the ante on moving the “Q” through check out.

Maybe its really not speed that Tim Horton is worried about. In fact maybe their policy is less about adding convenience to the customer experience and more about reducing processing costs. Even that argument falls short as the cost of cash-handling has been proven to be significant in the QSR world.

Sometimes we don’t have all the answers, but we can observe and document for the moment, hoping that the dots are connected somewhere down the road. For now, I’ll just put Tim Horton in my “Questions about Debit Cards” file.

Visitors to England usually have an easy to predict list of “must see” destinations during their stay. After coping with the adjustment to a different time zone, most are off to see Buckingham Palace, Big Ben, and the London Eye. With cultural needs somewhat satisfied, a bevy of High Street merchants are on the “shopping” list including Burberry’s, Fortnum & Mason, Harrods and Marks & Spencer, to name a few.

In these challenging economic times, one might assume that these big names might be viewed almost as touristic destinations with discounters being given the nod for actual purchases. That is not necessarily the case as the retail phenomena in the UK seems to favour the high and low ends of the market with only those mired in the middle encountering difficulty.

The grocery price war underway seems to reflect the trend as Asda; Wal-Mart’s European subsidiary is prospering while perennial market leader Tesco is seeking to re-establish its position by offering double points for the first time ever as part of its Club Card rewards program.

There appears to be a significant change in the UK Retail Fashion Market. Similar to the grocery retail sector, consumers are seeking bargains and the trend is for the low-price retailers (e.g. Primark, George at Asda, H&M) to enjoy growth in revenues, the middle-market retailers (e.g. Next, M&S) suffering a decline in sales whilst the high-end market is performing well with the likes of Hackett, Hugo Boss and Harrods showing significant results.

Over the past decade one of the most enduring trends on the UK high street has been price deflation. Fast and inexpensive fashion has become a fact of life for consumers used to being able to grab the latest looks at throwaway prices. The rise of value fashion has seen some of the biggest success stories of recent years with the likes of Primark, New Look and the supermarkets establishing cut-price clothing offers.

Retailers have been working with ever tighter margins to keep pace with the intense competition on price. But the global financial crisis has skewed a lot of the economic dynamics that made the rise of the value retailer possible, and now manufacturers, brands, retailers and consumers are all feeling an unprecedented pressure on finances.

The dramatic changes in the value of currencies, most notably the weakness of the sterling against the dollar and the euro, have meant that in the space of just a few months, suppliers and retailers have seen the cost of buying product (retailers typically buy in dollars from the Far East) rise significantly.

In this sector, Harrod’s posted surprisingly strong results as the Knightsbridge retailer owned by Mohamed Al Fayed said sales grew by 9% to hit a record £751.7m in the year to January 31.  For Loyalty Marketers, the news was good as well as the retailer commented that “take up of its loyalty card scheme had been strong over the period“.

Customer centric marketing combined with capital expenditure of £24m during the year were just a few aspects of Harrods’ secret to success. The fact that Harrod’s credits the loyalty scheme as a contributor to its recent success  tells us that Loyalty works among affluent shoppers as well as the mid-market. There is a similar case in the US, as Niemen Marcus continues to promote its “In Circle” program, generally rated as one of the best structured in the North American retail sector.

In other retail loyalty news, Debenhams withdrew from the Nectar Coalition Programme in 2008 as the relationship had failed to deliver an acceptable ROI for the leading UK department store.  I would suggest that Debenhams may have enjoyed greater success from the Nectar relationship if they had focused their Loyalty activities on Nectar rather than confusing customers by also offering their own Store Card Programme.

Nectar has now recruited House of Fraser and Next as new partners although points are only earned for online purchases. Marks and Spencer also operate a Loyalty scheme for their private label cardholders but also fail to recognise and thank other ‘loyal’ customers that prefer to pay cash or use another form of payment.

Across Europe there are numerous Fashion Retailer Storecard programmes offering rewards for consumers using high APR (average 19.9%) cards but seemingly ignoring the ‘invisible customer’ who may be a more valuable consumer.

It seems that Loyalty works with the affluent sector as in any other but, unlike the grocery market; Fashion Retailers are failing to create effective Customer Management strategies and only use Loyalty as a promotional tactic.

Visitors to England usually have an easy to predict list of “must see” destinations during their stay. After coping with the adjustment to a different time zone, most are off to see Buckingham Palace, Big Ben, and the London Eye. With cultural needs somewhat satisfied, a bevy of High Street merchants are on the “shopping” list including Burberry’s, Fortnum & Mason, Harrods and Marks & Spencer, to name a few.

In these challenging economic times, one might assume that these big names might be viewed almost as touristic destinations with discounters being given the nod for actual purchases. That is not necessarily the case as the retail phenomena in the UK seems to favour the high and low ends of the market with only those mired in the middle encountering difficulty.

The grocery price war underway seems to reflect the trend as Asda; Wal-Mart’s European subsidiary is prospering while perennial market leader Tesco is seeking to re-establish its position by offering double points for the first time ever as part of its Club Card rewards program.

There appears to be a significant change in the UK Retail Fashion Market. Similar to the grocery retail sector, consumers are seeking bargains and the trend is for the low-price retailers (e.g. Primark, George at Asda, H&M) to enjoy growth in revenues, the middle-market retailers (e.g. Next, M&S) suffering a decline in sales whilst the high-end market is performing well with the likes of Hackett, Hugo Boss and Harrods showing significant results.

Over the past decade one of the most enduring trends on the UK high street has been price deflation. Fast and inexpensive fashion has become a fact of life for consumers used to being able to grab the latest looks at throwaway prices. The rise of value fashion has seen some of the biggest success stories of recent years with the likes of Primark, New Look and the supermarkets establishing cut-price clothing offers.

Retailers have been working with ever tighter margins to keep pace with the intense competition on price. But the global financial crisis has skewed a lot of the economic dynamics that made the rise of the value retailer possible, and now manufacturers, brands, retailers and consumers are all feeling an unprecedented pressure on finances.

The dramatic changes in the value of currencies, most notably the weakness of the sterling against the dollar and the euro, have meant that in the space of just a few months, suppliers and retailers have seen the cost of buying product (retailers typically buy in dollars from the Far East) rise significantly.

In this sector, Harrod’s posted surprisingly strong results as the Knightsbridge retailer owned by Mohamed Al Fayed said sales grew by 9% to hit a record £751.7m in the year to January 31.  For Loyalty Marketers, the news was good as well as the retailer commented that “take up of its loyalty card scheme had been strong over the period“.

Customer centric marketing combined with capital expenditure of £24m during the year were just a few aspects of Harrods’ secret to success. The fact that Harrod’s credits the loyalty scheme as a contributor to its recent success  tells us that Loyalty works among affluent shoppers as well as the mid-market. There is a similar case in the US, as Niemen Marcus continues to promote its “In Circle” program, generally rated as one of the best structured in the North American retail sector.

In other retail loyalty news, Debenhams withdrew from the Nectar Coalition Programme in 2008 as the relationship had failed to deliver an acceptable ROI for the leading UK department store.  I would suggest that Debenhams may have enjoyed greater success from the Nectar relationship if they had focused their Loyalty activities on Nectar rather than confusing customers by also offering their own Store Card Programme.

Nectar has now recruited House of Fraser and Next as new partners although points are only earned for online purchases. Marks and Spencer also operate a Loyalty scheme for their private label cardholders but also fail to recognise and thank other ‘loyal’ customers that prefer to pay cash or use another form of payment.

Across Europe there are numerous Fashion Retailer Storecard programmes offering rewards for consumers using high APR (average 19.9%) cards but seemingly ignoring the ‘invisible customer’ who may be a more valuable consumer.

It seems that Loyalty works with the affluent sector as in any other but, unlike the grocery market; Fashion Retailers are failing to create effective Customer Management strategies and only use Loyalty as a promotional tactic.

One mantra of Loyalty Marketing practitioners is that discounting is not a sustainable strategy. While it does create temporary impact to boost sales and adjust inventory levels, it is not a differentiating tactic and does not serve as the foundation for creation of competitive advantage through a strategic marketing plan.

That said, discounting is one of the preferred tools of retailers and grocers. The Wall Street Journal reported that leading UK grocers have taken to slashing prices, offering discounts, and launching new private label brands to vie for basket share.

The approach is short of subtle as Asda, Morrisons, Sainsbury’s & Tesco are creating advertising campaigns highlighting price advantages and a slew of discounts.

The price wars were triggered by the economic meltdown started one year ago and each brand that formerly differentiated itself by a unique characteristic (Asda “low prices”, Morrison’s “low priced deli”, Sainsbury’s “good food”, Tesco “broad choice”) now seem to be merging at a rapid pace.

As example, Sainsbury’s renamed a familiar advertising campaign from “Taste the Difference” to “Spot the Difference” and has a celebrity chef instructing on how to “feed your family for a fiver”.

The introduction of new privately branded products is driven by gross margins typically 10% higher than regular brands. The chain that can convince the public that they offer highest quality and best price while looking out for the families’ interest will presumably break from the pack. Waitrose, a traditionally up-market retail grocery chain, have also introduced an ‘own label’ range to retain consumers’ loyalty.

There is an element of Consumer Fatigue in all of this ‘price-war’ activity with each Supermarket claiming to have many prices lower that its competitor. Consumers are confused and research indicates that all retailers are doing well during this ‘credit-crunch’ as many families are eating at home more often.

Fascinating here is that ALL of the competitors seem to be benefiting from price wars. Of those reporting, Morrison’s led with an 8.2% same store sale increase in the latest quarter while Sainsbury’s chalked up a 7.8% gain and Tesco’s 4.3%. In the US, Kroger posted a 13% increase in the most recent period. Tesco, however, has seen a decline in its share value (down 7.4p to 364.5p) and remains bottom of the UK supermarket league table in terms of underlying sales.

Kroger is of interest as they are the second largest food retailer in the U.S. following Walmart and are using DunnHumby, a data analytics firm owned by Tesco to leverage its loyalty program data and enable discounts and special offers choreographed by historical purchase data and customer preference.

Where the current price war will end is uncertain and experts including Darrell Rigby, Head of Global Retail Practice at Bain & Co. are sounding early alarms by saying “price cuts are management heroin“. He notes “they’re addictive …. customers develop a craving for big discounts and an aversion to full prices. Companies get used to the boost in volume and risk a backlash when they try to raise prices later.”

For Asda, its almost business as usual. A subsidiary of Walmart, the company subscribes to the “Always Lowest Prices” motto. For market leaders Tescos (30.8% market share) and Sainsbury’s (16%), pure price competition is new ground.

The question, particularly for Tesco is whether they are progressively eroding the equity they have built into the Club Card over the past decade and how they can change course in time to ensure that this will not, in fact, be the case.

STOP PRESS !!!

Tesco is determined to get back onto the front foot and is doubling Clubcard Reward Points. Members will now receive 2 points for every £1 spent, meaning that a family spending £100 a week will receive £104 a year in rewards. This is the biggest change made to Clubcard since its launch 14 years ago.

Analysts suggest that, on one level, this strategy could be put down to the fact that Tesco has performed well for a decade, whereas others are recovery plays or have much more patchy records. Also, with a Tesco on almost every corner, there is an element of saturation and some stores are bound to cannibalise sales of others.

The increase in points funding will cost Tesco £400m but their track record suggests this move has been properly planned and is not a knee-jerk reaction to rivals.

Mike Atkin is President MJA Associates a UK based Loyalty Consultancy. We welcome him as the kickoff contributor to the “Loyalty in Any Language” series.  A highly respected industry expert with twenty plus years experience within the Loyalty/CRM Solutions Market, Mike Atkin  has broad knowledge of all aspects of Loyalty Programmes, including strategy and operations.

Mike has reviewed and benchmarked over 40 global Loyalty Software Platforms and completed evaluation studies of capabilities on behalf of programme operators in the USA, UK, South Africa and Russia.

Mike has worked with many notable brands including Premier Points, Amex Membership Rewards, Shell Smart, Boots Advantage, Marriott Rewards, as well as Tesco, Sainsburys, Somerfield, LloydsTSB, Asda, ExxonMobil, GE Capital, American Airlines, Visa EMEA, House of Fraser and Microsoft.

One mantra of Loyalty Marketing practitioners is that discounting is not a sustainable strategy. While it does create temporary impact to boost sales and adjust inventory levels, it is not a differentiating tactic and does not serve as the foundation for creation of competitive advantage through a strategic marketing plan.

That said, discounting is one of the preferred tools of retailers and grocers. The Wall Street Journal reported that leading UK grocers have taken to slashing prices, offering discounts, and launching new private label brands to vie for basket share.

The approach is short of subtle as Asda, Morrisons, Sainsbury’s & Tesco are creating advertising campaigns highlighting price advantages and a slew of discounts.

The price wars were triggered by the economic meltdown started one year ago and each brand that formerly differentiated itself by a unique characteristic (Asda “low prices”, Morrison’s “low priced deli”, Sainsbury’s “good food”, Tesco “broad choice”) now seem to be merging at a rapid pace.

As example, Sainsbury’s renamed a familiar advertising campaign from “Taste the Difference” to “Spot the Difference” and has a celebrity chef instructing on how to “feed your family for a fiver”.

The introduction of new privately branded products is driven by gross margins typically 10% higher than regular brands. The chain that can convince the public that they offer highest quality and best price while looking out for the families’ interest will presumably break from the pack. Waitrose, a traditionally up-market retail grocery chain, have also introduced an ‘own label’ range to retain consumers’ loyalty.

There is an element of Consumer Fatigue in all of this ‘price-war’ activity with each Supermarket claiming to have many prices lower that its competitor. Consumers are confused and research indicates that all retailers are doing well during this ‘credit-crunch’ as many families are eating at home more often.

Fascinating here is that ALL of the competitors seem to be benefiting from price wars. Of those reporting, Morrison’s led with an 8.2% same store sale increase in the latest quarter while Sainsbury’s chalked up a 7.8% gain and Tesco’s 4.3%. In the US, Kroger posted a 13% increase in the most recent period. Tesco, however, has seen a decline in its share value (down 7.4p to 364.5p) and remains bottom of the UK supermarket league table in terms of underlying sales.

Kroger is of interest as they are the second largest food retailer in the U.S. following Walmart and are using DunnHumby, a data analytics firm owned by Tesco to leverage its loyalty program data and enable discounts and special offers choreographed by historical purchase data and customer preference.

Where the current price war will end is uncertain and experts including Darrell Rigby, Head of Global Retail Practice at Bain & Co. are sounding early alarms by saying “price cuts are management heroin“. He notes “they’re addictive …. customers develop a craving for big discounts and an aversion to full prices. Companies get used to the boost in volume and risk a backlash when they try to raise prices later.”

For Asda, its almost business as usual. A subsidiary of Walmart, the company subscribes to the “Always Lowest Prices” motto. For market leaders Tescos (30.8% market share) and Sainsbury’s (16%), pure price competition is new ground.

The question, particularly for Tesco is whether they are progressively eroding the equity they have built into the Club Card over the past decade and how they can change course in time to ensure that this will not, in fact, be the case.

STOP PRESS !!!

Tesco is determined to get back onto the front foot and is doubling Clubcard Reward Points. Members will now receive 2 points for every £1 spent, meaning that a family spending £100 a week will receive £104 a year in rewards. This is the biggest change made to Clubcard since its launch 14 years ago.

Analysts suggest that, on one level, this strategy could be put down to the fact that Tesco has performed well for a decade, whereas others are recovery plays or have much more patchy records. Also, with a Tesco on almost every corner, there is an element of saturation and some stores are bound to cannibalise sales of others.

The increase in points funding will cost Tesco £400m but their track record suggests this move has been properly planned and is not a knee-jerk reaction to rivals.

Mike Atkin is President MJA Associates a UK based Loyalty Consultancy. We welcome him as the kickoff contributor to the “Loyalty in Any Language” series.  A highly respected industry expert with twenty plus years experience within the Loyalty/CRM Solutions Market, Mike Atkin  has broad knowledge of all aspects of Loyalty Programmes, including strategy and operations.

Mike has reviewed and benchmarked over 40 global Loyalty Software Platforms and completed evaluation studies of capabilities on behalf of programme operators in the USA, UK, South Africa and Russia.

Mike has worked with many notable brands including Premier Points, Amex Membership Rewards, Shell Smart, Boots Advantage, Marriott Rewards, as well as Tesco, Sainsburys, Somerfield, LloydsTSB, Asda, ExxonMobil, GE Capital, American Airlines, Visa EMEA, House of Fraser and Microsoft.

After more than 100 posts I can say that Loyalty Truth has achieved a degree of permanency.

Founded on my own conviction and commitment, it is a welcome relief to have help. I express my gratitude to guest contributors Tom Rapsas, Jim Kuschill, Brian Kryzanski, and Mike Capizzi. They have each written about aspects of Loyalty Marketing where they have particular expertise and collectively they represent a growing foundation of support for this blog.

With so much to write about in the evolving Loyalty Marketing industry, the opportunity is here to establish some themes to follow for the future. Keep your eye out for articles categorized as “Loyalty 201“, “Loyalty in Any Language“, and “Loyalty Futures“. In addition, we’ll continue to document instances of the “Loyalty Asterisk“, to address the gotchas and tripwires of Loyalty Marketing.

• Loyalty 201 will address how essential elements of the business are evolving to meet the needs of increasingly empowered and knowledgeable customer groups. Here you will read about new directions in rewards, communications, and marketing technology which drive higher ROI for loyalty program sponsors. I’m assuming that my readers understand the basics and are ready to move on to consume solid food!
• Loyalty in Any Language will share learning from international markets. The influence of culture, custom, and unique business environments on the execution of effective marketing strategy is undeniable. These posts will provide a vital resource for any company with cross border interests. I will not only share my own first hand experiences working outside of our borders, but will showcase loyalty leaders from key markets around the world.
• Loyalty Futures will take inventory of just about anything that can be found in the crystal ball of Customer-centric strategic marketing. Where innovation in building brand loyalty and changing customer behavior is observed, we’ll share it here. Lots of big companies are trying to connect the dots of social media, millennials, digital CRM, and profitability and Loyalty Truth will makes its contribution to the cause.

According to what I read in the blogosphere, my approach to Loyalty Truth is somewhat non-conforming.

• I am driven by substance, not frequency of posting. Though I manage to get a dozen or so posts up each month, I have yet to publish a “throw away” article and hope I never do. There is so much change underway in Loyalty marketing that my inventory of “posts-to-do” is outpacing my time to properly research and post. This approach should translate into high quality posts that are almost mini case studies by themselves. You can be the judge.
• Balancing quality and readability is the next challenge. Beyond a certain length, you won’t spend time to read what’s posted, so I am saving some bigger topics for white papers to be published on the Hanifin Loyalty website.
• Lastly, I have to admit that while writing is an enjoyable pursuit, I publish Loyalty Truth with a purpose. The perspective, opinion, and experience that is baked into each post is meant to offer a teasing glimmer of insight into the value that Hanifin Loyalty brings to its clients. We confidently offer the highest level of strategic advice as well as exacting project management and tactical execution services to make sure clients reach their profitability targets. Give us a chance to serve as your portal for top-tier decision making. You’ll find there is still quite a value to be found in the dollar these days.

I hope you will enjoy these new features and spread the word about Loyalty Truth.

Enjoy the journey….