THE RISE OF THE

SAVVY SHOPPER
THE IMPACT OF THE RECESSION
ON CUSTOMER LOYALTY

INSIGHTS

Maria Sealey
Director of Research Services
Aimia
THERE ARE TWO SIDES TO EVERY STORY

Each of your customers is really two customers sharing one body: One customer motivated by transactional drivers
such as price and convenience; the other one motivated by emotional drivers such as status and experience.
Earning customer loyalty requires sophisticated combinations of reward and recognition, driven by deep customer
insight, and designed to appeal to both sides of your customers’ brains. Aimia can help you marry our data science
capabilities with your brand promise to build real relationships with your best customers. Let us help you tell both
sides of your story.

CREATE DEEPER RELATIONSHIPS WITH YOUR

CUSTOMERS BY CONNECTING BOTH SIDES

RATIONAL EMOTIONAL
DATA BRAND “I want to “I want to feel
SCIENCE PROMISE be rewarded.” recognized.”

YOUR YOUR
AND
BUSINESS CUSTOMER

© 2013 Aimia Inc. All Rights Reserved.


EDITOR’S NOTE
The recession may be over, but its impact still
reverberates everywhere. From the corner shop to the
high street or shopping mall. According to the Centre
for Retail Research, in 2012, 54 large- to medium-sized
UK retailers failed whilst U.S. Census Bureau statistics
reported 200,000 small businesses vanishing in the
U.S. by the end of 2010.
Despite the stark headlines, however, the news isn’t
all bad. Even as the going has gotten tougher, some
brands have risen to the challenge and built loyalty
around customer experiences, redemption touch
points, and the value exchange. As they carve out a
more important role in their customers’ lives, these
businesses are emerging from the recession stronger.
Table of Contents
2 Introduction: Stepping Off the Merry-Go-Round
4 The Persistence of Change
6 Loyalty, Indulgence and Security
7 Data Points: The Savvy Shopper
The Rise of the Savvy Shopper / 1
During rough times, marketers often take the
traditional approach of rampant promotions and steep
discounting. This approach has the virtue of driving
short-term results, but it ignores the opportunity to build
long-term, profitable relationships with best customers.
At the same time, a new breed of savvy consumer is
pounding the concrete and virtual pavements in search
of real relationships with their favourite brands. These
consumers understand the value of their pounds
and custom, and they expect to be rewarded and
recognized for their loyalty. While their price sensitivity
is high, they also value quality, service and a seamless
customer experience.
The most important question emerging from the
Great Recession is this: As consumers have changed
their shopping behaviour and values in response to the
recession, which of these changes are temporary, and
which are permanent? To answer this question, in May
and December 2012 we conducted attitudinal research
and transactional analysis to determine the attitudes
and behaviours of UK shoppers during and after the
economic downturn.
The results provide the foundation for this edition of
Insights, in which Maria Sealey explores the rise of the
new “savvy shopper”: more price-conscious, seeking value
out of every brand interaction, and looking to loyalty
programs as vehicles to stretch household budgets and
enjoy affordable indulgences. She also looks at some ways
brands have adjusted their value propositions to build
loyalty within these new consumer norms.
Her conclusion: While the recession has forever altered
the way consumers evaluate brands and make purchase
decisions, the fundamental rules of customer loyalty still
apply. To build relationships with the new savvy shoppers,
marketers must focus on the basic loyalty drivers while
using data science and customer insight to deliver
targeted combinations of reward and recognition.
Savvy shoppers require savvy marketers — and savvy
marketers understand the power of customer loyalty.
— Rick Ferguson, Vice President,
Knowledge Development
8 Back to Basics
9 Case Study: Nectar Savvy Families
10 Loyalty as a Differentiator
12 Conclusion: Your Best Foot Forward
© 2013 Aimia Inc. All Rights Reserved.
2 / The Rise of the Savvy Shopper

INTRODUCTION:
STEPPING OFF THE MERRY-GO-ROUND

The economic downturn turning to daily deals, rampant responded by upping the reward
changed how both consumers discounting, and rock-bottom funding rate — a move which,
and businesses perceive brand prices to generate immediate given that loyalty rewards often
loyalty. With consumer choices sales. These brands often become function as deferred discounts,
increasingly driven by transactional trapped on the promotional effectively mimics the deeper-
loyalty drivers such as price and merry-go-round, which quickly discount strategy of promotional
convenience, marketers may be becomes a death spiral — marketers. According to Aimia’s
forgiven for focusing on these consumers learn to wait out Insights paper “Ten Lessons
drivers at the expense of emotional brands for ever-steeper discounts, in Loyalty” (available for free
drivers of loyalty such as quality, or else they migrate en masse to download in the Knowledge
service, and experience. But for low-price category leaders. Centre of Aimia.com), consumers
businesses looking for ways to 20 years ago earned £1 in rewards
avoid, or at least step off, the Other marketers have taken for every £100 spent. Today that
low-price merry-go-round, the a longer-term, larger-payoff £1 has expanded to £15, and
emotional bonds of customer approach: They seek to build consumers are likely to hold six
loyalty have never been real relationships with their best or more reward cards in their
more important. customers by incorporating the wallets. With new entries into
full spectrum of loyalty drivers the loyalty market every day,
The shopping landscape has seen into their marketing efforts. that number will continue to rise.
seismic shifts over the past few Loyalty marketers in particular
years, there can be no doubt. are adept at leveraging the tools The good news is that consumers
A March 2010 study from OMD of reward and recognition to do seek out reward programs
Worldwide’s OMD Sense report build sustainable relationships as tools to help them stretch
revealed that 70 percent of UK — often through the stimulus of their household budgets and
consumers had changed their a loyalty reward program. But choose where to consolidate their
shopping habits as a result of what role can traditional vehicles spending. Our Post-Recession
the recession. And our own such as reward programs play Consumer Behaviour study
post-recession research indicates in an environment in which the revealed that 64 percent of
these new savvy shoppers may recession has seemingly rewritten UK shoppers are actively using
be here to stay (You can see the rules of customer loyalty? reward programs, and 78 percent
our high-level findings illustrated collect points whenever they can.
in the illustration on page 7). The UK market has become Clearly, consumers understand
So how can we foster loyalty saturated with loyalty programs the value exchange inherent in
with these promiscuous, vying for consumers’ attention; these programs.
pound-stretching customers? the impact of the recession has
placed corresponding pressure on So while consumers understand
Some brands have responded these programs to deliver results. the potential of reward programs,
to this altered landscape by Some program operators have marketers often fail to meet
their expectations of value and
relevance. Instead of offering
a one-size-fits-all financial
give-back approach, marketers
will better serve this new
generation of savvy shoppers
by leveraging shopper data and
“Our Post-Recession insight to deliver value across
Consumer Behaviour the entire shopping experience,
study revealed that from the awareness and
64 percent of UK shoppers are browsing stage, to the purchase,
actively using reward programs, all the way through to the
and 78 percent collect points post-purchase experience.
whenever they can. Clearly, Only by integrating your reward
program as an integral part of
consumers understand the
your overall customer strategy
value exchange inherent in can marketers hope to build
reward programs.” those emotional bonds with their
customers, and step down off the
promotional merry-go-round.

© 2013 Aimia Inc. All Rights Reserved.

 The Rise of the Savvy Shopper / 3

STOP THE RIDE, I WANT TO GET OFF

Marketers responding to the post-recession environment often find themselves on the promotional
“merry-go-round,” trapped in an endless cycle of discounts and promotions that put pressure on margins
and do little to engender long-term loyalty. To step off the merry-go-round, follow these guiding principles
for building real relationships:

IDENTIFY, UNDERSTAND AND INFLUENCE YOUR BEST CUSTOMERS

RECTIFY AND REASSURE CREATE MEMORABLE

IN REAL TIME EXPERIENCES

DELIVER RELEVANT RECOGNIZE VALUABLE

REWARDS CUSTOMERS

INVEST IN LONG-TERM LEVERAGE LOYALTY DATA

RELATIONSHIPS THROUGHOUT THE BUSINESS

© 2013 Aimia Inc. All Rights Reserved.

4 / The Rise of the Savvy Shopper
THE PERSISTENCE OF CHANGE
The recession has impacted
every cohort in the UK consumer
marketplace. At one end of
the scale are cash-strapped
households who are flocking
to the low end of the market
and favouring discount brands;
on the other end are affluent
households who still favour
the High Street — but are still
focused on value and finding
the best deals. The result of this
behaviour is a marketplace in
which lower levels of household
spending are the new normal.
The Office of National Statistics
reports that the typical UK
household is spending £2,340
a year less than before the
recession — 6.3 percent below
the pre-recession peak, a figure
that the Chief UK Economist of
Deutsche Bank, quoted in the
Globe and Mail, described
as “shocking.”
To dive a little deeper into this sea
change, in the summer and autumn
of 2012 we conducted an attitudinal
and transactional analysis of
post-recession shopping behaviour
against a nationally representative
sample of approximately 2,000
UK consumers, including a
representative sample of Nectar
collectors (Aimia operates the
Nectar loyalty program in the UK).
As a result of this research,
we identified four consumer
behavioural segments. We
devised these segments based
on a combination of our research
findings, consumers’ outlook for
the next 12 months, the consumers’
past incomes, and their likely
future earnings.
The only constant we found
amongst these four consumer
segments was the persistence of
change: each group felt the impact
© 2013 Aimia Inc. All Rights Reserved.
of the recession, and each group
has responded with a different, but
nonetheless persistent, change in
behaviour. Here in a nutshell are our
identified segments:
>> Life as Usual: These consumers
make up the most affluent cohort.
Given their high household
income and stable careers, they
were best situated to weather the
recession’s impact. However, they
believe conspicuous consumption
is socially unacceptable, so they
spend less, and seek value and
low prices even from traditional
luxury brands.
>> Copers: This cohort comprises
older, change-resistant consumers
who view the recession as
validation of their naturally
cautious behaviour. These
consumers are most likely to
shop locally, and are least likely
to engage in ecommerce or to
own a smartphone.
>> Anxious Pessimists: The largest
consumer cohort, Anxious
Pessimists were hit hardest by
the recession: They lost their jobs,
saw their savings evaporate, or
lost value in their homes. As a
result, they are fearful of another
downturn. They now shop
based on a strictly fixed budget,
and they economize whenever
they can.
>> Optimistic Millennials: The
youngest group of consumers
in our segments, Optimistic
Millennials came of age in a
down economy and are often
underemployed and burdened
with education debt. These
consumers leverage credit
cards and technology to help
them manage their lifestyles. To
them, the “new norms” — where
consumers plan, research, and
shop around for the best prices —
are the only norms they’ve known.
Despite the prolonged downturn,
they remain optimistic about their
personal financial prospects.
These four segments are united by a
single trait: They’ve all become more
careful about how they spend their
money. Call them the new “savvy
shoppers.” As few of these savvy
shoppers can afford, or are willing,
to take risks, they research and plan
their purchases more deliberately.
As a whole, UK consumers are now
more likely to shop across multiple
brands and retailers, and more quick
to redeem coupons, vouchers and
loyalty program currencies. They
waste less, preferring to reduce their
average spend per trip and top-up
regularly. And while they value the
convenience benefits of local stores,
overall convenience is now less
important than price.
Marketers must therefore recognize
that today’s consumer has evolved.
As a consequence of this sea
change, the route to true loyalty
has become harder to navigate.
Savvy shoppers are not less loyal,
but they are far more discriminating
in choosing to which brands to give
their loyalty. And they expect to
be rewarded and recognized for
their devotion.
To earn loyalty in the post-
recession marketplace, marketers
must leverage data and insight to
understand their customers better
than their competition, and use
the tools of loyalty management
to influence behaviour and build
lasting relationships. The only way
to survive a changing environment
is to adapt — and savvy shoppers
will require savvy marketers to
serve them.
 The Rise of the Savvy Shopper / 5

INSIGHT: THE NEW SAVVY SHOPPERS

As a result of attitudinal and transactional research conducted in the summer and autumn of 2012, Aimia has
identified four key post-recession behavioural segments within the UK consumer population. We identified these
segments by combining survey responses and transactional behaviour with age, income, potential earnings, and
future outlook. These four disparate segments are united by a single common fundamental change in behaviour:
they are all savvier shoppers looking for value, reward, and recognition out of every brand interaction.

E
OM
I NC
AST
P
GETTING BETTER

LIFE AS AGREE
USUAL
THINGS ARE

COPERS
NEITHER

ANXIOUS
PESSIMISTS DISAGREE

DO
W
N UP
FU OPTIMISTIC
TU SA
MILLENNIALS E
RE M E M
IN SA
CO
M E UP N
W
DO

OPTIMISTIC MILLENNIALS LIFE AS USUAL

>> 13.5% of population >> 32% of population

>> Current Income: £17.5k >> Current Income: £50k
>> Lifestage: Young independents >> Lifestage: Younger, affluent workers

COPERS ANXIOUS PESSIMISTS

>> 17.5% of population >> 37% of population

>> Current Income: £18k >> Current Income: £26k
>> Lifestage: Empty nesting and retired >> Lifestage: Middle aged, middle income workers

Source: Recessionary analysis: Aimia intelligent research survey, May 2012 © 2013 Aimia Inc. All Rights Reserved.
6 / The Rise of the Savvy Shopper
LOYALTY, INDULGENCE, AND SECURITY
Recognizing the fundamental shift
inherent in the rise of the savvy
shopper is only half the battle.
Marketers too must fundamentally
change the way they build loyalty
with newly discriminating UK
consumers. Indeed, this evolution
is already creating new winners
and losers in the UK marketplace.
The change is driving innovation,
launching new product categories,
and altering business models.
As a result, brand loyalty is
shifting to those businesses
most responsive and adaptable
to changing consumer needs.
For the cash-strapped, it’s about
financial security. For the affluent,
it’s about affordable indulgence.
While we may be technically out
of the recession, we’re now
definitively living in the Age of
Anxiety. Consumers have less
ready cash to spend, and they’re
reexamining that spending in light
of concerns about the economy,
jobs, and the rising cost of
everything from bread to fuel.
Some brands have benefited
from the rise of the savvy shoppers,
while others have had to quickly
adjust. Here’s a look at a few of
the fundamental changes in
the UK marketplace that have
occurred as a result of savvy
shopping behaviour:
© 2013 Aimia Inc. All Rights Reserved.
Low-price category leaders
have inherent advantages.
With less money to spend, many
consumers are wary of guilty
pleasures. By offering their
customers ways to make choices
that won’t stretch
their budgets, low-cost retailers
such as Primark, Wilkinson,
Poundland, Aldi, and Lidl have
become early beneficiaries of
savvy shoppers. These brands
offer stress-free shopping, build
trust through everyday low pricing,
and offer clear value to consumers
looking for a reason to return to
their stores. As a result, businesses
like Primark have grown in spite
of — or maybe because of — the
recession. According to Primark’s
latest investors’ report, the retailer
is chalking up record sales figures,
with profits for the six months
ending March 2013 “substantially
ahead of last year,” and sales
up 23 percent.
Store brands are gaining in
perceived quality. While Aimia
research reveals that price is a
primary driver of brand loyalty,
it’s only one factor — in all consumer
groups we’ve surveyed, quality
remains the number one loyalty
driver. So while our post-recession
research revealed that six out of
10 consumers are buying more
store-branded products than
previously, this change is driven
as much by perceived quality as it
is by price. According to a study
from Ipsos Marketing, since 2010 a
majority of global consumers view
store brands as the same or better
than national brands in terms of
quality, innovativeness, uniqueness,
and packaging.
Affordable indulgences are
winning. Even our “Life as Usual”
affluent consumers are managing
their money differently. When
shoppers “trade up” to luxury
indulgences, perceived savings have
become an increasingly prominent
consideration, and this change
has led to successful new product
categories. For example, grocer meal
deals such as Marks & Spencer’s
“Dine in for £10” allows affluent
shoppers to offset the cost of a
dinner out with affordable in-home
meals. Lidl, meanwhile, launched
its £5 lobster campaign in 2008 to
reach the “affluent thrifty” consumer
and has brought the promotion
back each year by popular demand.
By providing affordable treats that
offset other indulgences, these
retailers are winning loyalty with
savvy shoppers.
Bulk purchases have become an
extravagance. In 2011, a Bank of
England study found that shoppers
were ignoring BOGOF (Buy One
Get One Free) and bulk buy offers
in favour of cutting costs and
reducing wasteful purchases.
Marketers can help consumers feel
good both about themselves and
the brands they shop by reflecting
consumers’ desire to rein in
spending and manage consumption.
As Sainsbury’s Chief Executive
Justin King told The Guardian,
“People are increasingly looking to
businesses that give them value and
values. We never believed that the
credit crunch would lead to a values
crunch — and we’ve been right.”
Consumers crowd-source
reassurance. Consumers are
increasingly planning, researching,
and seeking reassurance online well
before they pop up on a brand’s
radar. Nearly half of the consumers
we surveyed visit price comparison
sites, review sites, blogs, and social
media to help them make purchase
decisions. As a result, price has
become transparent — you can’t
claim to offer the lowest price if
you don’t — and quality is now
determined by consensus.
Marketers must develop data
sources and derive insight from
these pre-purchase interactions,
and will need to reflect this
understanding early in the sales
cycle, to win customer loyalty.
 The Rise of the Savvy Shopper / 7

SURVEY DATA: THE SAVVY SHOPPER

To understand how UK consumers are behaving differently in the post-recession economy, Aimia conducted
attitudinal and transactional research of approximately 2,000 UK consumers. What we found was a new breed
of consumer: the savvy shopper, who seeks value from every brand transaction, weighs price against quality,
pre-plans shopping trips, and uses loyalty currency to stretch household budgets.

THEY ARE CAREFUL ADDED VALUE IS IMPORTANT

I spend money more carefully than I used to TO THEM
£ I am using loyalty programs
77%
64% LOYALTY

SAVE £

REWARDS
THEY CROSS-SHOP
When grocery shopping, I buy more store brand
products than I used to I collect points whenever I can

60% 78% REWARDS

REWARDS

I am shopping at Aldi and Lidl I am using vouchers or coupons when shopping

44% 66% SAVE

£ OFF
BABY
FOOD
£
THEY PRE-PLAN SHOPPING AND SEEK VALUE
I always have a list when shopping for food I shopped around to get the cheapest utility/
phone/TV provider
62%
Groceries
49%
✔
✔
✔

I am using price comparison sites I am using auction sites like eBay

49% 42% £
£ ££

Aimia conducted attitudinal and transactional research in May 2012 against a nationally representative set of 2,000 UK consumers, including a representative sample of
Nectar collectors. We followed this up with quantitative research in December 2012 against a nationally representative set of 2,014 UK consumers, including a representative
sample of Nectar collectors.

© 2013 Aimia Inc. All Rights Reserved.

8 / The Rise of the Savvy Shopper
BACK TO BASICS
In the post-recession economy,
customer data and analytical
insight will increasingly become
the dividing line between those
brands who successfully build
relationships with savvy shoppers,
and those brands who remain
trapped on the promotional
merry-go-round. From Sainsbury’s
offers based on individual purchase
history to Amazon’s sophisticated
recommendation engine,
personalized offers, differentiated
experiences, and relevant
rewards are now the hallmarks of
successful brands. But no matter
how sophisticated their analytics
capabilities, successful brands
must also remember to execute on
the fundamental drivers of loyalty.
In 2011, UK retail consultant
Mary Portas issued a report on
the British High Street. In it, she
reiterated that “service” and
“experience” are two key ways
to build customer loyalty. While
Portas’s advice was geared primarily
for Britain’s High Street shopkeepers,
all businesses can take note. Portas
believes good service is more than
a simple differentiator: For her, it’s a
consumer right.
She believes that the customer
experience is another way to touch
people on “a deeper human level”
and create loyalty. In her view, too
many businesses start with the
product and build outwards, instead fundamental loyalty drivers resonate customers” as their number-one
of beginning with the customer
experience and designing the
product or brand to fit into it.
“If I had a brick
for every time I’ve
repeated the phrase
Quality, Service, Cleanliness
and Value, I think I’d probably
be able to bridge the
Atlantic Ocean with them.”
— Ray Kroc, Chairman,
The McDonald’s
Corporation.
© 2013 Aimia Inc. All Rights Reserved.
Portas’s focus on service and for delivering on the customer
experience echoes the advice of experience. The retailer provides a
one of the seminal authorities on positive three-dimensional brand
customer loyalty: Ray Kroc, the experience that starts with its
late chairman of the McDonald’s products, incorporates its physical
corporation. As Ray was building and online stores, and is embodied
the McDonald’s empire in the 1960’s, by its experienced and welcoming
he trained his managers and staff staff. All these factors foster a
to deliver on the four fundamental sense of loyalty that enhances the
drivers of customer loyalty. Using the company’s bottom line — which
acronym QSCV, Ray defined these retail analysts recognize is helping
four basic loyalty drivers: them to outperform the market by
a significant degree.
>> Quality: Customer loyalty is driven
by the quality of your products Every brand should review their
and services in contrast to the ability to deliver on the basics.
quality of your competition. But what do you do to build loyalty
when you’ve reached a level of
>> Service: Loyalty is driven by the parity with the competition? In
responsiveness and training of mature markets such as the UK,
your front-line employees, and the many consumer-facing brands
ease of use of your virtual tools. find themselves at parity, offering
roughly the same customer
>> Cleanliness: Loyalty is driven by experience as their competitors —
the experience customers undergo the same prices, roughly the same
while doing business in your products, and the same levels of
physical or virtual locations. service. Factor in slow economic
More broadly labeled today growth and lower consumer
as “Environment.” confidence, and maintaining
profitable relationships with
>> Value: Loyalty is driven by the your best customers becomes
prices of your products and a daunting challenge.
services, which must be at least in
line with your competitors’ prices, That’s where customer insight
comes in. According to IBM’s
and reflective of your delivery of
“The Essential CIO, Insights from
the other three drivers.
the Global Chief Information Study,”
Collectively defined as the 88 percent of CEOs and CMOs
“customer experience,” these four rank “getting closer to their current
as strongly today as they did in priority. By marrying analytical
the 1960’s. Any brand hoping to insight with the tools of reward
build loyalty in the post-recession and recognition, brands who are
economy must execute on all four executing well along Ray Kroc’s
drivers. If you fall down on any one loyalty drivers can turn the raw
of them, no loyalty program, nor any material of customer loyalty into
level of analytical insight, will stem sustained, reciprocal, and meaningful
customer relationships. In the
the tide of customer defections.
next section, we’ll explore some
Amongst UK retailers, department
techniques for building relationships
store John Lewis is a poster child with the new savvy shoppers.
 The Rise of the Savvy Shopper / 9

CASE STUDY: NECTAR SAVVY FAMILIES

During the past four years, the Nectar coalition loyalty program (operated by
Aimia in the UK) has run a competition to find “savvy families” amongst UK
consumers. The winners are invited to blog about their shopping experiences,
highlight money-saving tips, and offer advice on how to stretch household
budgets. For this report, we interviewed the savvy family winners from 2011
and 2012 to find out how the recession has influenced their shopping behaviour.

Family Dean Stenton Hannah Mills

Background Dean and Ashlea Stenton and their two sons Hannah and her partner Richard, a civil
are from Pontefract. Lorry driver Dean is a engineer, live in Somerset with their two
seasoned online deal hunter and is the children. The family makes the most of
go-to man for friends who are looking to every opportunity to save money.
pick up a bargain.
What’s important Prices, added value and convenience. Quality Low prices and loyalty points.
to you? also matters: He is loyal to brands like Apple.
How do you Online, in store and on Online, in newspapers and ‘junk mail’.
find deals? price-comparison sites.
Have you Dean goes out of his way to find Hannah will go out of her way to shop at
changed your Holiday Inns because of its Priority Points Sainsbury’s to get Nectar points so she can
behaviour for a loyalty program, and for McDonald’s because “get something back.”
loyalty program? of its Coffee Loyalty Card, which offers a free
drink after six purchases.
What inspires you He describes himself as “not overly loyal to Points and vouchers.
to be loyal? any brand or store.” Prices, vouchers, cash
back and points matter to him. He expects
loyalty to be reciprocal, and is disappointed
by companies like Sky, which ignores
loyal customers and offer better deals
to new ones.
What advice Stay cheap and keep prices keen. Give something back.
would you give
to brands?
Savvy tips 1. Save on electricity bills by charging 1. Swapping with friends is a great way to
mobile phones, iPods, and sat navs in get something new and recycle things you
the car on the way to work. no longer use!

2. Learn the prices of the items you buy
every week, write a list and carry it with
you to compare prices in stores you visit.
3. Save water by using toilet bags (bags
that swell to occupy up to a litre of water
space in your cistern, saving water with
every flush).
2. Bleach is a household must and not just
for toilets — use it to keep your whites
white, flowers fresh and china cups
stain free.
3. When children’s clothes get too short, cut
them up to make shorts, skirts, or three-
quarter length trousers. If it fits
the waist, don’t let it go to waste!

Find out more about Nectar Savvy shopper at ww.nectar.com/savvy

© 2013 Aimia Inc. All Rights Reserved.

10 / The Rise of the Savvy Shopper
LOYALTY AS A DIFFERENTIATOR
Savvy shoppers responding to our
survey made one point loud and
clear: When making brand choices,
they view loyalty programs as a
key touch point. That’s because
loyalty and reward programs build
relationships through levers based
on basic human psychology — they
appeal to both the rational and
emotional side of the human brain.
By collecting and analyzing loyalty
program data, and then delivering
that insight back in the form of
reward and recognition, you can
build strong connections with
customers who might otherwise
evaluate you solely on transactional
loyalty considerations such as price
and convenience. Here then are
some tips and examples of how to
use reward, recognition and loyalty
programs to build real relationships
with today’s savvy shoppers.
© 2013 Aimia Inc. All Rights Reserved.
Loyalty programs motivate and
influence consumers by delivering
both rewards and recognition. This
powerful combination of economic
benefit and emotional appeal has
seen loyalty programs become the
predominant marketing vehicle in
mature markets such as the UK.
Here are some tips for using data to
deliver rewards and recognition to
savvy shoppers:
> Design rewards to appeal to
specific behaviour segments.
Our research revealed that all
four behaviour segments we
identified (see page 4) rely more
on loyalty currency to stretch their
budgets than they did prior to the
recession, with almost eight out of
ten consumers saying they collect
points whenever they can. “Life
as Usual” affluent consumers use
loyalty currency as an extension
of their disposable income,
spending it on days out, meals or
other treats. “Anxious Pessimists”
with lower incomes, meanwhile,
redeem loyalty currency to
pay for everyday essentials.
By understanding which of these
savvy shopper segments make
up your customer base, you can
design rewards that appeal to
their post-recession needs.
> Avoid drastic program changes.
Sometimes strategy or necessity
dictate changes in reward
program funding. But when Tesco
downgraded its longstanding
Clubcard double-points rewards
value structure to fund a price
drop in 2011, there was an almost
instantaneous, unexpected
backlash from its customers. Tesco
listened, and quickly changed
back to its previous, more
generous rewards structure. The
lesson: When evolving your reward
program, tread carefully. Roll out
changes over time, and give your
customers enough time to absorb
the shock.
> Use data to personalize.
U.S. department store Macy’s
personalizes consumer
interactions by using customer
data in a way similar to Amazon’s
recommendation engine.
For example, the retailer has
cross-profiled every pair of shoes
they sell to create shopper profiles
and identify likely next purchases.
When a customer requests a pair
of shoes, the sales associate uses
an iPad to find two recommended
alternatives, then offers three pairs
of shoes to try on. By offering a
personalized experience, Macy’s
has seen a sharp increase in
shoe purchases.
> Empower your frontline staff.
If customers experience service
problems, make sure your staff
has the training and authority
to offer real-time solutions.
U.S.-based gaming and hospitality
company Caesar’s Entertainment
gives its frontline casino and
hotel employees access to
real-time guest information,
along with a budget to manage
issues. For instance, if a guest
asks to reduce his bill after a
particularly significant loss in the
casino, the frontline worker can
review the customer’s history to
flag him as high-value customer
on the spot and resolve the
problem — thereby preventing a
bad decision from damaging
the relationship.
> Use data to get closer to your
customers. Coffee company
Nespresso differentiates itself
from competitors by marketing
directly to its customers rather
than through third-party channels.
This strategy gives customers a
reason to connect with it directly
online or in-store. Nespresso
then uses the information it
collects from customers as they
purchase to recognize shopper
preferences and to inform
future communications. As a
result, Nespresso can present
customers offers on new products,
personalized to individual
shopper tastes, regardless
of how they connect with
the brand.
 The Rise of the Savvy Shopper / 11

CASE STUDY: THE COALITION EFFECT

As a marketing discipline, loyalty marketing offers a wide variety of structural models designed to deliver
reward and recognition to best customers. While proprietary loyalty programs offer unprecedented
flexibility and control over program levers, multi-partner loyalty coalitions such as Nectar offer marketers
a rich value proposition that consolidates household spend within the partner network and provides rich
cross-shopping data that delivers deep insight into customer behaviour. Here’s a look at how two new
Nectar partner brands leveraged the coalition effect to build relationships with savvy shoppers.

In February 2011, British Gas joined the Nectar program. Pricing is

competitive within the energy industry, so British Gas had to find a way to
stand out, add value, and engage with its customers. The Nectar program
has enabled British Gas to reward customers and consequently to develop
more meaningful and more profitable relationships.

PROGRAM RESULTS AT THE END OF 2012:

5.2 MILLION 8% 10%

Improvement in Nectar
British Gas customers Reduction in churn
versus non-Nectar
enrolled in rates for Nectar
customer Net
the program enrolled customers
Promoter Scores

PROGRAM RESULTS
AT THE END OF 2012:

In October 2012, eBay joined the Nectar program. While eBay was
already a successful online retailer in its own right, the company wanted
to build its brand and differentiate itself from competitors like Amazon 2 MILLION
and Play.com. Through its loyalty program, customers earn points each
Number of linked accounts
time they make a purchase or win an auction and their points earned are
in the program’s
featured on each webpage they visit. During the first three months of the
first three months
program, two million customers linked their eBay accounts to Nectar —
proving consumers have a large appetite for added value in their
brand interactions.

© 2013 Aimia Inc. All Rights Reserved.

12 / The Rise of the Savvy Shopper
CONCLUSION: YOUR BEST FOOT FORWARD
We are witness to what is, in effect,
a perfect storm of marketplace
disruption. A disruptive recession,
combined with disruptive
demographic changes, and
accelerated by the disruptive
technology of mobile and social
platforms, has given rise to a new
breed of savvy shoppers — each
segment of which has changed
their consumption in different ways.
Unable to adapt to these rapid
changes, some brands have already
fallen by the wayside. Other brands,
their low-price business models
poised to take advantage of these
new behaviours, are thriving. Those
brands in the middle recognize
that they must change the way
they market — but in what way?
The truth is that there is no single
solution to solving the riddle of
the savvy shopper.
What we all recognize is that a “one-
size-fits-all” approach to building
customer relationships will no longer
suffice. If we are to earn their loyalty,
our four identified segments of
savvy shoppers will each require
separate and distinct combinations
of reward and recognition. “Life as
usual” shoppers will seek affordable
indulgences; Copers will favour low-
price leaders and simple, transparent
reward value; Anxious pessimists
will look for rewards that help them
stretch their household budgets;
and Optimistic Millennials will seek
immediate gratification and a
shorter pathway to rewards.
To meet the needs of these
shoppers, marketers will continue
to rely on a range of approaches.
Some brands will exploit inherent
advantages in price, quality, and
convenience. Others will launch or
evolve robust proprietary loyalty
programs designed to build real
relationships, while partners in
coalition programs such as Nectar
will continue to leverage rich value
propositions and enjoy economies of
scale. New players and new business
models will continue to thrive.
But while every brand will tailor their
solution to their strengths, certain
actions will pay dividends regardless
© 2013 Aimia Inc. All Rights Reserved.
of your business model, the
composition of your customer base,
or your unique market conditions.
Here then are the new ground rules
for building relationships with
savvy shoppers:
> Focus on the basics. While
consumers love to shop, spending
hard-won pounds in the post-
recession marketplace can be
stressful. A renewed focus on the
fundamental loyalty drivers of
Quality, Service, Environment and
Value provides your customers
with the basic building blocks
of customer loyalty. When the
customer experience delivers on
your brand promise, consumers
feel safer, and are more likely to
feel and act more loyal.
> Identify, understand, and
influence your best customers.
Customer loyalty programs
proliferate because they provide
a compelling value proposition
to encourage consumers to raise
their hands and be identified.
They also view loyalty programs as
a safe haven within which to share
personal details, shopping history,
and their aspirations in exchange
for reward and recognition. The
data flowing through the program
then provides the deep consumer
understanding marketers need
to change consumer behaviour.
Whether or not you operate
or partner in a formal loyalty
program, the tools of loyalty
marketing are your best toolset
for building real relationships.
> Invest in long-term customer
value. Even brands that do build
relationships through loyalty
marketing often measure the
impact of these efforts on the
same scale they use to measure
short-term discounts and
promotions. Recognize that the
true return on investment in loyalty
comes not solely from quarterly
impact, but from customer lifetime
value. Loyal customers not only
buy more, but they stay loyal
over a longer time period, and
recruit new customers into the
fold. The compounding interest on
investment in loyalty
is the true measure of its value.
> Innovate by improving your
customers lives. No marketing
activity can reach a savvy shopper
more quickly than an innovation
that saves them money, time, or
stress. Swedish bed company
Hästens, for example, partnered
with a boutique hotel so guests
could try their beds before buying
them, thereby demonstrating their
product quality and removing a
barrier to purchase. Meanwhile,
Belgian energy company
Electrabel installed in Brussels
airports bicycles equipped with
charging ports that allow riders
to arrive at their destinations
with fully charged cell phones or
laptops. Innovation that arises from
a customer-centric orientation,
rather than a product pipeline, will
drive long-term loyalty.
This new generation of savvy
shoppers will continue to present
a challenge to marketers. Only a
relentless focus on the customer,
fueled by data and powered
by reward and recognition, will
enable marketers to step off the
promotional merry-go-round. The
rise of the savvy shopper is not only
a challenge — it’s an opportunity.
The winners in today’s marketplace
will be those brands who rise to this
challenge, and meet it head on.
“When all around
are reacting simplistically
by cutting their budgets
in anticipation of lower sales,
the sophisticated marketer holds
the line, increases share of voice
in relationship to share of market,
and gains market share as a result. If
marketers exploit this media fact of
life alone they’ll be winners.”
— Moray MacLennan,
Chairman, M&C
Saatchi Europe
 The Rise of the Savvy Shopper / 13

ABOUT THE AUTHOR

Maria Sealey, Director of Research Services,
Aimia
Maria is responsible for the delivery of Aimia’s
Research Agency Services to clients. She
provides quantitative and qualitative insight to
support client product launches and ongoing
shopper insight in the UK marketplace.
Prior to joining Aimia, Maria built a strong
track record in insight and research across a
selection of major UK retailers. Her passion for
insight and research grew with her early career
roles as Head of Customer and Marketing
Research at leading DIY home improvement
retailer B&Q PLC, and Head of Retail
and Public Sector Research at
The Market Research Group (MRG).
Maria then spent seven years at Tesco PLC,
where she worked as Head of International
Insight directing teams in ten businesses
across the world. While in this position Maria
launched insight functions in two new markets,
and managed “new market entry” feasibility
studies. She was promoted to Head of UK
Customer Insight, where she led the team that
provides quantitative, qualitative, ad-hoc and
continuous insight on Tesco brand, advertising,
and deep dive technical studies.

About Aimia

We are a global leader in loyalty management. Our unique capabilities include proven
expertise in building proprietary loyalty strategies, launching and managing coalition
loyalty programs, creating value through loyalty analytics and driving innovation in the
emerging digital and mobile spaces. Employing more than 4,000 people in over
20 countries, we build and run loyalty programs for ourselves and for some of the
world’s best brands. Customer data is at the heart of everything we do. We are Aimia.
We inspire employee, channel and customer loyalty.

Visit us at aimia.com.
© 2013 Aimia Inc. All Rights Reserved.
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© 2013 Aimia Inc. All Rights Reserved.