Introduction

In light of the publication of our draft Policy Position Statement on Prosperous Places, and as the credit crunch continues to bite, we thought we’d explore how some towns are developing local loyalty schemes to lure more shoppers into their town centres. Click here to go to the Prosperous Places Campaign.

The big retailers – the likes of Tesco, Boots and Waterstones – have, for years, operated loyalty schemes, offering their customers incentives to remain loyal and choose their shops above others.  These schemes are not restricted to individual stores. Both the Nectar points and the Air Miles initiatives have seen the creation of partnerships between major retailers and service providers and credit cards companies.

So where do market towns fit in? According to the New Economic Foundation, small shops are closing at a rate of 2000 per year. Yet it is these local retailers that are more likely to provide jobs for local people, spend money locally and provide local services. So how can we attract more shoppers into our local shops?  Some market towns are tackling the challenge by following in the well-trodden footsteps of the retail giants and developing their own incentive schemes through the collaboration of independent stores.  By working together, shops can offer their own individual benefits to customers and encourage those customers to come to the high street as opposed to shopping elsewhere.

Increased Competition for Sales

Independent stores on the high street are facing increased competition, not only from larger superstores and out-of-town shopping centres, but also online shops, which do not have the overheads that an on-street shop does and as a result can sell their goods at reduced rates.  A recent survey by Ebay has suggested that by 2010, around fifty percent of new retail ventures will be operating online, and the level of High Street sales will fall by seven percent as more and more people switch to online shopping.

But there is of course still a need for high street shopping – consumers like to be able to browse products and services, and handle or try on the product.  Many people like to buy a product there and then and take it home immediately, some do not have the means or confidence yet to purchase online, while others don’t wish to risk buying luxury items online from potentially unknown sources. Above all, people enjoy shopping as a social activity.

The Value of Customer Retention

It is vital that high street shops take steps to fight back against increasingly aggressive competitor strategies.  Encouraging locals to shop locally on a regular basis, and to support their high streets, is fundamental.  Customer retention is not only a cost effective and profitable strategy, but in today’s business world it’s necessary. This is especially true when you remember that 80% of sales come from 20% of customers and clients.  Never forget that it is more costly to acquire new customers than it is to retain existing ones who already know about you.

Working together to lure shoppers back to the high street

While good overall service is the best way of generating customer loyalty, sometimes new relationships can be strengthened or old ones refreshed, using customer loyalty schemes.  Such schemes enable a retailer to offer fixed or percentage discounts, extra goods or prizes to reward customers for behaviour that benefits their business.

In a town setting, creating a loyalty system gives retailers the ability to do things that they might not necessarily be able to do or afford on their own.  It can raise a town’s profile and create an attractive and viable shopping experience for customers within a distinct geographic area.

For example, a tea shop might offer a complimentary drink and piece of cake, every tenth visit.  A butcher might offer a discount after a customer has spent a certain amount in store over a period of time.

The benefits to the retailer include:

-          Increased publicity and marketing for retailers, and indeed the town, especially if local press is involved as a partner;

-          Increased awareness of customer spend and habits as some loyalty schemes enable greater data collection; and

-          Increased retention of existing customers and sharing of customer base where the shopper is shopping in other shops within the scheme, and learns of your shop via them.

The benefits to the customer include:

-          Actual financial rewards for shopping locally;

-          Satisfaction of contributing to and sustaining the local town and economy; and

-          Increased potential for new shops to establish leading to greater consumer choice and a more thriving high street.

There are many examples of loyalty schemes, often funded and run in different ways.  Here is an overview of three schemes in operation:

Faversham Rewards – Key points

Faversham opted for the loyalty card offered by Savvy and launched the card in summer 2009.  Each business buys a bundle of the credit card sized loyalty cards from Savvy, and these are branded with their shop logo.  It’s £2.50 per card and they normally buy 100 each to begin with.  The shops also rent a card-reader from Savvy, which uses oyster technology to capture information about the shopper and store how much they have spent so far.

The shops sell the cards to customers for £5.00 each.  The shops then decide on their ‘offer’ and this is put on the Faversham.org website and in literature.  Shops may also do their own promotions in store.  A shopper may use their card in a shop and will collect points on their purchase.  Once they have enough points from that shop, they can take advantage of offers, like discounts.

Funding for the project has come from a number of sources – the Regional Development Agency and the local authorities and the Faversham Economic Partnership. The funding has paid for a part-time co-ordinator who has set up a business forum that meets every 2 months.  This forum agrees how the scheme might be progressed, and shops share knowledge and expertise.  It is hoped that this forum will enable the continuation of the scheme beyond 2011, when Ima may no longer be in post.

The loyalty card can be purchased by anyone, not just residents.

There is evidence that businesses are getting new custom from the scheme – for example where a shopper has the card and has started shopping at other shops in the scheme to take advantage of loyalty points.

Because the businesses have had to make a financial commitment to be in the scheme and it is hoped that this will give the scheme more stability and sustainability in keeping those businesses involved.

Each business receives regular businesses reports so that they can see exactly what the scheme has given them.

18 businesses originally signed and since then, four more have joined – that’s an average of one shop per month.  Currently around 1300 people have purchased cards and feedback is very positive.

View the Faversham Rewards website:

Caterham Shop Smart

Launched in summer 2009 the scheme offers free cards to the public, who register basic details in return to get one.   The free aspect aims to reduce barriers to entry to the scheme for shoppers.

Signed-up customers receive credit-card-sized cards and key fobs which can be shared among couples, for example.  3,000 cards were originally ordered based on 10% adult penetration target for Town + Hinterland.   After 3 months the scheme has 1,500+ members, from around 1,000 of these registered cards. Sustaining now with 45 shops and 1,500 members after 3 months we have momentum and credibility.

The cost to the shops is affordable. Shops are charged £50 per shop for 1 year which includes a listing on routine leaflets and a page website entry each on the new town website hub.

The scheme has been funded by local authority grants, sponsors and the shops themselves.  Each shop or businesses considers what loyalty offer to make.  Currently there is a mix of discounts and loyalty offers.  A town points scheme was considered but was too hard to implement and the administration proved to be a barrier.

To make the scheme viable for the public meant marketing was key and a website hub was created.  The Hub is crucial as it is where shop, town, business, and member information is stored.  It can be updated easily and is accessible to all – a virtual town.  Footfall on the website leads to real visits.

The hub was created by customizing some available software, originally for a single on-line shop.

Overall, the loyalty scheme has created a buzz and after just 3 months shops were reporting new faces, use of the cards and more shops and members joining – mostly from referral now, which is a good sign.

Visit the Caterham Shop Smart website.

The Lewes Pound

The Lewes Pound is much more about creating a local economy as to purely a loyalty scheme, with the impact of the environment firmly underpinning it.  The idea was instigated as a part of Transition Town Lewes, a community-led response to the challenges of climate change and peak oil.  Transition Towns seek to re-localise communities to allow to build resilience to these challenges, and the Lewes Pound is one of the ways to localise the economy.

The scheme is quite simple: Exchange Sterling for Lewes Pounds at any of the 10 issuing points, use your Lewes Pounds for local purchases at a 1/1 ratio, and if necessary, trade them back into sterling at any time.

The initiative was funded by local businesses with the support of the town council.  The first issue of the Lewes Pound (1£ note) was launched on the 9th of September 2008, and new notes (1, 5, 10, 21) were introduced on the 3rd of July this year.

The organisers were very keen to set up a paper currency because it provided a visible representation of the aims of the initiative.   Anyone who holds a Lewes Pound in their hands becomes part of a conversation about the benefits of local trade.  In the long-term, it is not unconceivable that the local currency can be used with a card, but that will only make sense once the scheme has a high number of users.

150 traders have signed up to accept the currency.  Residents don’t need to sign up, but there is a group of 300 people who have committed to using the Lewes Pound on a regular basis.

It cost roughly £4,500 for the initial run of 10,000 1-pound notes.  To date, there have not been any costs to the businesses or shoppers.

Advantages of the Lewes Pound: Helps build awareness about local sourcing, supporting local trade, reducing food miles; Builds community spirit; Increases trade for some traders; Brings tourists to the town. Disadvantages: The initiative is run by volunteers, and as such it is very difficult to get the most out of it. We are in the process of seeking funding to get more in-person support.

The organisers have supported numerous other communities in setting up their local currencies, including the recently launched Brixton and Stroud pounds.

Visit the Lewes Pound website.

NEW – Research Project exploring Loyalty Schemes

AMT’s consultancy arm, amt-i, is currently undertaking some research on loyalty schemes, sponsored by Savvy UK.

The final report, due in February 2010, will present the findings under the heading of “How to Implement a Successful Loyalty Scheme in your Market Town”.  The key findings will then be pulled together into an overall summary highlighting what types of Loyalty Schemes are currently being run and answering the question “What exactly is a Local Loyalty Scheme?”, national and regional coverage, the costs of implementing a Loyalty Scheme, loyalty scheme effectiveness and case studies of good practice.

amt-i will be conducting telephone interviews with selected loyalty card initiatives.  They will also be sending out a survey by email to towns to collect statistical information on such schemes.

If you would like to find out more about this work, please contact Hannah.Bowden@towns.org.uk You can also find out about other Town Centre services that amt-i offers by viewing their Town Centre Services Brochure.

Shop Local Event, North Yorkshire, February 2010

A shop local seminar and workshop is being planned as part of the North Yorkshire Towns Alive programme of events, for the end of February 2010.

The agenda has not yet been finalised, but the seminar is likely to consider three different shop local schemes and how ideas from these could be used to develop or improve shop local schemes in participants own towns.

Outputs from the research outlined above is likely to be highlighted during the event.

For more information on this event please contact Debbie.McGrath@towns.org.uk