Does free coffee in the supermarket foster loyalty?

Supermarket chain Waitrose has described the traditional points-based loyalty schemes of rivals such as Tesco as ‘meaningless’.  Customers, they say, derive little value from collecting points over time.

Instead, Waitrose claim they’re all about affinity and creating a social hub for the local community.  Under their My Waitrose scheme customers are eligible to collect a free cup of tea or coffee every day and, if they spend more than £5, a free newspaper.  The result is that Waitrose now brews around one million cups of free coffee a week.

According to Mark Price, Waitrose MD, speaking to Marketing Week : “We want to say to our customers ‘welcome to our shop, have a cup of coffee, read a newspaper, we’ll look after you’”.

If my local Waitrose is anything to go by, the offer is mostly taken up by individuals who pop in to claim their free coffee, buy some ciggies and pick up a free newspaper before decamping to their local Aldi.  Whereas the target yummy mummies seem to be too preoccupied dealing with little Hugo and Jemima, wrestling with a trolley and/or buggy to want to hold a Styrofoam cup of hot coffee as well.

Waitrose say they have no problem with this.  I’m not so sure.  I admire their distinctive approach in stepping aside from the competition and their desire to create a better shopping experience (I’ve argued for this recently in my piece on short-term sales growth v loyalty).  But I do wonder whether they have missed something in the execution.

Would it not have been wise to set a spend threshold for membership of the scheme? Membership is currently unrelated to spend, hence the free coffee brigade. Setting a qualifying £5 or £10 initial spend for membership would seem to be a more commercial approach to rewarding genuine customers and creating affinity. Rather than attracting visitors who have no intention of grabbing a basket and conducting a weekly shop.

Footfall in Waitrose may be on the up and its traditional ‘posh’, and possibly inaccessible, reputation may be under question, but I wonder whether Waitrose can reasonably argue that they are fostering greater levels of affinity and brand loyalty with their target audience?

But then Waitrose might be happy being the UK’s largest purveyor of coffee. At their own expense. 

The marketer’s dilemma: short term sales growth or loyalty?

It probably won’t come as a surprise to most switched-on marketers that the modern customer is highly promiscuous.  Shopping around has become a national pastime, particularly as easy access to the internet has allowed many customers to explore the range of offers available in the comfort of their homes without resorting to wearing out shoe leather on the High Street.

This promiscuity is perhaps no more marked than in the highly competitive world of supermarket shopping.  The modern British shopper has, it seems, become adept at taking advantage of price promotions to divide their share of food spend between rival operators as opposed to remaining loyal to one supermarket brand.  Chasing savings has become more important than the convenience of making one trip to one supermarket chain.

This creates a dilemma for marketers:  do you enter the fray and compete almost entirely on price to drive short term sales growth; or do you focus on building a loyal customer base and reap the benefits of lifetime value?  Immediate commercial concerns may well dictate the former.

The answer lies somewhere between the two in my opinion. 

Yes, price promotion may well be necessary in order to drive customers to your business.  But this has to be seen as a short term measure or you may find yourself in the position of continuingly competing on price.

The challenge is to create a shopping experience that is distinctive and gives customers what they want, over and above the attraction of a good deal.  This means making the purchasing process as simple and quick as possible – we know, for example, that a proportion of shoppers abandon their baskets because of queues at the checkout.  It could mean better trained staff with greater product knowledge.  And it could mean additional services and product ranges that make the attraction of shopping in one outlet greater than another.

Marketers outside the food sector would do well to take on board the lessons being learned by the large supermarket chains:  differentiation by price alone will not generate loyal customers.