Loyalty cards lose their allure

SHOPPERS are boycotting loyalty card schemes which promise money-back deals and other perks. Research shows consumers increasingly reckon the benefits on offer are too small to bother with.

Many of the schemes require cardholders to spend thousands to earn even the smallest rewards.

The Nectar scheme - accepted by retailers including Sainsbury's, BP and Debenhams - generally returns just one penny for every pound spent.

A shopper at Sainsbury's would therefore need to spend £5,000 to save just £50. If they paid for their groceries with a Barclaycard - also part of the Nectar network - they would get more money back.

But when the credit card is used at retailers outside the Nectar network its owner would need to spend £20,000 to earn just £50.

Debenhams is already thinking of pulling out of the scheme, a move that would seriously damage Nectar's credibility.

A study by the Institute for Grocery Distribution, an industry research agency, found 38% of shoppers refuse to have a loyalty card and 10% rarely or never use them. Very few customers claim rewards such as holiday discounts or theme park trips, it said.

'Some participants appeared to be regularly collecting points out of habit but had never redeemed their points or had any intention of doing so,' said a spokesman for the institute.

'Typically, factors such as price, quality, service and convenience have a high-perceived value and make a far greater contribution to fostering a loyal shopper than loyalty schemes. The importance of the schemes should not be overestimated. They are clearly no substitute for getting the basics right.'

Cardholders were no more loyal to a particular store or brand than those without a card and only 8% of shoppers thought it essential that stores offered them, the institute said.

One mother it interviewed said: 'A loyalty card is just a bit of a gimmick to get you to go back to a store.'

Consumer champion Martin Lewis said: 'Most stores with loyalty cards use them as a weapon to take focus away from whether you are getting a good deal or not.

'Boots, for example, which has the best loyalty card on the market, might sell a razor for £10. The loyalty benefit effectively brings the price down to £9.60.

'But if you go to a discount pharmaceuticals store you will get that same razor for £8.50. Shoppers really need to look beyond the loyalty schemes to the real price of items and who offers best value.'

Anger is also mounting over the way loyalty card firms sell information on users' shopping habits to marketing firms that send out junk mail.

The data - which stores use to help decide what to put on shelves - is pieced together from consumer surveys and analysis of buying habits.

Peter Looby, a loyalty card critic, has sold 500 T-shirts with the slogan, 'No, I haven't got a ******* loyalty card'.

The TV and film props agent from Sussex said: 'I am fed up with being asked again and again every time I go just to buy a pint of milk. If I wanted one of those cards, I'd have one.

'Each time you use a card you are handing over personal data which can then be sold on to other businesses. That is a gross invasion of privacy and there is no justification for retailers having that information. It is like having a barcode stamped on your backside.'

Nectar was launched in September 2002 at a cost of £30m as a direct rival to Air Miles, the free flights scheme linked to Tesco's Clubcard and NatWest credit cards.

A Barclaycard spokesman said rewards increased when spending on the card is tied to another Nectar member. Spending £4,000 at Sainsbury's on a Barclaycard would, for example, generate a £50 benefit.

Nectar rewards include free fast food meals, free cinema tickets, cheap flights and days out at Alton Towers.

Richard Campbell, marketing director of LMUK, which runs Nectar, dismissed research showing loyalty cards were falling out of favour as 'rubbish'.

'People enjoy the extra treats our scheme offers for spending that they were going to do anyway,' he said. Nectar is extremely popular. We have signed up one in two households in the country.'