Are you, like me, a member of a particular consumer demographic: the one that thinks of Marks & Spencer as primarily a clothing retailer? Certainly my first reaction on hearing about its new loyalty scheme, Sparks, was: “How’s that going to work then?”

The first challenge for any retailer’s loyalty scheme lies in creating a sufficient perception of value for a consumer to bother with it, in a cost-effective way. This is perhaps more clearly illustrated by considering the schemes operated by airlines. Have you perhaps signed up for one of these when you booked your summer holidays, only to realise that unless you are a seriously frequent flyer – which probably means for business, not pleasure – your chances of reaching any meaningful level of reward are nil? The occasional leisure flyer just isn’t the target consumer segment. On the other hand, if you do fly regularly, they genuinely do affect your brand choice – lounge access is a nice perk; saving up points for a 'free' upgrade to business-class on that long-haul holiday flight is a genuine incentive to switch brands. And it only costs the airline little more than the price of a couple of glasses of champagne and laundering a spare blanket for what would otherwise have been an empty seat in the off-season for business-travel anyway.

For a typical retailer of general merchandise, that frequency barrier can be insurmountable. Many are pretty pleased if their average consumer shops with them more than four times a year. For others, value-perception presents a similar challenge; you might make a purchase at Wilkos many times in a year, but it’s never going to be cost-effective for them to give you much of a loyalty reward.

But when you recall that Marks & Spencer isn’t a clothing retailer at all: it’s a food retailer that also sells clothing –  almost 57% of its sales last year were from food – so in theory, at least, that potentially puts it into the Clubcard or Nectar category, whose underlying participation-basis is that you might as well be bothered having one, because food isn’t really a discretionary purchase.

Customer benefits

For me personally, it’s also the first place where there seemed to be some dissonance in the proposition. I used my Sparks card this week when purchasing a pair of trousers. Admittedly it wasn’t a particularly high value purchase, but it was an item of clothing and here are my resulting proposed rewards:

Free Percy Pigs?! To be honest, I’d have preferred a discounted pair of socks. These offers are not going to affect my immediate next purchase decision (unless of course, it was their intention to encourage me to try something different).

But has Sparks met the retailer’s first challenge with a loyalty scheme: creating a sufficient perception of value to make it worthwhile for the consumer? If you are a regular food shopper at Marks & Spencer, the answer is almost certainly yes. If you’re not, the jury is probably still out: 10 points per pound spent sounds generous until that potentially inappropriate Percy Pig promotion pops up.

So where’s the value for Marks & Spencer? Its managed to connect me to my in-store purchase transaction. It’s no longer merely a purchase – it’s both a consumer-insight and a CRM-opportunity too.

What Sparks appears to have done is create the potential for some outstanding multichannel CRM. It now knows who I am and where I shop. On the evidence so far, it will able to exploit that in communication not only via email (or the app), but on the website and at the point-of-sale. They’ve also got my name, postcode, gender and age, which when merged with postcode-based demographic profiling from a company like Experian or CACI means they can pretty much pin-point me as a type.

What M&S has achieved, at least in theory, is to extend the consumer data, which it'll certainly be getting from its new website now it has left Amazon's platform, into the bricks-and-mortar space. It has also joined the dots on a consumer-by-consumer basis. No longer am I a named transaction on the website but an anonymous 'basket' in store, effectively two separate beings. I'm now, as perceived by the data, a single multichannel consumer. 

Strategic insights

Where one might want to be rather more circumspect, is whether it will deliver insight at a more strategic level. Clubcard is able to do so, because Clubcard holders are genuinely representative of the Tesco shopper population as a whole.

My mother is in her seventies and is a reasonably competent silver-surfer, regularly buying clothes from M&S, and occasionally treating herself to food. But if she, and others like her, don't sign-up to Sparks in the same proportion as other consumer-segments do, M&S might have a problem because any insight will be skewed.

The same could be true if participation levels vary between primarily food-shoppers and primarily clothes-shoppers; you can’t buy food online at Marks & Spencer, we’ve seen the scheme structure means it is possibly better suited to regular food - and therefore offline - shoppers, but you’re supposed to use a digital channel as your primary Sparks touchpoint.

“Of the 34 million people who shop in our stores every year, around 6.7 million also shop using our website. Whilst 8.3 million of our customers do not shop online at all, that still leaves over 19 million M&S customers who shop online but are yet to shop online with us. They represent our biggest opportunity for growth.” M&S Annual Report 2014.

A presentation slide from Tesco in the latter days of Philip Clarke’s ill-fated reign comes to mind:

Source: Tesco 'Winning in the new era of retail', Feb 2014. (Items coloured black are my additions)

One immediate comment to make here: Tesco was at least able to state confidently that this behaviour was true across all segments in its consumer-base, because the fully representative nature of its Clubcard base allowed to it to measure directly from Clubcard data (using a sample of two million consumers).

What Tesco wanted this slide to persuade us was to believe in its particular version of a phenomenon known optimistically as the 'Multichannel Halo Effect':

i) Consumers who shop online with us will also spend more in store

ii) Consumers who buy GM with us will also buy more food

Unfortunately, correlation never implies causality, and the first of these points can be reversed, becoming the 'Multichannel Cannibalisation Effect':

i) Our best customers spend more with us

ii) These same best customers are more likely to want to reach us via multiple channels

iii) If we don't offer these additional channels, they'll go somewhere else

Which way around is true for Marks & Spencer?

Source: Marks & Spencer Annual Reports 2012-2015

On the evidence, you’d probably have to give it to the cannibals.

What about the second part of Tesco’s (wishful) thinking, that GM sales can somehow drive food sales? Spun around – that food sales can be used to drive GM sales, by driving primarily offline food customers to become multichannel GM customers – this appears to be one of the things that Sparks is trying to do.

Many building blocks seem to be in place. For regular food shoppers, there will almost certainly be consumer-value in steadily building up Sparks points. The Sparks scheme is apparently well-positioned as a multi-touchpoint CRM tool, which could be used very actively to encourage its food consumers towards new categories within clothing.

What we’ll have to wait to find out is whether shoppers will be willing to be steered in this way. Multichannel by itself doesn’t appear to have generated any incrementality at all for Marks & Spencer in General Merchandise (although of course it will have stopped some customers leaving for online competitors). Will the very multichannel Sparks proposition be any better at creating incremental sales, or in producing some sort of cross-channel Halo Effect?

Summing up, Sparks looks like it probably ticks at least four essential strategic boxes for a retailer loyalty scheme:

1. It is sufficiently worthwhile for a significant percentage of consumers to bother collecting rewards, at least for their regular food shoppers

2. The rewards themselves are not so expensive that no possible generated benefits can offset their cost.

3. Incremental sales generated via strong CRM are very likely

4. Incremental sales generated via additional available consumer insight (especially for their “best”=multichannel shoppers) are at least a possibility.

If the existence of Sparks helps to balance its internal culture more effectively between product- and consumer-centricity, it might pay for itself in the long-run, even if it doesn’t immediately set Marks & Spencer’s world on fire.

Chris Jones is a freelance specialist in multichannel and eCommerce, with extensive senior-level experience as both consultant and hands-on interim. He has worked extensively in both B2B and B2C sectors, and has client engagement experience in 15 countries. He is the author of ‘The Multichannel Retail Handbook’. You can find him at www.redsock.biz