This article first appeared in Global Convenience Store Focus.
As the third-largest coffee shop chain in the UK, Caffè Nero operates significantly fewer stores than UK market leaders Costa Coffee or Starbucks, however it does boast the title of the largest independent coffee house group in Europe with over 750 stores in the UK and a total of over 1,000 stores internationally across 10 countries. And the family-owned firm seems laser focused on continued growth, declaring an expansion strategy that involves opening a “new store somewhere in the world every four days” including the United States, with almost thirty stores now in operation, predominantly in the city of Boston.
With such intense competition and ambition, I was keen to understand its loyalty strategy and how that fits in with these global goals. It seems that having been satisfied for many years with a simple “buy nine, get one free” proposition, the European-style coffee company is now trialling new strategies such as gamification to increase engagement, while simultaneously maintaining a richer reward ratio for customers in order to compete against powerful competitors. The table below shows the market leader Costa rewarding customers with just 5% back, followed by Starbuck’s UK reward at 7%, ensuring value-conscious consumers in the UK will be tempted by Caffè Nero’s relatively-generous 11% reward rate.
Starting with Simple
The Caffè Nero loyalty programme, like many coffee shops, initially operated a simple paper-based stamp card to track customer purchases. However the opportunity to connect with customers, simplify their payments and gather insightful data was obviously too good to miss. In 2017, the brand finally launched an app, allowing users to pay and collect their loyalty stamps with their phone and avoid the inevitable problem of lost or forgotten cards at the till.
In fact, losing the iconic paper-based stamp cards was a significant problem according a UK loyalty survey which estimated that 25 million people had lost two to five paper loyalty cards in the previous year, and the mechanic was also damaging the brand as UK consumers saw the stamp card as outdated (it was in use since 1997!) and also cluttered their wallets, so consumer demand for a digital solution was clear.
With operations in ten countries, we noticed some interesting regional variations to the brand’s functionality and loyalty proposition which we think are worth noting:
- UK members get an additional stamp if they bring a re-usable cup. It’s not clear whether the same reward is offered to customers in Ireland, however with reports of Government plans to implement a “latte levy” on disposable cups in both the UK and Ireland, it seems likely that Caffè Nero will extend this simple idea to its global network as one way to help change behaviour and align the brand with eco-conscious consumers.
- At the time of writing (November 2019), UK members still cannot add or use their gift cards as a payment method on their loyalty app, however this feature IS available to US customers, perhaps given the popularity of this idea from Starbucks and other coffee chains there.
- The Caffè Nero rewards app is not (yet) offered in all international markets such UAE or Turkey.
Caffè Nero invites customers to add a payment card to their account for faster payment.
Growing Use of Gamification
While the simple paper-based approach clearly served Caffè Nero well, the brand is increasingly implementing digital games for its customers to drive engagement. For example, in October 2018 the brand announced its first gamified campaign as follows:
- The company gave away 10,000 complimentary coffees to celebrate 10 million stamps awarded to customers on its loyalty payment app in its first year.
- The campaign ran for a short ten-day promotional period.
- To enter the competition, every time a customer bought a hot drink they were sent a digital ‘Wheel of Fortune’ – they would then spin the wheel to find out if they’d won.
The app was clearly meeting customer needs – in its first year, the app was downloaded over half a million times, with customers earning over 1 million free drinks.
Now two years in use, the brand recently announced its latest gamification-based marketing campaign on its loyalty app, launched in time to celebrate its Christmas menu, further enhancing its strategy to entertain and engage customers and with an even longer promotional period:
- All customers who buy coffee with the Caffè Nero’s loyalty payment app during the 2019 promotional period are eligible to win one of 10,000 free coffees.
- The 2019 competition is taking place over an extended period between 7 November and 24 December.
- Customers using the app are sent a digital ‘Christmas Cracker’ which is automatically ‘pulled’ to reveal their prize.
- New users receive double ‘Christmas crackers’ on their first use.
- As well as the headline of 10,000 free coffees, the prizes this year include seven jackpot prizes of unlimited coffees for a year – one each week until Christmas Eve.
Lessons in Loyalty
With over twenty years of consecutive market growth, it’s clear that consumer health and wellness trends in the UK are driving the growth of coffee shops and “displacing the traditional role of pubs”.
Caffè Nero has responded by this year investing heavily in its core product and announcing major menu changes such as stone-baked pizzas which seem to be achieving the delicate balance of tasty, affordable and healthy at under 500 calories, and also fit the European brand positioning perfectly. It’s a clever strategy and reminds me of the great advice from the business guru Stephen Covey – to “keep the main thing the main thing“.
With its menu products continuing to evolve so successfully, it will be exciting to see how the same laser focus drives its digital strategy. Caffè Nero is clearly committed to excellence with its UK app in particular scoring 4.7 out of five in its 8,200 app store ratings, and its increasing use of games is evidence that the brand is excited by the power of its loyalty programme to differentiate in its most competitive market. Commercially, its results are truly excellent too – with 82 consecutive quarters of growth, so Caffè Nero is one company we’ll certainly enjoy watching to see how it continues to delight its loyal customers and shareholders worldwide.
Liquid Barcodes is a leading global loyalty and digital marketing technology company specialized for the convenience store and foodservice industries. Our proprietary cloud-based technology platform allow retailers to create and manage their digital marketing campaigns with a proprietary process we call the “customer connection cycle’ to engage, promote and reward customers activities in real-time across digital and media channels.
How we do it:
We have developed the most advanced loyalty and digital marketing technology platform specifically for convenience store and foodservice retailers globally.
Retailers use our self-service dashboard to create and manage loyalty driven marketing campaigns that increase purchases with their existing customers, as well as effectively target and acquire new customers through partners or paid media channels.
One core component of live loyalty is gamification. We have gamified branding, loyalty and promotions. We believe this approach is essential in order to get customers’ attention and ultimately truly engage them with repeatable actions thereby winning their loyalty.
Check out some of our exciting/proven results here:
Chief Content Officer, Liquid Barcodes and Independent Loyalty Consultant
With over twenty-five years marketing experience, I specialise in loyalty marketing consulting, managing consumer loyalty propositions, strategy and operations. In addition to working with Liquid Barcodes, my clients have included Telefonica O2, Three Mobile, Electric Ireland, Allied Irish Bank and The Entertainer, as well as Avios – the global points currency for some of the world’s top airlines. I am also a judge for the Loyalty Magazine Awards.