#470: Diving into the World of Caffè Nero's Loyalty Program

This episode focuses on Caffè Nero’s loyalty programme, featuring insights from James Flett, the Marketing Director for Caffè Nero.

James has worked for more than 10 years on some of the UK’s largest and most loved loyalty programmes and has a wealth of experience about what motivates customer behaviour and change.

He heads up the UK Marketing team at Caffè Nero where he has many customer-centred responsibilities including Nero’s famous ‘little blue loyalty stamp card’. In 2017 he launched the Caffè Nero app – the paper card’s digital sister – that’s now used by more than 3 million people globally.

Prior to Caffe Nero he worked at the iconic music retailer, HMV, building Curzon cinemas on top of shops, inserting experiential retail in music festivals, and partnering with Apple to launch their products in-store.

Today we will be learning about James’ favourite loyalty programmes, what the loyalty landscape looks like in the coffee sector and about the Caffe Nero loyalty programme!

Hosted by Charlie Hills.

Show Notes :

1) James Flett⁠

2) Caffè Nero

3) European Loyalty Whitepaper

4) Mando Connect

5) YouGov

Audio Transcript

Paula: Welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals. I’m Paula Thomas, the Founder and CEO of Let’s Talk Loyalty. Today’s episode is hosted by Charlie Hills, Managing Director of Mando Connect, a UK based agency that uses smart data to create brilliant partnerships and rewards that really work.

If you work in loyalty marketing, make sure to join Let’s Talk Loyalty every Tuesday, every Wednesday, and every Thursday to learn the latest ideas from loyalty experts around the world.

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Charlie: Hello, and welcome to Let’s Talk Loyalty. I’m Charlie Hills, the Chief Strategy Officer for Mando Connect, WPP’s Loyalty Specialist Partnerships and Rewards agency. We have created a white paper in partnership with YouGov that explores loyalty, membership, appeal, and impact across 24 European markets. And I’m delighted to be hosting a series of podcasts featuring European loyalty experts to help our listeners better understand loyalty across this market.

Today, I’m delighted to welcome James Flett, the Marketing Director of Caffe Nero. James has worked for more than 10 years on some of the UK’s largest and most loved loyalty programs, and has a wealth of experience about what motivates customer behavior and change. He now heads up the UK marketing team at Caffe Nero, where he has many customer centered responsibilities, including Nero’s famous Little Blue Loyalty stamp card.

In 2017, he launched the Caffe Nero app, the Paper Cards Digital Sister that’s now used by more than 3 million people globally. Prior to Caffe Nero, he worked at the iconic music retailer HMV, building Curzon cinemas on top of shops, inserting experiential retail into music festivals, and partnering with Apple to launch their products in store.

Today, we’ll be learning more about James’s favorite loyalty programs, what the loyalty landscape looks like in the coffee sector, and of course, all about the Caffe Nero loyalty program. I hope you enjoy our conversation today.

Hello James, and welcome to Let’s Talk Loyalty. We’re delighted to have you as a guest on today. Welcome to the show. 

James: Hi, Charlie. Delighted to be here. Good to see you again. 

Charlie: It should be a really exciting episode. So without further ado, I thought we’d get straight into it. And I’m going to start with Paula’s favorite question that we ask every guest up at the beginning. And I know it’s a tricky question, but what is your favorite loyalty program? 

James: That is a tricky question. Thought quite long and hard about this one, Charlie. So I’m going to give you one old one and one new one. So an old one in my early twenties, I was a proud member of the Rough Trade Album Club. So you would pay like 9.99 a month, I think. And then they’d send you a random album. So they would kind of pick it. So they’d curate which album you were going to get, and you’d get all these great sleeve notes, as well as all of the other kind of album notes of albums that were coming out of that particular month. So it just made you feel like you’re very kind of participative in something and it was just really engaging, great brand.

And then a new one and I probably shouldn’t say this as I work for Caffe Nero, but I have been enjoying getting a free loaf of bread from Gales. They do an amazing kind of San Francisco sourdough bread. And you know, a loyalty program that gives you a free loaf of bread, I think is a great loyalty program.

Charlie: I completely agree. And who doesn’t love Gail? I think you’re allowed to say that. It’s a great bakery and a brilliant program and really nice to see that kind of innovation in that space. M&S Sparks gave away a loaf of bread a couple of weeks ago in a big change to their program. Yeah, all of us loyalty nerds are like, Oh gosh, what’s driving this? Is it a shift to everyday value? But there were people queuing up at Waterloo station is my local one. And there was honestly, there was like 50, 100 people out the door queuing up to get their free loaf of bread. So you’re not alone in your love of that. 

James: Yeah.Bread just has so many possibilities. I mean, you just think about all of the great conserves and toast and everything that you can do with it. And it’s great. 

Charlie: Yeah, I agree. Huge fan. Could never really go fully gluten free in my, my personal experience because bread is a large part of our our family DNA. And it’s interesting about the Rough Trade album because that’s almost a new mechanic now. You know, we’ve seen an explosion of subscription programs of that nature in the British market. You know, wine is a classic sector that now has a whole sort of host of subscription and tasting notes, so it’s quite cool to know that music was one of the first. 

James: Absolutely. I think there is something in just having something tangible just arriving through your letterbox as well, whether it be coffee subscriptions or wine or albums. I think there’s that moment of anticipation where you’re waiting for something to arrive and when it’s there, rather than that instant gratification, it feels like you’re just kind of surprised and delighted when it gets there and you just want to kind of consume it and get your hands over it. So it’s great.

Charlie: Yeah, I think that tangibility is something that a lot of loyalty programs really focus on as well, you know, it is that tangible reward moment and actually the customer or the member walking out with the thing that can have a far more emotional impact than perhaps a piece of communications or something. I think we’re quite lucky in that and that the reward is so central to what we do.

James: Absolutely. 

Charlie: So we’ve talked a little bit about the programs you like, but how did you get into loyalty marketing and tell us a little bit about your background. How have you ended up as the Marketing Director of Caffe Nero and obviously have a brilliant program as part of that?

James: Yeah, I mean, I’d like to say that it was all by design, but it’s actually almost entirely accidental, Charlie. So, I don’t mind saying, but I’m the least qualified person in my whole department. Everybody else has got a marketing degree apart from me. So, I actually studied law at university. But then when I did some work experience, I don’t know if I just perhaps wasn’t mature enough at the point or I just didn’t like the environment. I particularly didn’t like the people very much. And when I started working in HMV part time to try to earn some money to do my legal practice course, I just fell in love with the brand, fell in love with the people, fell in love with the customers and just felt like I belonged there, if that doesn’t sound too pretentious.

And then you just get taken on a wave. I got promoted into store manager, then went into head office. I was opening like Curzon cinemas on top of HMV shops. I was doing kind of experiential retail in festivals like Love Box and Global Gathering. Putting Apple products into our stores, so very still kind of customer focused.

And then join Nero back in 2013 in partnership. So kind of a space that you and I know quite well. So it’s kind of hired as partnerships manager. And then that just evolved because partnerships was all about trying to give rewards and benefits to other people’s customers, if you like. So other brands, customers, but as always, just very fixated on trying to give more benefits to our customers, so Caffeineiro customers. 

And so at that moment we didn’t have a database. We didn’t have any kind of CRM or anything, so we built a customer database. And then that developed into the Caffe Nero mobile app. And now we’ve got 3 million people on that globally now. So, it’s been a bit of a journey, and certainly I didn’t think that I would Become a kind of a generalist marketer. But here I am with you today.

Charlie: I think that’s one of my favorite things about loyalty marketing. Actually, people come to it from such interesting and diverse backgrounds, you know, from law through the store environment, through HMV to loyalty. It’s not an unusual journey. Actually, we’ve had so many guests that come into loyalty from so many different routes.

You know, one of the ones that always really surprises me is the CFO who then comes into loyalty and engagement marketing and gets really excited by, you know, being able to influence the numbers directly. So it’s one of the best things about loyalty, I think, and actually coming into it. And obviously remit is bigger than loyalty as well at Nero, so that’s really nice to see that common thread across everything. 

James: Yeah, I think the thread that runs through it is very much the customer and they are almost like a central point of gravity through all of those things that I just talked about. I think why the CFO gets quite excited about it and the CFO in the right business is because I don’t think there are many other kind of strategies that you can deploy that can become such a huge force multiplier. Because in a coffee shop world where customers might come to us a couple of times a week getting a customer to come three times a week or four times a week, which you do through loyalty programs to a CFO. That’s quite a big deal to kind of a marketing director. That’s a big deal, but perhaps a different reason. So I think that’s why when they see that irrational behavior that customers make when they’re on loyalty programs regardless of role, I think it’s very exciting for a brand and the customer as well.

Charlie: Yeah, I agree. We see everyone there and I think coffee is one of those sectors where you’ve done such a smart job of integrating the pain points and the experience of getting the coffee into the loyalty experience. It’s always held up as one of the best sectors. You know, I’ve been in many a workshop where we’re actually looking at what can we learn from others and that seamless payment and choice integration that you have in your sector is something I think many others aspire to.

I’m sure our listeners would love to hear more about the program, because not everyone will be as familiar or addicted to the seasonal drinks as I am. So tell us about the program and how it works and how you got to that sort of that three million number globally?

James: Yeah, sure. So it’s a, it’s quite a simple program and very kind of humble. So kind of refer to it as a kind of little blue stamp card. So people might know it very simply started out 27 years ago and it hasn’t changed since you buy a coffee, you get a stamp. Once you get nine stamps, you get a free coffee. That’s how it’s been for 27 years. It’s how it will be for the next 27 years.

It’s a little bit different to your kind of classic loyalty program because it’s not really built around points. It’s not really a typical kind of earn and burn program. Usually with loyalty programs, you’re rewarded for the amount of money that you spend. So you spend five pounds, get 500 points or whatever.

With the Caffe Nero program, we’re kind of rewarding you for that product that you’re actually buying. So it’s product based. And then when you’ve got enough stamps, then you can enjoy a free coffee on us. And we try to put no strings around that reward either. So on some programs, they’ll say, well, it’s a free drink. But you have to have a standard one, you can’t have any kind of cream, you can’t have anything whereas with the Nero program we almost kind of encourage you to go grande, kind of have it as that moment in the week where you can just really sit back, relax, and enjoy that thing that you’ve worked quite hard to earn.

So, yeah, I mean it’s got quite a lot of positive sentiment towards it apparently it’s one of the first stamp cards. First loyalty stamp cards. I don’t know that to be true, but certainly when I go around and meet people proudly get out that paper card and wave it at me almost like a badge of honor.

And then most recently, so back in 2017, we created a kind of a sister version, like a digital sister version of that card in the cafe near a mobile app, and that just brings a little bit of extra utility to the product. So with the app, you can pay for your coffee and get your loyalty stamps just in one single scan of a QR code. And then, of course, you will get extra benefits along the way which we’ll try to make as kind of personal to you as possible. So I know it’s your birthday today, Charlie. So at some point today, you might get in your inbox a email from someone in my team with a nice kind of slice of cake to go and enjoy in Caffe Nero.

Charlie: I know. I think that’s one of the things I love about the program, as well as the cake, obviously, and the coffee that comes with it, and the amazing hot chocolates that you do, is that consistency and simplicity. I think we’ve had so much change, even in the coffee sector in the British market, of programs changing the number of coffees, going to points, coming back, changing the number that you need, putting the card on the cup, you know, one of the big coffee providers and then taking it off again and putting it in an app. And I think that consistency, simplicity and generosity comes through really strongly in the program. Is there anything else you think that really sets it apart for, you know, for your customers as well as those things, or is actually that’s the DNA of the program? That’s what they love. 

James: I think that, I think people do genuinely. Like the program and its simplicity. I think you don’t really have to come all that often to get your free rewards. I think with some programs, even in the coffee space, and I’m not kind of picking on anybody particularly, but in the coffee space, sometimes you might have to spend about 60, 70 pounds before you can actually get that base level reward of a free coffee. Whereas ours is just very transparent. It’s kind of nine and get a free one. So I think people respond to that and really enjoy it. 

And we’ve never really, we’ve never really tried to you know, value engineer it either. And we talked about CFOs earlier. And often you might expect us to kind of add one extra stamp that you’ve got to get each year to be able to get your free coffee. And we’ve never, ever done that, but kind of the equation, if you like the value equation for the customer has always been the same. And so I think the transparency of a program and it’s kind of immediacy. So the speed it takes you to actually get that free coffee. I think people just respond to and they appreciate and like.

Charlie: Yeah. I agree. And I also think cleverly what you’ve done in this is in the choice of reward as well. So I speak as an avid coffee addict, as everyone who knows me knows. And I will sometimes use my free coffee for an indulgent treat, or sometimes use it for a bit of a stretch, or sometimes when I’m taking the kids, you know, I’ll let them get some kind of crazy hot chocolate.

But I love the fact that I can tailor what I have to the mood that I’m in on the day. prescription with it. Whereas I think what we’re seeing in a lot of the programs, particularly in grocery at the moment, is that restriction of vouchers and that restriction of what you can and can’t claim. And, you know, under a lot of the guise of personalization will serve you the vouchers and rewards that you want, but not actually giving the customer as much choice as you do through the simplicity of free coffee.

James: Yeah. Absolutely. And I think there’s also quite a lot of irrationality in customers behavior with loyalty programs as well. So people do want to have things on their own terms. And one example is some brands make you immediately redeem your benefit. As soon as you’ve earned it and customers might not want to do that because like you say, you might want to pick your moment when you want to go in and have that amazing drink.

And I think some brands think that’s what the customer wants because they’re kind of removing a point of friction and we have to get out a voucher and redeem it, etc. Whereas actually just like the customers or the individuals who, and the most amount of money are often the people who least like to spend it.

We see a similar behavior in coffee shops where those customers who earn more and more vouchers by getting their free coffees are the people who are probably the kind of lowest redeemers. You know, they might redeem their coffees, but you would expect them to kind of be coming in and redeeming that as soon as they get their freebie. But actually, I think they quite like to store them up. And I think it’s about loss aversion. I think people actually don’t want to kind of lose the vouchers from their apps. 

I mean, also something that makes our program different is with your reward if you want to you can send that voucher to someone else via kind of Whatsapp or Facebook or any way you want and that’s quite good for coffee because let’s say you’ve got someone like your son or daughter going to university and you want them to kind of stay on the good stuff, i.e. coffee and not on the bad stuff like alcohol or drugs. Then it’s quite nice to be able to say, I’ve got a coffee voucher here, I’m just going to share it with my friend or my family so they can go in and enjoy it because I’ve got loads of my app. I don’t need to kind of have any more. So that’s quite a kind of a nice moment.

Charlie: Yeah. I think there are so few programs that take advantage of that gifting as well. And I, we always talk to our clients about it as it’s sort of double the hit because you get the joy of getting the reward yourself and then you get the joy of giving it to somebody that you care about and also actually the joy of them then enjoying it and talking about it. So yeah, we always see it. It’s got a very big hit on on some of the attitudinal and kind of love and emotional connection metrics when you can bake that into the sort of the program DNA. It’s a great part of the program.

James: And often that customer who’s receiving it might also be new to the program as well. So you get that extra benefit of it being a kind of a new customer. 

Charlie: And hopefully they’ll come in and order some cake as well at the same time.

James: Yes, absolutely.

Charlie: And bring a friend and then you create this lovely virtual circle. And what other sort of trends are you seeing in the industry? I know coffee is somewhat strange, you know, one of the sectors that’s kind of right out at the front and, you know, has the most variety of types of programs as well in Britain. What sort of trends are you seeing? 

James: Yeah, I think particularly in coffee and QSR, I think there’s definitely a an acceleration in people launching loyalty programs. I mean, I’ve been doing this for quite a long time now, so, I see it as being quite cyclical, so people do get quite excited by new trends, but I kind of rushed out to buy the Sunday Times recently because they were promising this article and kind of new trends in loyalty and what new brands were doing.

And when I kind of read it, it was really all about brands moving away from discounts. So straight discounts more into loyalty programs. I don’t really think that’s new. I think it’s just quite cyclical and people just often try to trade themselves out of problems by deploying different strategies. And sometimes that’s discounting and sometimes it’s loyalty benefits. So, that’s certainly something that I’ve seen quite recently. You’ve got people like Pizza Express doing less discounting, going into more loyalty, which is really great. But then, we’re talking in the week where I’ve just been bombarded with Black Friday deals.

So as a customer, that can be quite discombobulating almost because it’s like, do you want my loyalty or do you just want my quick buck? It’s almost like fighting for both promiscuity and loyalty at the same time. But as I say, I mean, there’s not a lot that I’ve seen that’s new other than actually in groceries it’s quite interesting at the moment because I think something that is working quite well is where a grocer might be having a kind of price for their, let’s say club card member or their loyalty card member and a price for a non member. And I think that’s one quite interesting to me because it’s a great way to get people into the program because it’s really putting the incentive front and center.

But it’s also tapping into a real kind of problem for customers. I, they want to try to save money. So how am I going to do that? It helps the retailer because they don’t have to do a kind of a blanket discount for everybody and it just helps grow their program. So, I think that’s a new trend that I’ve seen, but I think it’s actually quite a good one for both customers and brands.

Charlie: Yeah, I think member pricing is really interesting and where it goes in the next two to three years, I think it is going to have to be quite revolutionary. We’ve just seen loyalty program membership in the research that we do with YouGov hit 90 percent in Britain, you know, and that’s up from an average, a bit like you, we’ve been doing this a long time now. It’s normally around the 70 percent mark. And a lot of that is this member pricing actually making, not forcing people to join the loyalty program, but making it financially so overt that if you join, you get a better deal, as well as the kind of, you know, the vouchers and rewards. It’s actually becoming a bit of a no brainer.

So I’m really interested to see how they keep that loyalty and how they maintain it and how they then, you know, innovate with those people that have come in because of member pricing. 

James: Yeah, what you’re desperate to see there as a customer is once that member is in that they don’t then kind of value engineer it. So we’re going to get you in at kind of a high discount and then as you go through the kind of life cycle stages but you’re just trying to almost increase for customer spend but decrease your brand spend because I just think that’s a zero sum game that just always eventually ends in kind of attrition and churn.

Charlie: Yeah, and people are so savvy to it as well. You know, we do a lot of customer research and five, ten years ago when we were sitting in groups of people talking about loyalty programs. They were like, Oh, this is lovely. And now people are so savvy and they understand how they work and they understand the business case and they understand the value of their data.

Probably cause they’ve been, you know, we’ve been too overt about it. Too many articles in the Sunday times about the, you know, the value case behind the loyalty programs. But it’s yeah, it’s interesting to see how savvy people are and how they actually do work out the value that they get. 

One of my favorite loyalty rewards is in the Lidl Plus app, the free bakery item at the end of the day. I think that’s a really clever, high value, generous kind of gift. It encourages behavior at a quiet shopping time. And it’s great for sustainability and, you know, lack of food waste. So I think there’s almost more pressure on loyalty programs now to come up with those, you know, almost those miracle magic rewards that hit so many KPIs in one go. 

James: Yeah. A hundred percent.

Charlie: Plus I love a pretzel, a little pretzel is very good. Second only to a Caffe Nero cake, of course. In Caffe Nero as a whole, I mean, how important is the loyalty program? 

James: Hugely important. I mean, it’s been there since day one, as I say, and it wasn’t really born out of a marketing or a finance department, which I think It’s good for it. It means that it’s kind of insulated from those kind of marketing and finance pressures, really, because it was conceived very much out of the brand purpose, which is to make a positive difference. So the idea being that if you demonstrate your loyalty by coming into us buying a coffee, then we’ll give you a coffee back.

And so it’s a very kind of, I don’t want to say it’s completely altruistic program because it’s not, but it’s one that certainly puts a customer at the center. You know, we, it’s very positive. It is a rich program, so we invest a huge amount in it in the amount of, you know, discount and margin, but we give away. And for us to do that, it must mean that it’s pretty important, but I think we put that into our like value equation as a business and thinking about what we want to return to the customer for what they’re giving to us, because without the customer, then we don’t have a business. So It’s really important to have a loyalty program, particularly in a sector like coffee where it’s so competitive and where there is this what you would call in kind of economic terms, like a perfect product. So, or perfect competition. 

The perception is that you can go to lots and lots of different places on the high street and get exactly the same product. And then people shop out of convenience of location. So they’ll be quite happy to stop by a prep or a cost or a Starbucks or a Caffe Nero, because I think that they’re getting the same product.

We would, of course, say, but it’s a different product that we need to be able to demonstrate that to a customer. So a loyalty program is good in the sense that it gets a customer to, you know, get you through the door or get the customer through the door. And then it’s also good because it gives that customer a, a reason or a incentive to return rather than going out into the land of promiscuity where there is just so much choice for them. So, I think it’s very important for us and for quite different reasons. 

Charlie: Yeah, that’s really interesting. That idea of perfect competition in your sector, because you know, those of us that drink a lot of coffee, we understand how they all taste different, but I can see how that would apply. It’s even more of a challenge in sectors like fuel, for example, or telecommunications network, where actually there are differences, but they’re even harder to prove. 

One of the things that’s made me think about is differentiation, actually, and the role that the loyalty program plays, plays in differentiating your coffee experience from other coffee experiences. We’ve seen a lot of consumer feedback in the last six months of programs. You know, everyone’s started a loyalty program and everyone’s kind of really investing in it, but we’re starting to see them more as differentiators and reasons for choice and actually customers are now saying to us, actually, I go to that brand because the loyalty program is so good and it’s better than the other one.

I think that’s always been an ambition in loyalty, but now almost the reality is coming true. Do you get that sort of feedback at Nero in terms of the role that the program plays in embedding people in? 

James: Yeah, a hundred percent. Cause I think if you look at a lot of the coffee programs, they’re all quite similar now because a lot of them have moved over from a points based system into a kind of stamp based system. And so they’re quite easy to compare. And often you see it in the newspapers about you know, how many coffees you’ve got to get at Caffe Nero or Costa to get your free coffee. And they’re all quite similar now in terms of the kind of reward thresholds. So there’s a kind of an easy comparison that the customer can make, but I think the other important thing about a loyalty program is what else it gives you.

So I spent quite a long time trying to convince people that it’s not the like virtue of having a mobile app that is going to make a customer loyal. It’s the ability to then communicate to that customer that is going to make them loyal. So first and foremost, it’s about the experience they have in store and the coffee that they have in store and how well they were served.

But talking about a point of differentiation, you don’t really get a lot of time in a coffee shop to be able to tell them about our kind of sourcing story or you know, the kind of the story about our kind of Classico blend because it’s a very time poor environment. So, having loyalty program and being able to communicate to those members via email or different modes of communication is really valuable because then you’re kind of talking to someone when they’re not in a time for environment where they just want a very quick takeaway coffee. And so on a Sunday morning, they might read one of our coffee stories that someone in my team sends out via email where we do talk about single origin versus blend and our relationship with farmers and everything else. 

So, it’s a good entry point loyalty program into a brand story that you can start to tell. And I think that’s when people would start to really see the difference between us and someone else. 

Charlie: That’s really nice. And actually that’s showing that loyalty is part of a much bigger brand experience or central to it, but actually part of everything that you’re doing and giving you some more touch points and ways to talk to people as well. We often find that actually in some sectors that are perhaps a bit less exciting than coffee, actually, the loyalty program and the opportunity to engage outside of service moments is really critical to the kind of marketing directors in those spaces. 

What about some of the challenges that you’ve faced? I mean, 27 years as a program, it can’t all have been plain sailing. What, you know, what are some of the challenges that you faced in the program and how have you dealt with them?

James: Yeah, so I’d probably divide this into pre mobile app and post mobile app. I think pre mobile app, so only existing on paper, the challenge is the great, but it’s such a popular program, but we don’t really know anything about that customer and how they engage with us because there’s no, like, customer record there that paired with the risk of fraud where, I mean, you could go to some, you know, Caffe Nero and there would be a student standing outside selling kind of fully stamped loyalty cards, or you could go into eBay and actually buy one of the red stamps so you can just print your own money at caffeineiro, which is pretty disappointing. So, I mean, that, that was a challenge. 

I think and then going into the mobile world and the digital space that comes with a challenge because we’ve already got a really successful loyalty program on paper. So how do you demonstrate the upside? And how do you convince people that by moving over to a digital version of app, you are going to see some betterment or it’s going to be accretive and it’s not going to be completely cannibalizing. So, that, that was certainly a challenge internally. 

And then externally, how do you demonstrate to a customer that the digital version is adding more utility, value, convenience to them. I mean, why? Why bother? It’s the same program. So why? Why should I move over from paper to digital? But I think if you can demonstrate its attributes, its utility and the things that are important to a customer, then I think that’s how we’ve been able to overcome the challenge.

Charlie: Yeah. No, I think that’s a common program says, you know, going from a paper card to a digital one is one thing, you know, a lot of the grocers struggle from a plastic card to a digital card, you know, the Waitrose case studies of that we’ve all seen in the press recently indicate that, you know, that is a hard thing to get the British public to do, you know, of a certain age, it’s totally fine, but for the majority of the population, it’s a much bigger shift, I think than programs often think.

What about some of the lessons you’ve learned, you know, in, in running that programming? Obviously, there’s a. lot in digital, there’s a lot in paper, there’s a lot in loyalty, but is there anything else that sort of stands out?

James: So I think a couple of things, I think experimentation is really, really key. I think when you are a retailer at scale, you’ve always got a underlying and base performance, which is really, really hard to shift and you can’t do the same things and expect a different result all the time. So I think the more you can actually one experiment and two learn from those experiments, I think is really key. So I think that’s something that we’ve certainly learned. 

And also don’t expect customers to behave in the logical way that you think that they’re going to behave because they don’t. So I mean, the thing that I love about our program or our comms program that we send is that the most successful, email that we send to customers on a monthly basis doesn’t have any promotion attached to it whatsoever. It’s the email that we send at the start of the month that says Charlie, your favorite coffee last month was a double macchiato. Your favorite store was Weybridge. You’ve got three vouchers, two stamps on your card. 

And the amount of customers who then come into our stores the week after getting that it just because I think it just demonstrates the equity that they have in the program and the equity they have in the brand. And you would get a lot more customers coming into your stores, which is great. Then you would if you just sent an email that was 25 percent off coffee today. I think that is completely illogical. Completely irrational, but completely beautiful. 

Charlie: Yeah, it’s completely fabulous. Yeah. Yeah, it’s brilliant, I think, when you can uncover those kind of insights and actually do it in such a genuine way to the brand as well. You know, the Spotify unwrapped principles we’re seeing kind of, you know, everywhere. Sainsbury’s big campaign that, you know, was all over the billboards. You know, you’ve bought the most toilet paper in Manchester. Who would have thought that, you know, that would be such a motivating thing? But I love it when you uncover stuff like that.

What about success for the program? I mean, obviously, member acquisition is a big part of it. Digital acquisition must be what sort of KPIs are you focused on as a team? 

James: Yeah, so I think our success measures have really kind of morphed and multiplied over time. So, starting with the app. So when we launched the app. And certainly in the first few days or weeks, I was just like really kind of obsessed with like reviews. So what people were saying, because I’d sweated my heart for about kind of six months trying to get it launched. So reviews and what people thought was really key. Selfishly kind of just downloads were really key because I wanted people to download it and like it. So to get to kind of number one in the food and drink charts in the first couple of days was amazing. 

And then I think over time your perspective just changes because it becomes more about the marginal gains that you can make, particularly when you’ve got quite a big base of, let’s say, kind of 3 million customers. You’re really into the world of making kind of marginal gains rather you’re not going to go from 50,000 members to 200,000 members like overnight. 

And in coffee shops and particularly loyalty in coffee shops, the North Star for us is very much about customer frequency so our customers coming to our coffee shops more or less than they did before by virtue of having this little app or little loyalty program installed in their device and that’s something that we really obsessed about because I think it’s a bit of a proxy for engagement in the brand. And also market share and other things. So, now it’s very much about frequency and engagement of existing customers as well as behaviors from new customers as well. 

Charlie: I think that’s something that we’re seeing is some of the most successful programs at the moment as well, an explosion of sort of second tier KPIs, but actually an increasing attempt to have a North Star exactly as you said that language from a few programs now we’re actually one main KPI is what unites everybody and then you have a sort of suite of secondary KPIs under it. It’s interesting to see that in coffee, it’s frequency that makes a lot of sense rather than upsell and cross sell as well. 

And what about internal com? You know, we all know Cafe Nero’s got fantastic offices in Covent Garden and is a really kind of united business. But how do you communicate about that program internally as well? You know, what sort of, what tactics do you use?

James: I think we talked about earlier that the coffee shop is quite a time poor environment. So it is through our customers, but it is through our baristas as well. So anything that we, communicate to them, it has to add some value in some way. It can’t take them away from the bar. It can’t distract them. It has to be quite surgical. So, landing the right message in the right way is really key. 

I think when we launched the new loyalty program on the app, it was, between you and I and let’s assume that nobody’s listening. It was a nightmare. It was a real nightmare because, you know, we needed 5,000 people, 5,000 baristas to test the app, make sure it worked. And that was really hard. It helps a lot, but the baristas and I do as well, we all have our, if you like, staff discount on the Caffe Nero app. So it means that we are kind of engaged a lot in that program and we have to use it. We have to understand it. And you know, we’re up to like 35 percent of all of our customers using the Caffe Nero app now, and so it is just almost business as usual.

People see it every day. 1 in 3 transactions goes through on the Caffe Nero app. So, baristas have quickly found out how to use it, how to process it with customers, how to help customers, and then we just have to keep a regular dialogue with baristas about what’s new, what’s coming up, what promotions we might have so they can help customers kind of navigate it all in store.

Charlie: Yeah, I always think it’s an amazing work environment as everyone’s so busy, kind of charging about in there. It’s a lot to then land a loyalty message as well. But my personal experience, we’ve always been very informed baristas. And obviously when you launched it, we went and checked it out. And some of the other big programs that have launched recently have tried really hard as well.

I was really impressed with the MyDyas launch as well, you know, we went and did some mystery shopping and we went into a few of their stores. And as part of that, their team were really well informed, a slightly less time intensive counter experience in the Caffe Nero, slightly less production going on.

But they’re not the only ones that are time poor. You’re obviously in a big role across a big business and you’re pretty time poor as well. How do you keep up to date with everything that’s going on in the loyalty industry and understand how to then experiment on, you know, different things within the program?

James: Yes, I’ve signed myself up to quite a lot of newsletters and follow you quite a lot and what you’re posting about. I’m also a bit of a bookworm as well, there’s quite a lot of books I like to read not specifically so much about loyalty marketing more about, like, customer behavior, so I’m a bit of a nerd around behavioral science love stuff. Like nudge and other things that people can read, and also a bit of a nerd around kind of customer experience as well, which is something that I have to do quite a lot of in my role. 

So, I think just always trying to learn and understand what motivates people and what behaviors are and what good experience looks like as well as kind of keeping up with all of the so called trends.

Charlie: Yeah, I think that’s a really important part of what we all do, which is actually taking a sort of a broader view. I think we can all read the loyalty press and we can all read the loyalty books, but actually that behavioral science piece and that customer experiences, so much of it works across, you know, we’re so lucky on a lot of the programs we work with. We’re part of big, you know, agency collaborations. And I’m always really inspired by what we can learn from others and a fellow kind of nerd and geek, obviously, which is why I’m on the podcast. 

And then what about new ideas and innovations in that nerd space? You know, we’ve talked about member pricing and obviously that’s one that we’re both really interested in and kind of, I’m not sure admire is the right word. I’m intrigued about to see what happens for the long run, but what else have you seen? 

James: Yeah, so, I think one that I’m quite proud of is probably the wrong way of putting it, but I think I’m quite excited by is we’ve just done a partnership with Waitrose, and there are a few, like, constituent parts of that partnership. So we’re supplying coffee from Manero Roastery for their loyalty members to enjoy in a Waitrose store. We’ve got all of our coffee at home products in Waitrose stores now, which is quite exciting. But I think the thing that I’m most excited about is that if you’re a MyWaitrose member you can link your account in the Caffe Nero app, so it’s ostensibly like a joint loyalty program and you can get benefits in Caffe Nero and you can get benefits in Waitrose.

I think that’s actually quite new. I don’t really see a lot of that. I know Nike have done it with JD and a few others, but I think it’s quite interesting in the spirit of partnerships to see how. You can each become force multipliers for one another because you can help drive those different objectives. So I’m really excited to see that. 

I think something that was a bit of an innovation when we launched it, and again, something that people just love, it’s our most popular campaign each year. It’s our Christmas crackers campaign that’s running at the moment. So buy a coffee, you get your normal stamp, but you also get a little digital Christmas cracker, shake your phone, open the cracker, and you might have a really terrible joke, which most of which have been written by me. 

Charlie: Excellent.

James: And then, and if you don’t get a joke, you can win something humble, like a bonus stamp, but it might be like a trip to Milan or kind of a trip to Hollywood or like an Apple watch or something from one of our amazing partners. And I think that was a kind of different way of doing loyalty because it wasn’t just rewarding you for that product that you just bought, but it was trying to create an experience out of it as well. And I think people just respond to that really well and people love it. So very proud of that one. 

Charlie: Yeah, I think, well, I think both of those are great examples. I mean, obviously partnerships has been used by a lot of programs for rewards, a lot for member acquisition, but almost that kind of baby coalition approach that you’re talking about choosing selected brands and programs to work with to create a better experience, I think is going to be one of the big things we see over the next few years. 

And then promotions within loyalty programs. I think those are the best ones where actually people want them, you know, and actually they become a part of the brand experience. And that lovely gamification of just shake the phone. But linking it to exactly that seasonal moment is is a really smart move. Actually, I think that’s a lot smarter and a lot more ownable than a lot of programs that sort of tactically do promotions at different times but don’t repeat.

Maybe that’s that 27 years of longevity coming through without you always realizing it at Nero, actually that consistency. And then once people have experienced it a few times, of course they can fall in love with it. And I think that’s a great idea. It’s really nice themes. 

Okay. Well, look, thank you so much for your time today. It’s been absolutely brilliant to have you on. I feel like we’ve covered so much from coffee, from retail from trends that we’re covering out, but I’m sure as ever, our listeners will have more questions. How can they how can they reach out to you if they’ve got more questions and is there anything else you’d like to share?

James: Things like share. So I always say to people just be a rational, be a logical that’s where lots of exciting things happen, particularly in loyalty. And don’t limit yourself you can find me on LinkedIn, jamesf@caffenero.com. You can find me all over social media probably, so always happy to have a chat about loyalty or anything else.

Charlie: That’s brilliant. And thank you. And we’ll put those details in the show notes as well for anybody that wants to connect on LinkedIn and find out more. Well, from all of us at Let’s Talk Loyalty, thank you so much for today. It’s een brilliant to have you on and goodbye for now. 

James: Thanks, Charlie. Great to see you.

Paula: This show is sponsored by The Loyalty People, a global strategic consultancy with a laser focus on loyalty, CRM, and customer engagement, the loyalty people work with clients in lots of different ways, whether it’s the strategic design of your loyalty program or a full service, including loyalty project execution. And they can also advise you on choosing the right technology and service partners. On their website, The Loyalty People also runs a free global community for loyalty practitioners. And they also publish their own loyalty expert insights. 

So, for more information and to subscribe. Check out theloyaltypeople.global.

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