Asda - Loyalty Programme or EDLP

UK supermarket retailer ASDA has publicly stated a number of times that it doesn't believe in loyalty programmes. CEO Andy Bond famously said "You can't buy loyalty with plastic points" and their website actually has a page describing why they don't do "loyalty", saying:-

At Asda we reward all of our customers for their loyalty by charging low prices every day of the week, all year round.

ASDA has always prided itself on being an Every Day Low Price retailer. In a article last year, ASDA said:-

EDLP is very much at the heart of our pricing strategy. [The aim for 2010 is] sucking out the promotional money on offer from our suppliers [in order to] invest all of it in lowering prices across the board.

The problem with an EDLP strategy though is three-fold:-

Hard to prove - Will consumers really believe you when you state you have the lowest prices. With so many deals around, so many different brands within the same category and so much HiLo style pricing strategies even within EDLP retailers, consumer are confused about what a low price really is.

Lacks Engagement - Even if a customer sees initial savings on their first shop, this quickly becomes "normal" on subsequent shops meaning the whole EDLP strategy becomes forgotten. It may work initially for acquisition, but fails in the long term when it comes to retention.

Encourages dis-loyalty - When EDLP are mixed with sales promotion activities this actively creates dis-loyalty. It plays to a promotional audience who will shop around and only buy products on special offer. Long term, rather than EDLP locking consumers in with a trusted promise, the sales promotion activity simply dilutes it.

When reviewing various retail loyalty programmes a couple of years ago, COLLOQUY stated “A marketing strategy focused solely on sale prices and promotions not only faces diminishing returns, but can also actually breed disloyal customers [..] retail marketers have an opportunity to shift their focus from EDLP towards loyalty drivers that build true customer engagement, larger transactions and improved margins.”

Source : YouTalkMarketing.com