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With Coca Cola announcing it is to buy Costa Coffee for a reported £3.9bn, Yoyo CEO Michael Rolph explains why creating a data-led loyalty programme should be the next move for the soft drinks giant, as it takes its first step into the world of coffee.
Last week, we found out that Coca-Cola is to buy Costa Coffee from Whitbread in a £3.9bn deal that will see the global soft drinks giant enter the coffee market for the very first time.
But through this acquisition, Coca Cola enters the coffee market at a time when Costa has themselves said that “footfall weakness” is having a negative impact on sales (they reported a 2% fall in like-for-like sales in the first three months of 2018).
In such a saturated market, Coca Cola will need to come up with a strategy that clearly puts Costa front-of-mind for UK coffee drinkers, who consume a massive 95 million cups a day.
In my view, a quick win for Coca Cola would be a reassessment of Costa’s loyalty programme, a vital component to most, if not all, major coffee chains in the UK.
Despite it’s huge reach, Costa’s current loyalty offering has fallen behind rivals such as Starbucks and Caffè Nero in terms of customer value, and they’ve had a fair bit of flack for this in the past few months.
One press report said Costa customers had to spend £68 before being rewarded with a free coffee and that it’s loyalty scheme was ‘three times less ”rewarding” than its competitors’.
In the meantime, the likes of Starbucks and Caffè Nero have been able to deliver delightful omnichannel loyalty offerings for their customers, mixing simple app journey’s with personalised experiences powered by customer data.
This strategy has enabled them to create genuinely improved, personalised in-store experiences, and there’s an obvious consumer appetite for this if it’s delivered in the right way.
Take Nero – within just 12 months of launching its new combined payments and loyalty app, 350,000 users had signed up and 3.6 million app transactions were processed. The loyalty app was launched in April 2017, and just over a year later Caffè Nero reported a 2.5% like-for-like sales growth for the 12 months ending 31st May 2018.
And then there’s Starbucks – according to eMarketer, it’s loyalty app is a more popular form of payment than Apple Pay!
Most tellingly, we can also see the disparity in the consumer ratings between the Caffè Nero and Starbucks loyalty apps with that of Costa’s. In the iOS app store, Caffè Nero and Starbucks currently have a 4.6 and 4.7 rating respectively, while Costa’s app-based loyalty experience languishes at 2.7.
So our advice to Coca Cola, who are taking their very first step into the world of coffee? A revamped data-led loyalty programme, which places customer experience at the centre, would be a good starting point in turning their huge reach into increased business value.
The original version of this article was posted on UKTN on Friday 31 August. You can view the article here.