The Boots Advantage card is one of the most successful loyalty programmes in the UK.

Launched eight years ago, the scheme has 13 million active customers, and about half of all transactions at stores use the card.

‘Advantage card customers are valuable – the average transaction value for a cardholder is, on average, 50 per cent higher than for a non-card holder,’ says group IT director Rob Fraser.

‘When someone takes out an Advantage card, their spend starts at the normal level, but moves up over time to match the average for cardholders. It is not just taken by our highest spenders; you do see that change in behaviour.’

Customers earn points for transactions – typically a minimum of four pence in every pound is accumulated on the card, but with special promotions, the average return to cardholders is six per cent per year.

‘The increased average transaction value and spend profile we get from people just having a card more than pays for the administration of the scheme. So we get all the insight for free essentially, and that insight is the really valuable part,’ says Fraser.

A database with ‘many terabytes’ of information has been built up, and has provided valuable understanding of Boots’ customers.

‘It is a huge feedback from customers, based on what they do, not what they say. We get a load of behavioural information that allows us to understand what our customers really want,’ says Fraser.

‘Now the Advantage card has been running for eight years, you can see someone who got their card at 22, and how life has changed for them as they reach 30. The longer you have the scheme the better you see how people progress through life and how their patterns change. There is nothing so compelling as being able to thread it through particular customers and see the shifts.’

For example, Boots recently expanded its range of baby products. The company had previously cut back because this is a competitive, low-profit business that takes up a lot of space in stores. But through the Advantage card, it received a different insight on the long-term benefit of these products.

‘It allowed us to see how valuable our baby customers were,’ says Fraser.

‘People might have been with us as a teenager buying cosmetics, then maybe drifted away, but they come back when they buy baby products, and then they stay with us. If we make that connection with them, when they have children, they become very long-term loyal customers. We realised it creates this fantastic bond with that set of customers.’

IT has always been central to the Advantage scheme, but Fraser says it is essential that technology is used in a way that makes sense to customers.

‘We trialled kiosks that allow you to put camera media straight in and print your digital photos – you don’t have to hand them in at the desk and wait. It instantly captured customers’ imagination. They were not afraid of the technology, and we went from a pilot to a full rollout almost immediately,’ he says.

‘In contrast, last Christmas we trialled an internet kiosk in stores that would allow people to search online for products on Boots.com, decide what they want, print a voucher to pay for it at the cash desk, and have it delivered to their home. We found that did not quite make sense to customers.’

Fraser says technology works when it helps to understand customers better.

‘In the end, customers are loyal if you serve their needs best,’ he says.