Do Reward Schemes Positively Affect Customer’s Loyalty?
Reward schemes have become a staple of marketing in the never-ending quest to secure customer loyalty. From having a card stamped when you buy coffee to get points when you fill-up with gas or do the weekly grocery shopping, loyalty schemes, and inducements to try a certain store such as through the use of POS gift cards remain popular with brands and businesses.
More Than Simply Points or Money Off
Historically the basic model for reward schemes has been to award points based on purchase value or simply offer money off a future purchase when certain amounts have been spent with the business.
These days reward schemes have evolved to embrace more than simply ‘bribing’ customers with money off inducements.
The chance to have customers interact with a brand to build a relationship, encourage them to recommend it, and facilitate the capture of valuable marketing data from them are now other objectives of reward schemes in the pursuit of loyalty.
A general philosophy among many businesses and brands is not just to reward people for spending certain amounts with them, but also for the length of time they’ve been customers and how frequently they purchase.
Basic Points Schemes Tailing Off in Popularity
In the UK, three big household name brands – Tesco and Sainsbury’s the supermarket giants and pharmaceutical chain Boots – offer basic ‘points for purchase’ schemes that are dwindling in popularity; recent surveys have found that the average UK consumer carries an average of five loyalty cards, and about ten million of them have unused points.
The Omnichannel Approach
As touched on above, encouraging customers to connect with a brand or a business, in general, seems to be the way ahead – and it’s working.
For example, beauty brand Tarte has a loyalty program that not only rewards people for making purchases but also for sharing content on social media, making referrals and opening emails from the company.
This is a sound commercial move as many people make buying decisions based on recommendations when it comes to beauty, hence the proliferation of beauty bloggers working with brands. Tarte’s scheme turns users into brand advocates for a mutually beneficial partnership.
Brands and businesses know certain factors can influence people to increase their loyalty:
Personalization – brands ‘talking’ to their customers as individuals make a big difference.
For example, sending out a mass email promoting money off voucher to stimulate a purchase is far more effective if it’s tailored to each recipient by showing them how many points they’ve ‘banked’ individually, etc.
Everyone knows how successful Amazon is with their ‘you may also like this’ recommendations on product pages, so businesses demonstrating they know what their customers like is a powerful way to induce loyalty.
Social responsibility – brands showing commitment to their locality, the environment or supporting certain good causes makes a difference to loyalty – for example, the ‘for every XX you spend we’ll donate X to this charity’ method plays well.
Premium Loyalty Programs
Offering a degree of exclusivity and ‘special perks’ for being an especially loyal customer works – and in certain cases such as with Amazon’s Prime people are prepared to pay extra.
Chatbots Take the Strain
Improved chatbot technology – automated ‘robots’ that can interact with people online – means businesses and brands can communicate with their customers easily to help build brand engagement and even walk them through joining loyalty schemes.
Convenience store chain 7-Eleven started a chatbot on Facebook Messenger that can help people sign up to the loyalty program and immediately supply a digital loyalty card so people can straight away start earning points.
Clearly, loyalty programs work but not necessarily in the basic ‘points for purchase’ model that kicked the movement off; brand engagement, advocacy and data capture matter a great deal to businesses, and loyalty programs are definitely helping in this regard.