Originally started years ago by airlines with their Air Miles, loyalty schemes have become prevalent here in the UK. From cards that reward you with a freebie after you’ve bought eight pizzas from a local takeaway to schemes like the Tesco Clubcard that allow you to accrue points to spend on other things. A recent survey has revealed that only one out of every ten British adults does not own a loyalty card, with a third of people owning five or more! Their ubiquitousness cannot be denied, but are they really so invaluable to businesses?
Advantage – Improved Relationships with Customers
Loyalty schemes help retain customers, first and foremost. By implementing a reward card program in your store, you are incentivising your customers’ future returns, thus giving them a reason (beyond your quality product, excellent service, etc.) to come back again. It may also increase the number of customers visiting your store, as many people are very interested in getting a “bargain”. Sales will be improved because most consumers don’t like to feel they’ve wasted what they’ve already accrued via a reward scheme.
Disadvantage – Cheapening of Brand Value
Although you want your clients to feel as though they’re receiving a bargain, you don’t want your entire business to be condemned to the metaphorical bargain bin. If customers think of your product as being cheap, they may be wary of returning. Avoid this by using your scheme wisely – make them know they’re getting a quality product for cheap, not simply a cheap product.
Advantage – Customer Knowledge
You can increase your knowledge of your customer base by requiring a registration to enable use of your reward programme. Tesco’s Clubcard, for example, gathers marketing data every time their card is used – this allows them to track your spending habits, thus helping them direct their future marketing strategies. You can also use registration to gather email addresses, then emailing your customers at regular intervals, either with a newsletter or weekly discounts and the like.
Disadvantage – Customer Stalking
The downside to the gathering of said data is that many customers are now becoming wise to it, and are naturally feeling somewhat wary. Lots of people feel uncomfortable in the knowledge that their habits are being tracked, believing they are being “monitored”. Obviously, you don’t want this to happen. Also, take care not to use the email addresses too frequently – spam is one of the biggest turn-offs to consumers.
Advantage – Increased Business
When done correctly, loyalty programmes can lead to cheap advertisement and a heightened return on investment. A survey has found that two thirds of people would choose to shop in an outlet that had a loyalty scheme over one that didn’t, so get an edge over your competition by employing one of your own. They also build loyalty among your customers (hence the name) and can attract new customers alongside the old. There are a number of ways in which you can use loyalty schemes to make your business better.
Disadvantage – Decreased Profits
Although you will be increasing sales, some rewards schemes will cut into your profit margins a little. This cannot be helped, and is usually quite obvious – normally, your customers would pay for all six coffees, rather than buying five and getting the sixth for free. This is fairly inherent – it is a “reward”, after all. However, this lessening of initial profit should be more than compensated for, once you’ve taken into account the increased number of customers coming through the door, generating a higher total revenue than before. Written by James Lordin.