Let’s talk about loyalty: the evolution of customer rewards schemes
Date posted: 25 March 2015 | Posted in: Blog
In recent months I have had a number of conversations around the continued (or not) success ofÂ points based rewards systems likeÂ Nectar,Â BootsÂ and Clubcard. These schemes work largely because brands such asÂ TescoÂ enjoy regular contact with consumers, allowing small rewards to add up to a meaningful number. Brands with less consumer touch points have tried to employ this strategy, however on the whole have struggled to engage consumers.
Weâve see this with the points schemes of low engagement categories being significantly out performed by high frequency categories such asÂ BootsÂ /Superdrug. Though there have also been examples of low engagement brands successfully using point schemes,Â British GasÂ for example work with Nectar and in the first six weeks of the partnership were able to reduce churn by 5%.
However British Gas and Nectarâs initial success was asterisked by millions of pounds being ploughed into ATL; it would be interesting to see how results have performed as the partnership has matured. For other brands, signing up to Nectar can be expensive and in a market saturated with points schemes there are questions around how tired programmes like this are becoming.
Take myself for example. As anÂ e-onÂ customer Iâm regularly sent emails and DM about how many points Iâve collected, however Iâve never had any inclination to open them, especially as my points value is only Â£15 p/a. Iâd prefer it if they just took the money off my bills! E-on, if youâre listeningâ¦
A far more cost efficient and effective way for a brand to engender loyalty is to distinguish their loyalty offering from a âme tooâ mentality. A good example of this isÂ Sky, who stripped back theirÂ Sky RewardsÂ loyalty scheme to focus on providing money canât buy experiences through their partnership with The O2 and other big-ticket suppliers.
In itself the change is impressive as it shows a flexible marketing strategy, something which is essential in a market where consumer demand is constantly evolving and digital has allowed loyalty schemes to be quickly copied and oversupplied.
Supplying high value rewards is also intelligent as thereâs less competition from rival loyalty schemes, making it easier to communicate Skyâs message and more likely consumers will take up the offer. Additionally, Skyâs offer is relevant to its consumers who trust Sky to provide quality entertainment and therefore appreciate the loyalty programme providing it for free.
In our opinion, low engagement categories and loyalty have a complex relationship and itâs important to create a differentiated experience that is consistent with the brand for it to actually work, keeping it simple, accessible yet valuable to the customer.
Tara Honeywell is managing director of Mediator.