Loyalty Schemes

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Loyalty Schemes
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Loyalty Schemes
Types of Loyalty Scheme, eg

• Account Cards (eg. Marks Spencer)
• Loyalty Rewards (eg. B to B)
• Membership Schemes (American Express Card)
• Pure Tie-In (Long-Term Contracts)
• Combinations of the Above Loyalty Cards
  (American Express Membership Rewards, Plussa)
• Other ?

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Loyalty Card Schemes

• Logic Behind Aprropriateness of Loyalty Schemes
• Is it easy for customers to compare overall
  product / offering prices ?
• If so then bonuses benefits can be easily
  compared to price differences and therefore
  possibly counted out eg Customers of
  supermarkets may use loyalty cards because it is
  a definite benefit in a shopping environment
  where they find it hard to compare combined
  prices. Some other products are not like that
  because overall price is simpler to compare (eg.
  cars?).
• Are competitors prices often compared by media?
  and if so are loyalty bonuses contained in the
  price comparisons ?
• If not, then bonus benefit schemes may damage
  your price image (eg.Cars).
• Is it desirable to buy more of something ?
• Credit card customers may use loyalty schemes
  because they can increase their benefit by
  spending more with the credit card. If customers
  need no more of something than they already buy
  then there is no point buying more just to get
  more points (eg. electricity). Of course a
  company can sell more of something else to the
  loyal customer, then a bonus scheme may be
  beneficial.

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Loyalty Card Schemes
Are There Realistically Options To Choose
? Most loyalty schemes are designed to make
customers choose one company Always instead of
Occasionally, or at least more often (ie. if two
or more companies are believed otherwise similar
then it makes sense for a customer to buy all
from one and gain loyalty benefits rather than
buying some from each and gaining no loyalty
benefits or not enough from any). With monopoly
industries, or banks etc, this is not a realistic
assumption. Are There Competitor Loyalty Card
Schemes ? If so then it is necessary to either
offer the best scheme (perhaps through
partnerships with other sellers, or to offer a
minimum reward level (eg. American Express)
Are The Loyalty Benefits Motivating ? This is
perhaps an obvious but critical factor, dependent
on each loyalty card schemes characteristics.
Often loyalty benefits are so small, difficult to
get, or the minimum requirement is too high (eg.
Barclaycard).
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Loyalty Card Schemes

• Benefits For Customers
• Saving Money / Make Money
• Convenience Factor Ease of Payment (Speed and
  Simplicity)
• Special Offers / Discounts for Card Holders
• Feeling Of Belonging and Membership
• Possibility of Receiving other Financial
  Services
• Member Magazines etc.

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Loyalty Card Schemes

• Benefits For Companies Which Offer Such Schemes
• Identification of Customers (enabling deeper
  relationship marketing)
• Reason for More Contact with Customer
• Identifiaction of Customer Behaviour who buys
  what, when, where how much, how, etc.
  Identification of Trends.
• Customer Tie-In
• Increased Sales Volume / Turnover

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Loyalty Card Schemes

• Benefits For Companies Which Offer Such Schemes
• Damage to Competitors (if successful and
  especially if rewards based on minimum
  requirements, eg. air miles)
• Cross Marketing Opportunities (eg. Finacial
  Services)
• Customer Satisfaction
• Word of Mouth if it is a good deal
• Differentiation / More Appropriate To Those Who
  Want It

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Loyalty Card Schemes

• Benefits For Companies Which Offer Such Schemes
• May Hide Real Prices Therefore Enable Higher
  Prices
• Perhaps New Customers
• Possibility To Sell Customer Data (in certain
  circumstances)

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Loyalty Card Schemes

• Drawbacks For Companies Offering Such Schemes
• High Cost of Promotion and Implementation
• Effort / human resources possibly removed from
  other marketing projects
• Difficult to Get Out of such schemes (once in
  always in, well at least for a long time)
• If Scale, Customer Benefits and Other
  Requirements are Not Achieved Then Scheme May Be
  an Expensive failure.

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Loyalty Card Schemes

• Drawbacks For Companies Offering Such Schemes
• It May Hide Real Loyalty and Satisfaction
  Levels (eg. in American Express switching may
  take place following retrieval of minimum
  accumulated rewards). Ie. Disloyalty may be
  delayed rather than avoided.
• Customer Information May Be Partial and
  Misleading
• Do not Loose Profits to Bonuses and Rewards
  (What is the real cost/benefit)
• The Case of Hoover

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Loyalty PartnershipsSource Iain Pringle
Affinity Solutions IIR Conference, October 2002

• Advantages
• Existing customer bases infrastructure
• Widely understood mechanics
• Frequent customer interaction
• Turn key solution
• Link with aspirational brands
• Brand Exclusivity
• Disadvantages
• Builds loyalty to a currency, not a brand
• High cost
• Training and integration issues
• Anonymity
• Few opportunities left Nectar ?

Nectar is a new type of reward card - one which
lets you collect points at more than one place,
rather than using lots of cards in different
shops. All you have to do is hand over your
Nectar card whenever you shop at Sainsbury's,
Debenhams and wherever you see the Nectar sign at
BP. You can also earn points every time you use
your Barclaycard. And if you pay with your
Barclaycard at Sainsbury's, Debenhams and BP
you'll earn two lots of points! You can also earn
points when you shop by phone or on the
internet. And from time to time you'll be able
to earn bonus points to boost your total... which
means you could enjoy even more great rewards.
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Loyalty PartnershipsSource Iain Pringle
Affinity Solutions IIR Conference, October 2002
Three easy ways to get your rewards
Exchanging points for Nectar vouchers You will
need to exchange the Nectar points on your card
for Nectar vouchers to claim many of the rewards
that are available. Each voucher represents 500
Nectar points and you can get them at the till of
Your Sainsburys Home Store or by calling the
Nectar Helpline on 0870 4 100 100. Then just fill
in the back of the vouchers and present them to
the relevant reward supplier. Booking with
Nectar Some rewards like flights are
available only by calling the Nectar Helpline on
0870 4 100 100. Please have your Nectar card with
you when you call and your points will be
deducted automatically. Instant redemption In
some instances theres no need for a Nectar
voucher. Points can be automatically deducted
when your card is swiped.
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Loyalty PartnershipsSource Iain Pringle
Affinity Solutions IIR Conference, October 2002
Rewards Partners There are far more rewards
partners than points partners. Therefore,
customers can use their benefits in a huge range
of places for entertainment, travel, shopping etc.
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Loyalty PartnershipsSource Iain Pringle
Affinity Solutions IIR Conference, October 2002
Problems People who shop at Sainsburys, get
vouchers to buy petrol at sainsburys and then
get nectar points when they buy petrol at
sainsburys, so are not only unlikely to buy BP
but also get two lots of rewards for the same
purchase. A large number of customers already
have Barclaycard and shop at Sainsburys and even
at Debenhams ie. their loyalty is already
assured