Farmers recently launched a new structure to its very well subscribed Farmers Club loyalty programme. The changes have sparked outrage on social media with hundreds voicing their disappointment on what they view as a less rewarding scheme, providing a lesson for other retailers who may have similar loyalty programme adjustments.
One of the main issues being voiced by consumers stems from the adjustment to the $20 voucher achieved when $200 is spent on fragrance and selected beauty brands within a 6-month period. It halves the time previously available to amass the same amount of spend.
Farmers stated, “Some consumers have concerns that the seasonal rewards will not advantage them as greatly, but these are only one part of the new benefits – we want to make sure more of our 1.4 million members are benefiting from the club.”
It appears like a shrewd move from Farmers, which undoubtedly has a greatly varied demographic in its membership. However with social media playing a more and more powerful role in business, companies have to pay close attention to the psychology of their entire range of customers to avoid such public backlashes.
Colleen Ryan, head of strategy at TRA, commented on the subject.
“Farmers have fallen foul of people’s inbuilt loss aversion – so even though the card has given additional benefits, everyone is anchored to the pain of losing the $20 vouchers. Companies running loyalty programmes need to be well informed on behavioural economic principles – so for example people value a loss higher than the equivalent gain.”
Ryan explained that a strategy for companies to avoid loss aversion is to “launch” and new programme with a bonus so consumers feel a gain equivalent to whatever loss may be experienced from the new programme. An example in Farmers’ case could be a bonus $20 voucher to mark the changeover.
Another important thing to note, says Ryan, is to “be aware that loyalty programmes are not stand alone customer experience touch points, instead they are part of the total brand experience so calling foul play on a company’s loyalty programme impacts the whole brand experience.”