Close
 

Is your loyalty scheme wasting you time and money?

  • Opinion
  • October 29, 2015
  • Colleen Ryan
Is your loyalty scheme wasting you time and money?

So here is the thing, survey after survey claims to give definitive proof that loyalty schemes are powerful drivers of protection loyalty and share of wallet. This one from Australia – For love or money is just one of many.

But it’s worth looking a bit deeper and noting these surveys are (in very basic terms) based on what people say in answer to this question: ‘Do you like companies to give you free stuff when you buy from them?’ Well who would say no to that?

But what if the question was: ‘If they didn’t give you free stuff would you still buy your favourite brand of coffee?’ That’s also going to be a yes.

Given that analysis, in many cases the financial benefits of these schemes just don’t add up. A McKinsey study of 55 companies across North America and Europe showed over the past 10 years, those with more prominent loyalty programmes grew at the same rate, or slower, than those with no or low investment in them. Even worse, companies with high-profile programmes had earnings margins 10%lower than comparable companies.

So why do so many people claim that the presence of a loyalty scheme is a factor influencing them when they are deciding whether they choose a brand or select a particular retailer. Could this be because they don’t like to be seen as profligate, or as someone not smart enough to take advantage of a good deal – so they answer in a way that makes them seem sensible. Our society doesn’t revere people who make emotionally-based decisions. Instead it values canny shoppers, so that’s how we like to see ourselves.

Lately my company, insight agency TRA, has been having some in depth conversations with New Zealanders. And, what they are telling us is a somewhat different story about loyalty programmes. People have literally opened their wallets for us. What it showed is a small number of regularly-used cards, which are readily accessible – and a deck of cards tucked at the back, which are periodically culled.

“I don’t think about it until I’m at the cash desk, then I might look to see if I’ve got one of their cards or I wouldn’t bother if I wasn’t spending much,” says a young adult in Hamilton.

“They say you get money off when you swipe your card but everyone’s got one so why don’t they just cut the prices,” says an Auckland mum.

I’m certainly not saying there are no benefits in a loyalty programme, but in my opinion the most important is probably one too many companies don’t think about – the ability to find out what their customers actually do.

Smart analytics can use behavioural data from purchases to tell companies exactly what behaviour is changing or being reinforced by a programme. Analytics can identify the type of customers a company has and how they are engaging with the loyalty scheme.

For example, are they price sensitive and do they respond to direct price communications. Behavioural data can help optimise and to attach a dollar value against the not insignificant cost of the scheme.

New Zealand differs from many international markets in having one strong, multiple-outlet card – Fly Buys – which is coupled with the dominant airline brand’s travel rewards scheme, Airpoints. However, that doesn’t mean we buck the global trend described by the McKinsey findings. Our research would suggest New Zealand loyalty programmes don’t actually alter buying behaviour; instead their real value still primarily in the power of behavioural data analysis to tailor communications and product range.

But before you press pause on your loyalty scheme, there is one other way to get value from a loyalty programme over and above the data from behavioural analysis. But that only when a scheme is a fully-embedded part of the brand experience. If all it is doing is offering customers discounted prices, it will neither drive goodwill nor discharge the glue that attracts loyalty.

So how do you embed your loyalty scheme into the brand experience? One way is by offering rewards for things other than purchases – for example for being a brand advocate, like Powershop rewards people for introducing friends.

Another way is by recognising members as a whole person, not just a buyer of your product. For example, Christchurch hairdresser True Grit rewards customers with a pamper pack, instead of just a reduced price or free haircut, so the reward adds value in terms of a pampering experience. The salon also offers a reward for introducing a friend – and both the introducer and the friend get a $25 reward.

It’s widely accepted that the power of brands lies in the emotional associations they create – and the same is true of a brand’s loyalty scheme. When Air New Zealand ‘Airpoints for Business’ launched recently, that is exactly what the airline did. The scheme triggered an emotional response. SMEs feel undervalued and want to be recognised and acknowledged as proper businesses with needs that are different from domestic customers.

So Airpoints for Business launched with the offer of having one of New Zealand’s leading entrepreneurs as a mentor – instead of the usual sign-up prize of an iPad or a weekend for two in Rotorua. At a stroke, the Airpoints for Business scheme became part of the total brand experience.

Five tips for a successful loyalty programme:

  1. Launch a scheme which will give you access to customer data you can use to make better and more tailored decisions. Set up the scheme single-mindedly with that intent.
  2. If you are not going to be able to use the data from the scheme then aim for an enhanced brand experience and assess success against that criteria i.e. positive emotional associations with your brand.
  3. If you are entering the market just because your direct competitor has a scheme, then set very tight limits around the extent to which you will use the card for price discounting.
  4. Think carefully about an exit strategy if your scheme doesn’t meet your objectives. You need to have a plan in place so you can don’t get caught in a cost increase spiral.
  5. Above all, make it easy. Whether or not you have made brand experience a goal, people’s interaction with your scheme will be experienced that way. People want it to be quick and simple and they will assess how much thought you have put into what the experience is like for them.

This article originally appeared on Idealog.

​ ​

This is a community discussion forum. Comment is free but please respect our rules:

  1. Don’t be abusive or use sweary type words
  2. Don’t break the law: libel, slander and defamatory comments are forbidden
  3. Don’t resort to name-calling, mean-spiritedness, or slagging off
  4. Don’t pretend to be someone else.

If we find you doing these things, your comments will be edited without recourse and you may be asked to go away and reconsider your actions.
We respect the right to free speech and anonymous comments. Don’t abuse the privilege.

 

InStyle names All Is For All’s Grace Stratton a ‘Badass Woman’

  • News
  • July 18, 2019
  • The Register team
InStyle names All Is For All’s Grace Stratton a ‘Badass Woman’

Grace Stratton, the 20-year-old founder of specialty ecommerce site All Is For All, has been named one of 50 global Badass Women by US glossy magazine InStyle. The list includes international celebrities like Mindy Kaling and businesspeople like Stitch Fix chief executive Katrina Lake.

Read more
 
 

Wellbeing in the workplace: Here's how its affecting your staff, and your bottom line

  • Opinion
  • July 18, 2019
  • Elly Strang
Wellbeing in the workplace: Here's how its affecting your staff, and your bottom line

Idealog editor Elly Strang recently spoke at the Magazine Publishers Association conference about the importance of wellbeing in the workplace, and the key takeaways from Wellness Month. She shares why it shouldn't be thought of as a luxury nice-to-have, like yoga classes, as research is showing it impacts on your bottom line, as well as some tips on how to create change in the workplace.

Read more
 
 

How HomeAR is incorporating AR into architecture design

  • technology
  • July 18, 2019
  • Courtney Devereux
How HomeAR is incorporating AR into architecture design

Many people struggle to envision plans from simple 2D renders and floor plans, as without a designer's eye, filling in blanks from imagination isn’t the most reliable method when it comes to something as important as building a brand-new home or store. Reactar has launched an augmented reality-based platform, HomeAR, to counteract this, which allows users to see and engage with homes in a virtual way, making the very personal process more reliable.

Read more
 

Social scoreboard

Zavy and The Register have worked together to create a scoreboard that compares how the top 25 traditional media advertising spenders in New Zealand have performed on social media over the past 30 days, updated in real time.

 
topics
Regional rollercoaster
What does retail look like in 2019 for ...
Concept to closet
Business coverage of New Zealand Fashion Week.
Town centres
A positive retail environment over the past 12 ...
Amazon Arrival
Keeping up with all things Amazon as it ...
The Retail Yearbook 2017
As we battle our way through the busiest ...
Hospitality enhancing retail
Some think food and integrated hospitality offerings will ...
The future is bright
We spoke with four retailers in their twenties ...
Spotlight on signage
At first glance, the humble in-store sign might ...
Red Awards 2016
The Red Awards for retail interior design celebrate ...
Auckland Unitary Plan
Auckland is changing. The Unitary Plan will decide ...
How to open a store
Sarah Dunn considers what it would take to ...
All things to all people
Kiwi retailers share their omnichannel strategies.
Rising stars
Retail's top young achievers.
Delivering on your promises
The sale isn't over until your item is ...
Retail in heartland New Zealand
Retailers keep the regions pumping, but how strong ...
Sisterhood
Women in retail help one another. We spoke ...
The changing face of retail
Shifting demographics are creating big changes in New ...
The retail yearbook
With the help of experts in the retail ...
Retail rogues
We put the spotlight on staff training. Jai ...
Here come the giants
Topshop has arrived in Auckland’s CBD, David Jones ...
From retail to e-tail
Ecommerce has become part of the way mainstream ...
Window shopping: A spotlight on social media
Sarah Dunn and Elly Strang look at how ...
Loyalty in the digital age
How are retailers maintaining loyalty? Sarah Dunn, Elly ...
The Innovators | In partnership with Spark Business
Technology is rapidly changing the retail industry as ...
 

Simon West is the new chief executive of Torpedo7

  • Who's Where
  • July 18, 2019
Simon West is the new chief executive of Torpedo7

Simon West, who has 20 years' experience leading companies like Ezibuy, has been appointed the chief executive of The Warehouse Group's outdoor retailer Torpedo7.

Read more
 
 

Bay of Plenty D2C Saltysea opens its first store

  • Design
  • July 17, 2019
  • Sarah Dunn
Bay of Plenty D2C Saltysea opens its first store

Stephanie Saxton has been selling cheeky swimsuits and ethical activewear online out of Bay of Plenty's Athenree since 2018. She's now opened Saltysea's first bricks and mortar store, the Salty Collective.

Read more
 

What the investment community thinks Kiwi businesses lead on the world stage with

  • News
  • July 16, 2019
  • Idealog
What the investment community thinks Kiwi businesses lead on the world stage with

Every business goes through a life cycle: start-up, growth, maturity and renewal, rebirth or decline. Once you’ve made it past the juicy, creative ideation stage and into the growth and maturity stage, the time for many comes to seek investment. But what do investors look for beyond a commercial return? And what do investors think New Zealand companies excel at when compared to our neighbouring countries around the world? Executive director of the Angel Association of New Zealand Suse Reynolds shares her top tips for those who are looking for investment.

Read more
 
Next page
Results for
Topics
Jobs
About us.

The Register provides essential industry news and intelligence, updated daily. And the digital newsletter delivers the latest news to your inbox twice a week — for free!

©2009–2015 Tangible Media. All rights reserved.
Use of this site constitutes acceptance of our Privacy policy.

Advertise
The Register

editor@theregister.co.nz

Content marketing/advertising? Email anita.hayhoe@icg.co.nz or call 022 639 3004

View Media Kit

}