Why Loyalty Card Points Often Don’t End in Prizes

What price can you put on loyalty? Well, according to Deutsche Bank, AU$500m if you’re an Australian grocer. But the evidence suggests that splashing the cash on loyalty is a game of diminishing returns. Membership schemes in the UK have fallen 15 percent since 2014 and customers are using loyalty cards less and less. 

But as marketers, we’ve had it banged into our heads that it costs much less to cultivate loyalty among existing customers than keep prospecting new ones. It seems times have changed. The question is, are the thousands dedicated to loyalty schemes being wasted? 

Using loyalty to rack up points that lead to discounts just won’t cut it with today’s consumer. Yes, they might use the discount but as these are generally available across the web, they don’t directly drive loyalty with the brand. There’s also evidence to suggest consumers aren’t the price tarts retailers think they are. We’ve seen research that says 25 percent of customers might price check on their mobile in store but that means that 75 per cent don’t. 

Loyalty matters but it’s how brands go about getting it that has changed. Customers won’t deny that they like a discount but that doesn’t build a relationship. Relationships are about value. You can see it in the choice of one brand over another online - positive reviews beat lowest price every time. And what are those reviews around? Service, quality and value. 

Pret a Manger has got the hang of this. There is no scheme per se in the sandwich chain but its staff are instructed to foster loyalty however they can through those three maxims. This means that occasionally a customer is met with an ‘it’s on us’ at the till. So, there’s still room for the freebie but as a rule, the customer is always met with a smile and a quality crayfish sarnie. 

Then there’s making the customer pay for their own loyalty. There is a perverse trait in humanity that dictates we don’t value anything we get for free. Coffee chain Harris + Hoole discovered that offering customers a free coffee didn’t mean they spent the money they saved on other products, they just started coming in only to get a free coffee. They went from customers to abusers. 

Amazon flips that on its head with Prime. By paying $99 a year, customers get access to all sorts of products and privileges including video streaming, free same day delivery and an excellent returns service (which actually comes as standard but still contributes to the warm, fuzzy feeling). It costs Amazon up to $2bn a year but it more than makes up for this in increased purchasing. 

The second thing run-of-the-mill loyalty schemes don’t acknowledge is that customers are smart. They know they’re handing over data every time more points ping up and they want retailers to use it. Customers are loyal to retailers who know who they are, understand their needs and cater specifically to them, Loyalty is getting personal. 

Harvey Nichols is taking loyalty upscale by using a mechanic that’s open to every retailer from a petrol forecourt to premium jewellers. Using its mobile app it offers points yes, but customers have the option to convert it into discounts or treats and every now and again, personalised ‘surprises’ ping up based on their data. There is talk of using iBeacons so perhaps the future of loyalty is a vision of high-end shoppers playing Pokemon Go trying to catch a Hermes scarf… 

Whether you gamify or reward, chat or lock in, loyalty has a price that goes beyond money. Retailers need to look to their relationships if they’re to halt the loyalty decline. Leave handing out points to the traffic cops. The customer will always ask “What’s in it for me?”