Digital direct: Reward schemes can add value to customers' baskets

Revolution UK 29-Nov-06

Research from You Gov reveals only nine per cent of shoppers said collecting loyalty and reward points would make them visit the same store. But, this doesn't distinguish between on- and offline or between own-branded and coalition schemes.

In the case of offline, proximity, convenience and transport can
influence consumers' choice of store. If a retailer offers one per cent
value in reward points, it's no surprise this would alter the purchasing

behaviour of few customers. Online, reward schemes more effectively

alter behaviour.

As sites are equally accessible and convenient to visit, so a retailer
has no excuse for losing traffic. The web's transparency, helped by
price-comparison sites, means price variances between retailers are
lower. Good for consumers, but it squeezes retailers' margins and can
lead to the commoditisation of a product. Then, a rewards programme can
provide a differentiator.

Retailers need a wide-ranging catalogue that appeals to all types of
customer, with enough low-value rewards to show newcomers that saving
points is worthwhile. Along with a variety of high-value rewards to
encourage people to participate long term.

Coalition loyalty programmes, which let consumers multi-collect points
across several retailers, are effective: brands have reported rises of
60 per cent in basket size and 40 per cent in frequency of purchase from
existing customers.

Finally, you need to do more than make a big splash at the launch and
then let the scheme take care of itself. A loyalty programme provides
you with many reasons to engage your customers with your brand on an
ongoing basis. The data you collect lets you drive communications where
they'll have the greatest impact, and add real value to customer
relationships.
Robert Barker, commercial director at ipoints.co.uk.