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.