Three questions to retailers about point-rewards loyalty programs

 

Three questions…:

1) Does your point-rewards loyalty program resemble those of your competitors?

Be aware that what your shoppers understand about your point-rewards loyalty program is that:

  • they will be rewarded for the info they provide (personal info, shopping-behavior, etc.)
  • they will be rewarded for their purchases
  • the more they buy, the more they will be rewarded

In other words, from the point of view of shoppers, all point-rewards loyalty programs feel alike.

To make sure that the answer to my first question is “no”, retailers basically need to give out rewards that shoppers truly value, for example:

  • modern/exclusive/experiential/… rewards (e.g. cooking classes, personalized items, …)
  • priority lanes at check-out (saving time is *VERY*valuable for shoppers)

 

2) Are you effectively gathering knowledge about your shoppers through your point-rewards loyalty program?

To be valuable, a point-rewards loyalty program should significantly improve:

  • shopper-loyalty

and

  • knowledge about the shopper

Improving knowledge about the shopper:

  • is hard and expensive (specific skills are needed, technology is complex, etc.)

but

  • is essential (it’s pure “competitive-advantage”)

To make sure that the answer to my second question is “yes”, retailers need to invest the money necessary to successfully mine the data that point-rewards loyalty programs acquire: no investment, no point-rewards loyalty program ROI.

 

3) Are you encouraging cherry-picking?

The most fervent fans of point-rewards loyalty programs are “cherry-pickers”, shoppers who are likely to load up on low-margin deals while earning their points.

To make sure that the answer to my third question is “no”, retailers essentially need to:

  • avoid creating and nurturing their own “monster” shoppers through futile promotions
  • be aware that points programs may generate early indication of incremental sales gains, but in time they risk to erode margins without the benefit of progressive, substantial sales increases

 

A final, additional question: is your point-rewards loyalty program strengthening your brands/brand value?

If your answer is yes, you can be sure that your point-rewards loyalty program will have a measurable, decisive long term effect on your business.

Andy Cavallini

 

 

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