Discount promotions undermine loyalty schemes

“Do you have a Clubcard Sir?”
“Yes – but not on me.”
No surprise that a massive 40% of consumers forget to use their loyalty cards regularly. Shoppers also fail to redeem many of the rewards that they earn, which is all good news for the retailer. In the USA a new scheme called Rainbow Rewards allows credit card holders to earn cash back every month, when they shop at local merchants who are members of the scheme. This ensures that we always redeem the rewards we earn. Soon we will be using our phones to pay for our shopping too – making forgetting that Clubcard a thing of the past, and the price of loyalty a lot higher for the retailer.

Retailers have been warned to invest in loyalty programmes rather than heavy discounting to maintain long-term engagement with shoppers.

Maximiles’ Loyalty Report found that retailers are undermining their own loyalty programmes by relying on promotion and discounts in the run up to Christmas. Eight out of 10 shoppers will not continue to shop with a brand after a Christmas promotion has ended, the report found.

Guy Keeling, managing director of Maximiles, says: “Brands need to think smarter about their promotions by building a reward element where money off is directly related to customer loyalty. By offering discounts separately from ongoing loyalty promotions, retailers undermine their reward programmes.”

According to the study of 1,100 consumers, retailers are not marketing their loyalty programmes effectively as 40% of consumers forget to use them regularly.

Separately, Asda has been named as the retailer that most UK consumers want to launch a reward scheme, according to research from loyalty firm ICLP.

The supermarket, which currently opts for “Every Day Low Prices” rather than a loyalty programme, came top of a survey carried out by loyalty specialist ICLP to find out which retailer shoppers wanted to introduce a scheme.

It was closely followed by high street fashion chain Next.

The research found that 60% of consumers believe a reward programme “strengthens their relationship with the brand”.

Tesco and Boots, which operate two of the most popular loyalty schemes in the UK, topped the poll of retailers shoppers have the strongest relationship with.

Stuart Evans, ICLP UK general manager says: “It is clear that customers want something in return for their loyalty. When UK shoppers feel the pinch of the VAT increase next year, this call will surely get louder and go out to more and more top UK brands.

“These brands need to heed this warning, to ensure that the best loved UK companies stay in the hearts of their customers going into 2011”

- YouGov Insight:

Christmas Spending

  • 18% of YouGov respondents celebrating Christmas say that they intend to spend less on food and drink this year.
  • This compares to 10% who say that they intend to spend more on food and drink this year.
  • 36% of Christmas celebrants intend to spend £100-249 on gifts this Christmas
  • 30% of Christmas celebrants intend to spend £250-499 on gifts this Christmas
  • 33% say that they are going to splash out this Christmas despite financial constraints
  • The two most wanted gifts this Christmas are clothing (25%) and books (24%)
  • The gift categories most likely to be bought this year are books (54%) and clothing (52%)

Source: brandrepublic.com

 
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