Loyalty Schemes

Types of Loyalty Scheme, eg: Account Cards (eg. Marks & Spencer) Loyalty Rewards (eg. B to B) Membership Schemes (American Express Card) Pure Tie-In (Long-Term Contracts) Combinations of the Above: Loyalty Cards (American Express Membership Rewards, Plussa) Other ?

Loyalty Card Schemes Logic Behind Aprropriateness of Loyalty Schemes : Is it easy for customers to compare overall product / offering prices ? If so then bonuses benefits can be easily compared to price differences and therefore possibly counted out eg: Customers of supermarkets may use loyalty cards because it is a definite benefit in a shopping environment where they find it hard to compare combined prices. Some other products are not like that because overall price is simpler to compare (eg. cars?). Are competitors prices often compared by media? and if so are loyalty bonuses contained in the price comparisons ? If not, then bonus benefit schemes may damage your price image (eg.Cars). Is it desirable to buy more of something ? Credit card customers may use loyalty schemes because they can increase their benefit by spending more with the credit card. If customers need no more of something than they already buy then there is no point buying more just to get more points (eg. electricity). Of course a company can sell more of something else to the loyal customer, then a bonus scheme may be beneficial.

Loyalty Card Schemes Are There Realistically Options To Choose ? Most loyalty schemes are designed to make customers choose one company Always instead of Occasionally, or at least more often (ie. if two or more companies are believed otherwise similar then it makes sense for a customer to buy all from one and gain loyalty benefits rather than buying some from each and gaining no loyalty benefits or not enough from any). With monopoly industries, or banks etc, this is not a realistic assumption. Are There Competitor Loyalty Card Schemes ? If so then it is necessary to either offer the best scheme (perhaps through partnerships with other sellers, or to offer a minimum reward level (eg. American Express) Are The Loyalty Benefits Motivating ? This is perhaps an obvious but critical factor, dependent on each loyalty card schemes characteristics. Often loyalty benefits are so small, difficult to get, or the minimum requirement is too high (eg. Barclaycard).

Loyalty Card Schemes Benefits For Customers - Saving Money / Make Money - Convenience Factor – Ease of Payment (Speed and Simplicity) - Special Offers / Discounts for Card Holders - Feeling Of Belonging and Membership - Possibility of Receiving other Financial Services - Member Magazines etc.

Benefits For Companies Which Offer Such Schemes Identification of Customers (enabling deeper relationship marketing) Reason for More Contact with Customer Identifiaction of Customer Behaviour – who buys what, when, where how much, how, etc. + Identification of Trends. Customer Tie-In Increased Sales Volume / Turnover Loyalty Card Schemes

Benefits For Companies Which Offer Such Schemes - Damage to Competitors (if successful and especially if rewards based on minimum requirements, eg. air miles) - Cross Marketing Opportunities (eg. Finacial Services) - Customer Satisfaction - Word of Mouth if it is a good deal - Differentiation / More Appropriate To Those Who Want It Loyalty Card Schemes

Benefits For Companies Which Offer Such Schemes May Hide Real Prices & Therefore Enable Higher Prices Perhaps New Customers Possibility To Sell Customer Data (in certain circumstances) Loyalty Card Schemes

Drawbacks For Companies Offering Such Schemes High Cost of Promotion and Implementation Effort / human resources possibly removed from other marketing projects Difficult to Get Out of such schemes (once in always in, well at least for a long time) If Scale, Customer Benefits and Other Requirements are Not Achieved Then Scheme May Be an Expensive failure.

Loyalty Card Schemes Drawbacks For Companies Offering Such Schemes It May Hide Real Loyalty and Satisfaction Levels (eg. in American Express switching may take place following retrieval of minimum accumulated rewards). Ie. Disloyalty may be delayed rather than avoided. Customer Information May Be Partial and Misleading Do not Loose Profits to Bonuses and Rewards (What is the real cost/benefit) The Case of Hoover

Loyalty Partnerships Source: Iain Pringle – Affinity Solutions – IIR Conference, October 2002 Advantages: Existing customer bases & infrastructure Widely understood mechanics Frequent customer interaction Turn key solution Link with aspirational brands Brand Exclusivity Disadvantages: Builds loyalty to a currency, not a brand High cost Training and integration issues Anonymity Few opportunities left – Nectar ? Nectar is a new type of reward card - one which lets you collect points at more than one place, rather than using lots of cards in different shops. All you have to do is hand over your Nectar card whenever you shop at Sainsbury's, Debenhams and wherever you see the Nectar sign at BP*. You can also earn points every time you use your Barclaycard*. And if you pay with your Barclaycard at Sainsbury's, Debenhams and BP you'll earn two lots of points! You can also earn points when you shop by phone or on the internet*. And from time to time you'll be able to earn bonus points to boost your total... which means you could enjoy even more great rewards.

Loyalty Partnerships Source: Iain Pringle – Affinity Solutions – IIR Conference, October 2002 Three easy ways to get your rewards Exchanging points for Nectar vouchers You will need to exchange the Nectar points on your card for Nectar vouchers to claim many of the rewards that are available. Each voucher represents 500 Nectar points and you can get them at the till of Your Sainsburys Home Store* or by calling the Nectar Helpline on Then just fill in the back of the vouchers and present them to the relevant reward supplier. Booking with Nectar Some rewards – like flights – are available only by calling the Nectar Helpline on Please have your Nectar card with you when you call and your points will be deducted automatically. Instant redemption In some instances theres no need for a Nectar voucher. Points can be automatically deducted when your card is swiped.

Loyalty Partnerships Source: Iain Pringle – Affinity Solutions – IIR Conference, October 2002 Rewards Partners There are far more rewards partners than points partners. Therefore, customers can use their benefits in a huge range of places for entertainment, travel, shopping etc.

Loyalty Partnerships Source: Iain Pringle – Affinity Solutions – IIR Conference, October 2002 Problems People who shop at Sainsburys, get vouchers to buy petrol at sainsburys and then get nectar points when they buy petrol at sainsburys, so are not only unlikely to buy BP but also get two lots of rewards for the same purchase. A large number of customers already have Barclaycard and shop at Sainsburys and even at Debenhams – ie. their loyalty is already assured