Saturday 18 July 2009

Loyalty Lifebuoy


I was reading a new white paper from Carlson Marketing about loyalty rewards entitled “The Role of Merchandise and Gift Cards Rewards in Loyalty Programs”. Whilst the report itself has some great stats and best practice around the selection and usage of rewards within a loyalty programme, the part that really peaked my interest was how redemption has changed in the recession.

Anecdotally I’d expected this – just looking at my own pattern of redemption, I’ve shifted from redeeming for a holiday to redeeming for more everyday rewards such as cinema and restaurant vouchers. This isn’t because I’m any worse off than before the recession, but there is a tendency to just “pull back” a little – just in case.

So given my personal experience, I was wondering if this was reflective of wider programme usage, and the report from Carlson suggests it is.

When looking at gift card rewards, the pattern of usage has changed with a increase of 168% within everyday expenses of fuel and groceries, suggesting people are increasingly using the cash based loyalty reward to pay for immediate needs rather than treats.


It’s also interesting that at least part of this shift came from restaurant usage, with a drop of 3% for redemptions in this category. The restaurant trade is one of the hardest hit industries in the recession as people cut back on unnecessary expense – choosing instead to cook or buy in to eat of home. In a recent PWC survey, 25% of consumers stated that the first thing to be cut if spending had to be reduced was eating out/fast food.

Loyalty programmes are however becoming more attractive as part of the recession with consumers reappraising the value exchange. What may have seemed like too much effort 12 months ago now seems like a great way to get something for nothing. In a recent article on Smart Money, it stated that consumer participation in loyalty is up 20% since 2007 and a third of shoppers have indicated that they are relying more on loyalty programmes to find value in these tough economic times – essentially using loyalty to help them stay afloat.

However, even though consumer needs are changing and reward programmes should take account of this – the rules of the game haven’t changed. As the Carlson report points out, rewards are remembered longer than cash – making reference to a report by the Incentive Federation in 2005 where 4 out of 5 respondents made this point.

If programmes go too far out of their way to accommodate everyday expenses in the short term - providing cash to make them more flexible or lowering the redemption threshold to make them easier to attain - it could simply lead to less loyalty and motivation in the long term.

Some brands however are not just “tipping their hat” to recession hit customers, some are going full out to recognise and support them. As detailed in a recent blog by Marketing Week Associate Editor Ruth Mortimer, brands like Pfizer and TalkTalk have put in place specific measures to deal with hard hard hit customers. TalkTalk for example provides a 6 month grace period for customers in difficulty, giving them a basic service for free.

Brands which can retain their customers by helping them to make ends meet - providing that extra little lift or helping hand – are surely more likely to be looked on favourably as things improve - the trick will be getting the balance right so that short term help doesn’t erode long term loyalty.


Unknown said...

To the editor of Loyalty Guy

I have been reading your article on "Loyalty Lifebuoy" and I found your point of view interesting. We would really like to hear your views on a current piece of activity which I believe is relevant for you and your users.

We have built an online hub aimed at helping Business & IT Decision Makers on behalf of Microsoft. Primarily the hub is designed to facilitate an open, un-moderated discussion forum tailored towards the decision makers in Small to Medium sized organisations and identifying what the current issues are that affect businesses.

User comments will determine future discussion threads to which either Microsoft or another relevant business figure will respond. In addition there is access to a wide range of free content and white papers.

We have added your site to our blog roll and would appreciate your comments on the functionality of the hub and participation in the discussion.



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