Sunday 12 June 2011 washes away points based loyalty


Sometimes it's good to remember that loyalty marketing doesn't necessarily mean points marketing. Whilst points provide a great way of letting customers track their progress over time and link multiple purchases into a continuous journey, they are not the only way to execute a loyalty programme.

Within a loyalty programme, what we're trying to do is link one purchase to the next - to build a context around the purchases. Sales promotion tends to encourage a single purchase, typically rewarding customers instantly with a discount or premium. This is normally aimed at customer acquisition or as a way of lifting short term sales. Loyalty on the other hand tends to recognise behaviour over a number of transactions to create repeat purchases. Ideally it recognises and rewards regular custom without discounting products and services to new customers.

A good example of this is, an online retailer of cleaning, health and beauty products. They have developed a programme which allows customers to nominate 5 products for which they want to receive a discount on with future purchases. The customer can then change these nominated products every 90 days.

Whilst on the face of it this may not be considered a traditional loyalty programme, there are in fact a number of interesting loyalty mechanics at play here:-

  • Scarcity Dynamic - By limiting the discount to just 5 products, it forces the customer to really think about the products they buy (and the ones sells). The limited number will make it more valuable for customers and something they'll want to use wisely.
  • Commitment - By getting customers to select 5 products, they essentially get the customer to psychologically commit to buying these before they actually purchase. Research in this area would suggest customers committing for a small thing (creating a favourite) then go on to commit to a bigger thing (the purchase).
  • Appointment Dynamic - The change every 90 days means a customer keeps the discount front of mind. They know they have a window of opportunity to "re-stack the decks" and so this forces them to think about their purchases (and

Discounting would not be a traditional loyalty mechanic. Points are normally used to provide price differentiation without actually changing the price. However, this programme design is clever in that it limits the discounts, personalises them and gets full price for the rest.

There are some other levers which could have been used such as a Progression Dynamic which could have allowed a customer to unlock more discounts over time, but it's still a strong design.

An online retailer like doesn't need a loyalty programme in order to identify their customers, they need one to change behaviour. Their programme design would seem a great fit for their audience and a clever use of loyalty mechanics.

American Express provide another good example of this in what could be described as both a sales promotion or a short term loyalty programme. The programme, called "25" encourages customers to use their card in 8 out of a possible 18 outlets. In return, the customer is awarded a £25 statement credit.

As with there are a number of mechanics used within the programme design that make this effective.

  • Appointment Dynamic - The programme is time limited meaning customers have to do something now in order to benefit.
  • Repeat Purchases - It encourages multiple purchases, reinforcing the right behaviours that Amex are looking to promote.
  • Behaviour Change - Not only are Amex trying to get customers to use their card, showing their wide acceptance, but they are also trying to get customers to understand that they can use their card for smaller purchases, with brands such as McDonalds or Pret.
  • Collection - The programme materials include a reminder card which shows the 25 participating brands and a visual cue to the 8 needed to collect. Customers can tick each brand off as they shop.
  • Recognition - The reward on offer is motivating enough for most customers to at least think about taking part.
  • Customer Identification - Whilst Amex already know who their customer is, the programme requires an email address to take part, helping to make it easier to communicate with them in the future.

Again, this isn't a traditional loyalty programme; however, the loyalty mechanics are still clearly in operation. This is a great example of targeting specific behaviours with a targeted programme.

When we think about loyalty we need to make sure that this isn't limited to an always on points programme. There are many different ways of engaging customers, creating repeat custom and recognising changes in behaviour.


Barry Kirk said...

Mark, great overview of two programs I wasn't familiar with that show a more innovative take on the traditional loyalty model. As another practitioner in the space who would like to see more brands pushing beyond points-only models, I love examples like these. One thought -- for both of the brands mentioned, I think they might also consider including an "exploration" aspect to the experience -- i.e. make two of your 5 products something you've never tried before, or earn faster by spending in categories you previously haven't used that card for. The brand benefits from cross-purchase/usage, and the consumer expands their benefits by expanding their brand experience.

Travis Boisvert said...

Great article, Mark. Love the examples. And, Barry, I completely agree with your thoughts as well. I wrote a blog post awhile ago about the need to explore what I call "point-less" loyalty programs. Similar sentiments if either of you is interested in reading:

Mark Sage said...

Great article Travis and Barry I agree that loyalty practitioners need to lead the charge in making loyalty marketing more than points marketing. Like the thoughts around "exploration". Tesco do this within their couponing, but it's a great idea to get consumers to pick products/categories they are willing to try/explore.

Unknown said...

Excellent post and comments. It's great to see innovation and fresh ideas in customer loyalty, particularly in a difficult economy when regular customers are even more valuable.

One thing I didn't see touched on is the social aspect — sharing rewards with friends, creating social incentive. Just curious if that's been incorporated.

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