Loyalty programs and schemes were originally an extremely effective strategy for a business to sustain income; businesses provide customers with incentives to continue using their brand on a regular basis. These are particularly popular with those who are working with a strict budget as consumers feel like they are getting something for nothing, however that might not always be the case. In fact, the savings to be had from loyalty schemes might just be encouraging consumers to spend, offering practically no return or reward.
This guide looks loyalty schemes and where consumers and where customers might want to reconsider their usage. Of course, we will also look at the benefits to be had and how to maximise your rewards.
Loyalty Schemes Explained
Loyalty schemes are not complicated, and it is important to note that some are better than others. Typically, consumers collect a stamp or digital points every time they shop, earning a ratio of points to pounds. Thus, the more you spend the more you earn. Money Saving Expert advises that in order for consumers to reap the best return, they should “Never choose where you shop due to loyalty schemes, yet always use it if you shop somewhere with one.” This advice suggests that determining where we shop based on potential loyalty returns could be harmful financial behaviour and perhaps even encourage spending. It is important to remember that loyalty schemes will always benefit the business or corporation more than the consumer, regardless of how much it may feel like you are getting for free.
Collecting stamps in a booklet or on a card were the early days of loyalty schemes, but still live on today with even the biggest conglomerates, including McDonalds. The fast food chain trialled switching out their sticker & stamp reward schemes for an app in the UK. However, it seems they have decided to run both after a wave of complaints. The introduction of the new loyalty scheme was intended to target This targeted and strategically mapped-out loyalty scheme highlights how these programs are designed to make a company more competitive. The McDonalds example indicates how loyalty schemes are another way companies attempt to encroach on their competitors market share, and thus re-confirming that it’s all about benefiting the company, not the consumer.
Since the days of simple stamp-collection, loyalty schemes have become much more sophisticated. Upgrading to the barcode swiping system found in a lot of supermarkets or plastic credit card-like schemes. More recently, as , loyalty schemes have started to go totally digital, rolling out loyalty apps.
Loyalty-Based Shopping Behaviours
With technology advancing, it’s no surprise that loyalty schemes and marketing techniques quickly started developing apps or digital cards for their consumers to use and collect points. These allow consumers to add their digital rewards card to their mobile wallet or store them on their phone. Despite McDonald’s mixed reviews, reports show that this updated method for engaging in loyalty programs is more appealing to 59% of people. However, the same study highlights that the majority of consumers are not prepared for completely digital reward schemes, suggesting that to maintain their appeal, companies must offer rewards on multiple platforms.
Furthermore, if 59% of consumers are more likely to sign up to a loyalty scheme on a digital platform and 82.4% of people (polled from the same survey) claimed they are more likely to shop in places where loyalty programs are available, this suggests that businesses that cannot keep up with this technology, or cannot afford the up-front cost of developing an app will be missing out on loyal business. In turn, this suggests that consumers might be stepping away from the SME towards conglomerates that can offer them better – or seemingly more lucrative – reward schemes that they can carry around in their pocket. Moreover, those 82.4% of consumers polled could be making the loyalty scheme errors that simply encourage spending and chase the illusive or exclusive rewards. Whilst these behaviours might not seem to have huge financial ramifications, it could lead to poor financial cycles and decision making as it might be harder to stick to a budget when the deals are marketed so well. Those who commit poor or unsustainable financial decisions may be short of cash when they need it, forcing many to reach out for an emergency loan to pay their bills.
What Should I Look Out For When Signing Up For A New Loyalty Scheme?
Money Saving . There are benefits still to be had, particularly if you are a genuine, returning customer. Big ticket-items feel like they earn better rewards, but the reality is you are likely to still to be getting the same ratio of pounds to points. Some popular schemes could be found at:
- Ikea Family
- Nando’s – £21 spent for a free starter or ¼ chicken
It is worth comparing what you spend on your monthly shop, for example, before deciding if a supermarket that offers reward schemes is worth it. Many shoppers do not realise that it may benefit them more to shop at a closer store or budget supermarkets as the value of rewards is minimal.
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