From restaurants to grocery stores and stationers to shopping malls, loyalty schemes are fast becoming an inevitable marketing strategy for building customer loyalty. Businesses adopt them to compliment traditional, mobile, online and social media marketing. Loyalty schemes are used to encourage and build customer loyalty, reward loyal customers, promote brand identity, market products and services and stimulate sales.
Although loyalty schemes are distinctive in their applications, especially in the incentives and rewards businesses offer their customers, there are features that are common to the majority of them. They have loyalty cards, rewards, redemption process, membership and terms and conditions.
These are platforms that deliver the loyalty schemes. They are branded cards that detail the loyalty rewards, products on offer and the number of times customers must participate in order to qualify for a reward, redemption processes and duration of the scheme, membership details and terms and condition.
There are two types of loyalty cards, paper and plastic loyalty cards. See illustrations below.
Nando’s Paper Loyalty Card
Costa Coffee Plastic Loyalty Card
Incentives & reward
The main attractions of every loyalty scheme are the incentives and reward. Incentives are steps customers should take, which would demonstrate their loyalty, in order to receive certain rewards. For example, using the Nando’s Loyalty Rewards as a case study, customers are offered a free ¼ chicken after visiting a Nando’s restaurant three times, a free ½ chicken after six visits and a free whole chicken after ten visits. Therefore, the more they visit the more the reward increases.
When starting a loyalty scheme the business must decide what product and service would be on offer. Then they must decide on their target market. For example although McDonald’s restaurant offer a wide range of products, they have two loyalty schemes that target two different markets. They have a coffee loyalty scheme for coffee drinkers, perhaps to promote their morning breakfast menu and their coffee in general, and a student loyalty scheme specifically for students. Participants are given a McDonald’s coffee loyalty card while the students are required to present valid student IDs to redeem the offers.
The redemption process shows what the customer must do in order to receive the reward. In this case study, Caffè Nero requires their customers to buy nine cups of coffee in order to qualify for a free coffee. All they have to do after nine purchases is to simply present their loyalty card at any of their stores to claim a free cup of coffee. No identification, registration and membership are required. The loyalty card becomes invalid after the final redemption. Afterwards, a new loyalty card is issued to the customer to start accumulating new points for another free cup of coffee.
Caffè Nero Loyalty Card
Every loyalty scheme has duration. Most are yearly while the rest are periodical. The duration is determined by the objectives of the schemes. A loyalty scheme could be used to launch a new store at a specific location or to promote a specific range of products.
Registration & membership
For the purpose of gathering customer details for analysis, some loyalty schemes require registration and membership. Registration is either done online or by filling and posting an application form. However this is mostly associated with plastic loyalty cards. Most paper loyalty cards do not require registration and membership and are cost-effective.
Points & stamps
The type of loyalty card would determine whether the customer accumulates redeemable points or stamps. Plastic loyalty cards usually allow accumulation of points. In other words, the customer is automatically awarded points, which determine the value of their reward. For example, using Sainsbury’s Nectar card, a customer collects 2 points for every £1 spent. In this case the customer must accumulate a minimum of 500 points, which is £2.50, before they can redeem it on any of their products. While with a paper loyalty card, the customer accumulates stamps or signatures for every visit. For example, a customer’s Nando’s loyalty card is signed and stamped after spending a minimum of £6.
Terms and conditions
And finally, the terms and conditions define the legal obligations and liabilities of both the loyalty scheme provider and participants. Unlike campaigns where the winners are chosen by ballot, customers that fulfil your loyalty scheme terms and conditions must be rewarded. Loyalty schemes might be applied at specific locations, specific times of the day, for specific products and limited to specific markets.
This blog was written by Evelina Azar of www.iamloyal.co.uk. Evelina is the Marketing Director of Iamloyal Ltd.
Iamloyal is a specialised marketing company that manages loyalty schemes (B2B and B2C), designs, brands, prints and distributes loyalty cards.
If you would like more information or advice on how to start a loyalty scheme or how to improve your existing scheme contact me on 08432893105 or email at Evelina.firstname.lastname@example.org. You can also follow us at www.twitter.com/loyaltyscheme