Are loyalty programs really worth it?

Retailers of all sizes use loyalty programs, the idea behind it being that customers will shop repeatedly with them with the aim of growing enough loyalty points to gain some freebies. But the question is, do these loyalty programs really offer enough reward on their own?

We picked a number of retailers to look at the value of their own-brand loyalty program and compared it with some of the rewards available in the affiliate space.

House of Fraser

To start off with, we looked at department store House of Fraser and their ‘Recognition’ loyalty card. At first glance, the rewards look pretty standard, 1 point for every £1 spent in-store or online. Makes sense, and they also offer additional bonuses in the cardholder’s birthday month.

So what do the points add up to? On their website, HOF advertise that members receive a £5 voucher for every 500 points accrued. Remembering £1 equals 1 point, that’s a £5 voucher for every £500 spent with the store. Without getting the calculator out, that’s a 1% reward. A quick look at Quidco reveals that existing customer cashback also tracks at 1%. Customers can also double up by tracking through Quidco and using their Recognition card, but for those who don’t like form filling, where is the incentive for customers to join their own program?

Boots

The Boots Advantage Card has been around since before the beginning of time. It’s success has been the high level of reward that comes with being a cardholder. £1 spent gets you 4 points on the card, and with each point gets you a penny, so that’s 4p for every £1 spent – 4% as standard. Members also benefit from additional discounts, bonus points and so on. Versus Quidco, who offer between 1.5% – 3% cashback, the Advantage Card like for like offers better rewards – the way it should be.

M&S – Sparks

The recently launched Sparks card from M&S offers the faithful shopper of the high-street juggernaut to begin earning rewards again, after the retailer scrapped a previous version many years ago. The retailer confirms the amount of points earned by members on their purchases, though at the time of writing they were unable to confirm what rewards members actually get, except personalised shopping and standard bonuses as with the other two schemes.

Versus Quidco cashback where there is no usual rate on M&S, the Sparks scheme, at least at face value, represents better value than the affiliate channel.

Overall, there’s a mix of positives and negatives between their own-brand loyalty schemes and obtaining cashback through the affiliate channel. Arguably though, a retailer’s own loyalty scheme should certainly offer more than a third party cashback site, or even discount/voucher publisher.

Loyalty schemes not only offer the ability to contact those customers directly, but also offer the retailer valuable insights into particular customers’ behaviour, for example what they buy, how frequently, and can prompt them into another purchase if their systems notice that the customer hasn’t purchased recently. Creating demographic information can also help with the marketing of the retailer, to effectively target their audience, but also helps with the wider supply chain of purchasing and customer service. Whilst Google Analytics and the like can offer some demographic information of visitors, it doesn’t always reflect the customers that transact.

In the case of HOF, they’re a household name, but from some short analysis, what is the incentive for a customer to sign up to their Recognition scheme alone?

On the contrary, investing in loyalty with a third party cashback site or point-awarding publisher has some positives, too. For one, it also gives access to those new customers, to not only transact for the first time, but also to immediately become a returning customer and almost brand ambassador. It also reduces the cost of setting up the ‘own brand’ schemes and of course saves time too.

Indeed, retailer’s own loyalty programs are always going to be the preferred option, but a close eye needs to be kept to ensure those loyal customers are being rewarded higher than they can be by third parties.