Are retail loyalty schemes still rewarding?

Loyalty schemes have long been regarded as a crucial tool in the retail marketer’s arsenal. They aim to reward loyal customers, attract new ones, avert lapsers from leaving and ultimately increase sales.

They have become particularly important over the past few years as high street retailers fight for market share in an environment characterised by intense competition, regulatory changes and the increasing encroachment of ecommerce giants.

“Loyalty schemes have become particularly important over the past few years as high street retailers fight for market share”

As consumers ourselves, we understand the drivers behind signing up for a scheme, the rewards we expect and the behaviours we exhibit.

But from a retail point of view, how successful are they? Do loyalty schemes really deliver ROI? We recently commissioned research into retail loyalty, surveying both retailers and consumers, to find the answers to some of these questions.

The reasons for loyalty rewards

The rationale behind the loyalty scheme is clear. Our retailer research finds that 64% of retailers say the purpose of a scheme is to reward customers. They also say it helps them:

• Deliver exceptional customer experiences across the omnichannel environment
• Better understand customer needs
• Improve attraction and retention of customers.

This is supported by our consumer research, with 85% of shoppers saying they were more likely to engage with a brand if there was a loyalty scheme in place.

However, when it comes to the actual rewards on offer, there is a disparity between what retailers say they are using, what consumers say they want and what is actually being redeemed.

For example, consumers value money-back offers. According to our research, the main benefit of belonging to a loyalty scheme is receiving coupons to spend in store (34%), followed by money-back offers (32%).

“When it comes to the actual rewards on offer, there is a disparity between what retailers say they are using, what consumers say they want and what is actually being redeemed”

From the retailer perspective, the three most common rewards on offer include digital coupons, discounts on new products and in-store coupons.

Money-back offers feature eighth on the list, however according to retailers they are the third most redeemed reward behind in-store and digital coupons.

This suggests there may be some way to go before expectations and outcomes are aligned; and it stands to reason that when they are the loyalty scheme will be more successful.

The data challenge

One of the biggest challenges in building a successful loyalty scheme is data – specifically the quality and availability.

Part of this challenge is in the differing opinions between retailers and consumers when it comes to the use of this data.

The majority of retailers (81%) believe customers are willing to share their data with them and 88% believe customers also trust them with their data.

However, consumers have differing views:

• 64% say they are likely to share their personal data with brands in exchange for relevant offers and promotions
• 32% say they feel rewarded for sharing this information

The future

There is little doubt of the power in a loyalty scheme, but the challenge moving forward will be on proper implementation, aligning consumer demand with business outcomes, and ensuring there is the right data and technology to support it.