Loyalty Programmes The Good, The Bad and The Ugly
There are so many loyalty programmes, one need only look in a wallet to see club cards and points cards from all over the high street. But why do some work and others fail, sometimes quite spectacularly? We take a look at the best, the worst (and the downright awful) examples of loyalty programmes. There are lessons to be learnt from these examples.
“Sticker shock” is the moment shoppers are surprised by the amount of shipping, tax or other costs added on at the checkout stage. It can be a key cause to cart abandonment rates of up to 75.6% (according to a 2015 study of 500 leading global brands). Amazon Prime gives customers free one-day and sometimes same-day shipping on millions of products and no minimum value for delivery.
Why it works: Amazon Prime customers know exactly what they’re buying, with no hidden costs. It’s a great added value feature. Furthermore, Prime members are given access to unlimited streaming of movies and TV and a ‘library’ feature for their Kindle, borrowing books whenever they like.
Results: It is estimated that Amazon loses $1-2bn a year through Prime, but this is easily recouped in transactions - the average order value (per year) for a Prime customer is $1,500 compared to $625 by non-Prime members.
The world-renowned hotel chain has a loyalty programme that is truly global. It works, as many loyalty programmes do, on a points scheme, but also includes added bonuses such as free stays, recognition gifts, bonus points and retail gift cards.
Why it works: The scheme is simple and adds genuine value to its members’ hotel stays. Members work their way up through the various tiers of membership, accumulating benefits along the way. The scheme doesn’t become stale as there’s always something to work towards. Its new streamlined administration and supply chain (read more here) ensures that customers receive their rewards, that they are tailored to location and cultures, and that they are delivered in real-time.
Results: Best Western Rewards has millions of members in over 100 countries. The company enjoyed its 70th anniversary this year and announced record success. This is, in part, thanks to its strong loyalty programme. The scheme has been named as one of the top three hotel loyalty schemes.
The airline’s TrueBlue programme might go down in history as one of the most draconian when it comes to expiry dates. It serves as a good reminder that added value (actual and perceived) is paramount, as is the ability to redeem rewards easily and quickly.
Why it was bad: Quite simply, frequent flyer miles expired a year after the day they were acquired. The drawback is so glaringly obvious, it’s surprising this scheme ever saw the light of day. But it did. The expiry date policy meant that most users didn’t accumulate enough miles in a year to redeem them. Rendering the whole thing utterly pointless.
Results: The programme was discontinued some time ago. The whole objective of a loyalty scheme is redemption rates. Whilst we don’t know the redemption rates of this particular programme, it is recommended to aim to have achieve least 50%. The blue-ribbon programmes can even achieve 60-70%.
Starbucks already had a thriving loyalty programme. But at the start of 2016, it was scrapped in favour of a reloadable prepaid Starbucks Visa. Users can earn points wherever Visa is accepted. It’s a change that was met with a backlash - nay a Twitter storm - from its customers. It wasn’t a knee-jerk reaction either, with a month long barrage of negative social buzz.
Why it was ugly: The scheme doesn’t really reward loyal customers (with points for frequent visits), it benefits those who spend more on the new card. Whilst this encourages people to spend more, it is noted by the company themselves, that loyalty scheme members already spent three times more than normal customers. These customers are the ones that keep coming back and may have a high lifetime value - they are loyalty personified, surely? On the flip-side, big spenders now get points that reflect their true value to the brand (in terms of spend).
Results: It’s too early to say what impact this will have. Company perception may have been lowered, but it’s doubtful that revenue will be struck. Loyal customers who just pop in to get their morning coffee may have to make up to 56 more visits to receive the same perks in a year.
Not all Loyalty Programmes were created equal. But the ones that work often have the same successful elements:
- Genuinely appeal to customers
- Add value
- Reward the right behaviours
- Reward every purchase
- Give choice
- Are easy to understand
- Give users time to accumulate points