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Do Customer Loyalty Schemes Really Benefit Their Members?
By Adam Singleton
Nowadays it seems that every major retailer, airline and chain is offering customers the chance to sign up to a loyalty scheme. By rewarding regular customers for their business with every conceivable bonus from discounts on purchases to free flights and accommodation, is there a radical difference between loyalty schemes?
Competition for customers' loyalty is fierce, so many big-name brands spend a huge proportion of their budgets on devising, implementing and maintaining these schemes in the hope of gaining an edge over their competitors. However, some experts believe that many loyalty schemes actually fail to radically change customer behaviour or deliver a bottom line contribution to profit. In fact, research has shown that the amount of profit per customer is actually reduced because most loyalty schemes discounts customers' existing behaviour, rather than rewarding increased positive behaviour such as spending more money or returning more frequently.
The loyalty schemes of most high street retailers normally offer discounts against goods by collecting points each time a customer shops. These points are usually determined by the customer's spend, with a set number of points being rewarded for every pound spent. However, more often than not, these points can take a long time to accumulate and can often only be redeemed for discounts against certain products. Furthermore in many cases, discounts are time-locked so if points aren't redeemed within a given time, the customer can frequently lose out.
Airline loyalty schemes normally operate in a similar way, rewarding flyers with 'airmiles' which can be redeemed for free or discounted flights depending on the distance travelled. Some schemes also offer discounted food and drink in airport departure lounges as well as discounted seat upgrades, extra baggage allowance and complimentary in-flight drinks. Some airline loyalty schemes now offer members the ability to collect airmiles outwith flying, enabling members to collect while doing the weekly shop, filling the car with fuel or buying products online through affiliated retailers.
Most major chains operate a loyalty programme for frequent visitors. Points collected through these schemes can often be used for stays at all the hotels in a chain around the world. The Radisson Goldpoints scheme offers members the chance to collect points through stays and purchases made online and offers generous discounts to members.
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