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The Power of Loyalty Cards

Author: Amanda Hosking



lots of reward cards                                                                                                                                   Source: savethestudent.org

As a brand, one of your main aims will be to attract and gain loyal customers. People who shop with you repeatedly will become your customer base and will spend a lot of money on your brand. This means having loyal customers is a must.

There are a variety of ways you gain loyal clients. One way that has been proven to work, is the use of reward cards or schemes. These schemes work by offering customers points, voucher, or treats for spending money with the brand. This provides people with an incentive to spend with a certain company. For example, if one brand has a reward scheme and a similar brand does not, an individual is more likely to make their purchase at the store that has the reward scheme as they are benefitting from spending their money there.

Research has confirmed this, finding that people were more inclined to use credit cards which had more attractive reward schemes. This shows that rewards do promote loyalty.

Many brands offer reward schemes, some being more competitive than others. Here are some of the best offerings to gain inspiration from:

Boots Advantage Card

Boots provide a range of products including medicine, toiletries, cosmetics, electricals, and perfume. This means it attracts a range of customers and competes with stores such as Superdrug, ASDA, and Tesco.

By providing a reward card Boots aims to encourage customers to shop with them over its competitors. The advantage card means cardholders gain 4 points per every £1 spent. 1 point is worth 1p so points can build up quickly.

Customers can then spend their points on items in the store. For example, a customer with 800 points could buy a £8 mascara.

In addition, Boots often have points offers on different items each week. E.g. ‘500 points when you buy any two Lancôme items’. This encourages customers to purchase these items and boosts their reward points.

boots advantage card                                                                                                                                       Source: mirror.co.uk

John Lewis

The John Lewis reward card entitles card holders to free coffee and cake once a month. They also receive a variety of vouchers and offers throughout the year.

Customers receive their coffee and cake vouchers through the post and do not need to spend any money to receive it. This is appealing to customers and will encourage them to make a trip to the store each month to claim their reward. And whilst they are then in the store they may make a purchase. John Lewis has been very clever here. The free reward is a great way to gain brand loyalty and increase sales.

coffee and cake
If you are thinking of rolling out a reward card, ensure:

• The rewards are worthwhile and appealing for the customer.
• The scheme competes with other brands in the same field.
• Customers are buying frequently enough to attain the rewards.
• The customer can have a physical reward card and an online account/app to keep track of their progress. This keeps the customer involved in the scheme.

In addition to gaining loyalty, reward schemes can be used to promote new purchases. If you have a new product that you want people to try, consider having a reward card offer such as ‘300 extra points when you buy our new face cream’. This can help persuade customers to buy the item as they will be motivated by the points incentive.

When designing a reward scheme, you may want to contemplate the goal gradient hypothesis which suggests we are more likely to aim for something the closer it gets. A research study considered this theory by giving one group a coffee card with 12 stamps required and the other group a coffee card with 10 stamps required. Having all spots stamped gained participants a free coffee. The card with 12 spots had 2 stamps already, whereas the card with 10 spots had none.

It was found that the group with 2 stamps bought more coffee than the group with no stamps. This was because the first group felt closer to their goal as 2 spots were already stamped, so they felt as if they had made more progress.

Nando's Logo                                                                                                                                          Source: Wikipedia

You can replicate this with your reward scheme if desired. Nando’s is a great example of this. Their reward card gives customers free food after three, six and nine trips. This means as soon as you sign up you are only three visits away from your first reward. This provides a sense of closeness to the goal of a free starter and aims to encourage people to dine there more often. And when this goal has been achieved, you are only three more visits off more free food.

So, if you think your brand is suitable for a reward card, give it a go as it really does work to gain brand loyalty.

Sources

Journal of Service Research 9 (How Effective Are Loyalty Reward Programs in Driving Share of Wallet – Jochen Wirtz et al)
Journal of Marketing Research 43 (The Goal-Gradient Hypothesis Resurrected – Ran Kivetz et al)
Brainfluence (Roger Dooley)