Do retailer loyalty schemes actually work?

Loyalty schemes are fast becoming part of many retailers strategies to encourage both new and loyal customers to use their services. What every business has in common is the desire to drive repeat sales and business, whether this is in the form of membership cards, loyalty schemes or reward plans. It is apparent that now more than ever, consumers have an increasing number of shops to choose from; this means that the retailers themselves must remain competitive and differentiate from the competition.

There are many different ways to stand out from your competitors, one of the most popular and common ways to do so is by introducing a form of loyalty scheme. These are usually targeted towards customers that will more frequently purchase from one chosen shop. The concept behind these schemes is that you are offering specific customers, that have signed up to your loyalty plan, rewards in the form of free items, coupons, access to early releases and more. This is, ultimately, an incentive for people to not switch to another shop to use their services or purchase their products.

There are a few ways in which a loyalty scheme can operate. The following are two of the most popular forms of loyalty systems:

1. Points System

This is one of the more common schemes that a significant amount of businesses use. It involves a customer signing up with an email and every time they purchase from the shop, they receive points. As the customer purchases more, the points add up and this can then be exchanged for a number of things. For example, it can give you money off or a percentage off the total bill.

This system is usually very effective, but of course, this depends on the type of business as this method cannot work for all shops. It is usually most successful for businesses such as coffee shops and supermarkets, as these are made for short-term purchases.

1. VIP Membership Fee

This scheme is certainly aimed towards a specific type of shop, as it usually involves an upfront purchase to become a member. Customers will need to get an appealing return if they are going to be tempted to purchase a loyalty membership of this type.

However, a lot of companies do have success by offering a VIP membership with a fee; for example, online shops that offer unlimited delivery for a year with an annual payment like Amazon or ASOS have a really profitable loyalty membership plan.

So, the question is, do they really work? Well, based on a recent poll fromRetail Maxim, 85% of people that took part confirmed that they are signed up to loyalty schemes, and a huge 73.8% of them are, in fact, a member of multiple loyalty schemes. It is apparent that this strategy is extremely popular amongst many customers. In saying this, it does beg the question of how successful are these loyalty memberships when so many shops are opting for them; how do they remain competitive?

It seems that the answer lies in improving the customer experience. Vouchers and prizes are always great, but what is making certain businesses stand out amongst the competition is the ability to create an all-around better experience for customers. Listening to what the customer wants is key, asking questions and getting to know the customer can really improve the chance of gaining more loyal customers. Engaging with them and their needs are what is giving retailers the competitive edge. For instance, asking customers a few questions where they can express their preferred taste in clothes, products or services can give a great insight into the type of rewards or deals that should be offered.

The importance to move with the times regarding loyalty schemes is vital for success. For example, there is no use in offering your customers a service as a reward that they already expect, such as ‘free click and collect’. Engaging with the consumers is always a great way to establish a more focused, loyal and active customer base. Competitions through social media with the chance to win something by sharing, liking, or commenting on a post can lead to more returning customers. In fact, our recent poll determined that 68.6% of the people that took part would be influenced by a loyalty card to decide where they shop; 12.4% of this figure are people that admitted they would be influenced a great deal.

With the number of loyalty schemes on the increase, remaining personal and competitive is the key to success. Customers want to feel as though they are getting the best deal for their loyalty. Many businesses have triumphed using a loyalty plan and a significant amount of people are buying into them and, in turn, are being converted into loyal customers.

Retail Maxim has a great knowledge of the retail sector and provides a range of mystery shopping jobs within the industry. If you are interested in becoming a mystery shopper, you can take a look at our website for more information or contact us if you have any questions, we would be happy to help!