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Loyalty schemes — the elephant in the room?

Loyalty schemes — the elephant in the room?

June 17, 2011 by

ElephantNow and again at SellerDeck we get asked whether our ecommerce software includes functionality to support a loyalty scheme. The answer is no, and there are very good reasons why we have not developed it. I thought the rationale would be worth sharing more widely. If you’re considering developing a loyalty for your own site, it might just persuade you otherwise.

Firstly, loyalty schemes don’t produce loyalty. Most people have multiple loyalty cards, and use them promiscuously. The level of reward — usually about one per cent — is pretty minimal. One special offer can save more money than the loyalty points on your entire weekly shop. So people take advantage of the schemes because they are free and painless to use. But they don’t influence where people shop on any given occasion.

Consequently, the term loyalty is a really misnomer. If loyalty is what you’re looking for, a loyalty scheme won’t deliver that.

The main advantage of loyalty schemes to the large chains is in the data they make available. Every time you present a reward card you identify yourself personally at the checkout. This enables the company to track a huge range of data, both for individuals, and for particular demographics. Your supermarket knows how often you shop, and where. It knows your average weekly spend. It knows your family diet, what items you purchase regularly, and how often. In consumables and FMCG, this enables large companies to follow market trends very closely, react to changes quickly, and target their merchandising according to local and temporal preferences and trends.

That’s great if you are a large chain with multiple branches, a website and maybe a mail order channel as well. If all you have is a website, it’s pointless. You can already identify regular customers from your orders database, and mine the same kind of data directly from that.

So given that a loyalty scheme doesn’t deliver loyalty, costs time and money to operate and doesn’t give you anything that you don’t already have – doesn’t it start to look like one huge white elephant in the room?

Bruce Townsend is an expert contributor to Marketing Donut and online marketing specialist at SellerDeck.

Read more in our dedicated section on customer loyalty.

Posted in Customer care | 1 comment

Comments

I have to strongly disagree.I think the answer should be yes, and I have a website with loyalty points to provide the evidence that I base my answer on. It largely depends on what you sell, and how big that market is.It also depends on whether that product is likely to be bought often, like vitamins or consumables, or once a year or two.

I sell a product that only 4 or 5 other websites sell the UK, and that product is restricted to a minimum selling price. This means that the playing field is very level, and incentives to shop with one seller or the other become more important. If all sellers are offering free delivery and great customer service, there is little reason to shop with one or the other if loyalty points are not used. Add a points scheme, and once the customer is buying from you there is a very compelling reason for them to choose you next time, especially if it means they will get a few pounds off compared to another seller. The loyalty points scheme here is a clear reason to shop with me, instead of others.

Supermarkets etc are a totally different setup, and like you say are used for other reasons, such as market research etc, but for small to medium ecommerce businesses, a loyalty scheme is one that I think is very important, adn does indeed work, at least in my experience.

I think SellerDeck would benefit hugely from a loyalty points scheme. Include it, and it is up to the store owner to decide if they wish to use it or not, but not including it especially after people have asked for it is plain foolish. Elephant in the room, I dont think so...more like Emu with its head in the sand.

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