Should Bonus Schemes Be Tailored to Loyal Customers or Big Spenders?
Loyalty schemes have become ubiquitous in modern business, largely because they can be implemented in some form within almost every industry. However, questions remain over the most effective way to run such a scheme.
Should they reward those who have spent the most frequently, or simply those who have spent the most? A look at supermarkets and media companies reveal that there has been a recent trend towards the former category.
Supermarket loyalty cards used to operate on a straightforward basis: spend money, earn points based on the scope of that expenditure, convert points into bonuses. That approach was tilted in favour of lavish spenders rather than loyal customers. Those who shopped little but often in a store could accumulate fewer points than someone who did a larger shop once each month.
That might seem fair from a purely monetary perspective, but bonus schemes are as much about improving a brand’s image as they are about attracting pure profits. Importantly, the frequent shopper may feel more inclined to spend more on a visit if they feel personally valued by the company. Last year, many of Britain’s major supermarkets adjusted their strategies accordingly.
Tesco revamped their Clubcard to value loyalty, while Marketing Week reported how Sainsbury’s redeveloped their Nectar points scheme. This allowed customers to gain Nectar points not purely based on the size of their shop but also based on the frequency and longevity of their visits to Sainsbury’s. This shift in focus allows both loyal customers and big spenders to benefit from the bonus scheme.
A VIP scheme still retains an aura of luxury from back when its benefits were more tangible. This is something that Casino Wings observed in their analysis of online casino’s VIP programmes. Physical venues could easily reward their most valued customers with free accommodation and complimentary drinks, but websites obviously don’t have that capability. Instead, many online casinos look to reward players for frequent visits to their site in other ways, such as the chance to win holidays and sporting tickets.
Sky’s VIP scheme has taken a similar approach to rewarding its customers. Broadband Choices has broken down the scheme, in which customers are eligible for perks depending on how long they have subscribed to Sky services. Crucially, even new members are able to receive VIP benefits, which removes an element of exclusivity. Members in the 0-3 year bracket can still receive sporting tickets and entry into lucrative prize draws.
This type of approach demonstrated by online casinos and Sky, where brand loyalty is prioritised over pure expenditure, works to destigmatise the ‘VIP’ tag. Everyone wants to feel like a VIP and with these strategies that provide entry-level access to benefits, everyone can. Consumers have to do nothing more than keep using the same service in order to receive greater benefits, something which could be crucial when it comes to retaining customers.
Something for everyone
The safe answer to the question about who to reward, loyal customers or lavish spenders, is that both should be considered. Giving bonuses to big spenders is a fair way to ensure that they keep spending big at your company. However, ensure that there is also a scheme that covers those who shop frequently, albeit less extravagantly. Consider the potential benefits of a loyalty scheme that rewards frequent and sustained custom for your business. Not only will this strengthen brand affinity, but it can also be an effective way to encourage those frequent shoppers to spend a bit bigger each time they use your service.