How loyalty schemes can unlock real value

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By: Wise Marketer Staff |

Posted on October 11, 2012

How loyalty schemes can unlock real value

Loyalty programmes that stay attuned and responsive to their members by giving them tangible rewards are those that will be left standing in an increasingly competitive environment, according to Jolande Duvenage, CEO for the South African coalition loyalty programme, eBucks.

Duvenage asserts that the increase in rewards programmes in the market, and a greater commitment from the companies that run them, has matured the sector and created some healthy competition in the South African loyalty market. In addition, consumers are becoming more savvy and knowledgeable when it comes to joining and using rewards programmes - and tend to use them to extend their purchasing power and stretch their wallets.

"Consumers want to feel like they are in control of their finances and are wary of being exploited. We have found that many eBucks members see the rewards they earn each month as a way to stretch their wallets," said Duvenage.

Rewards and loyalty programmes are seen to play an increasingly important role in the economy as they help increase purchasing power. For example, in good times, loyalty points earned by making everyday purchases can be set aside to purchase big ticket items or luxury items such as expensive electronics, holidays or expensive jewellery. In tougher times, members of rewards programmes tend to rely more on their rewards currency to make ends meet by purchasing everyday items like fuel, groceries, medicine and airtime.

Duvenage said eBucks has brought more retail partners on board over the last few years to add everyday value to members. In the past year alone, nearly half the total eBucks spent each month were redeemed on necessities.

Loyalty programmes generally use one of four mechanisms to reward members, with each reward type offering its own set of benefits:

  1. Discounts and cash back Discounts offer an immediate monetary reward to members but are generally limited to transactions at specific partners. A cash back programme generally gives customers cash back in the form of a credit against an outstanding balance.  
  2. Rewards currency programmes This would be a programme like eBucks where the rewards currency is not a reward in itself, but a means to a reward. These programmes offer versatility and choice.  
  3. Soft benefits Soft benefits hold significant appeal for many rewards programme members. In this case there is no money that customers will receive back and no rewards currency. Rather, soft benefits involving additional services or exclusive privileges for customers are offered.  
  4. Hybrid rewards The latest trend in the loyalty industry is to offer a combination of rewards currency, discounts, cash back, and soft benefits. A hybrid programme allows consumers to use their rewards currency as a way to extend their purchasing power. For example, eBucks now allows its members to take advantage of significant eBucks discounts on selected items in the eBucks shop (such as gadgets, movie tickets, flights and more) using their eBucks as a method of payment.

These different mechanisms are then packaged into a rewards programme offering either in the form of a customer club, where you pay a membership fee, or as part of a free rewards programme.

Whether a consumer prefers several frequent, smaller rewards or the ability to save or pool their rewards currency for a luxury item, the success of a rewards programme to a large extent depends on how relevant the reward is to the individual. It is important for consumers to establish whether their lifestyle and behaviour is aligned to the rewards programme of their choice to ensure that the most value can be derived.

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