Loyalty schemes used for high-tech toys before DIY

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By: Wise Marketer Staff |

Posted on October 13, 2005

More American consumers would rather play with high-tech toys than make improvements to their homes, with their loyalty scheme redemptions having switched focus from DIY items to electronic goods, according to Maritz Loyalty Marketing.

Maritz Loyalty Marketing's Almanac - an annual analysis of the redemption activity for all of the company's loyalty programme clients - revealed that, when it comes to the top loyalty reward choices, consumers have changed their preference this year from home improvement rewards to the latest electronic gadgets. Supporting this conclusion, redemptions for Best Buy's gift certificates have moved ahead of Home Depot in terms of popularity among loyalty rewards card customers.

Reward popularity
Maritz Loyalty Marketing, which provides credit card consumer loyalty programmes for nine out of the top ten US banks, found that gift certificates are currently the most popular reward option:

Reward option % preferring
Gift certificates 57.0%
In-kind rewards (lower APR, cash back, lower fees) 37.0%
Travel 2.7%
Merchandise 2.6%

Table 1: Reward types by popularity (2005)
Source: Maritz Loyalty Marketing Almanac

No one-horse race
According to Gail Sneed, director of professional services for Maritz Loyalty Marketing, the high redemption rate for gift certificates might lead some to believe they are the best item for customer rewards programmes to offer, but creating a successful rewards programme isn't always that straightforward: "While it may appear merchandise and travel are not as popular among rewards card clients, successful programmes offer a range of rewards specifically targeted to customer segments."

Sneed added that the top banks already understand that to attract customers and retain those that may not spend at an elevated level, they still need to offer cash back, low APRs and lower fees (or even no fees at all) - as well as gift certificates - that don't take a lot of points to earn.

But to nurture loyal customers who will stick with their card for a long time, and to appeal to higher-income earners, banks also need to offer a variety of merchandise and travel rewards that these long-termers can work toward while they faithfully continue to use their card.

In-kind rewards
When analysing in-kind offerings, such as cash back, APR reductions and statement credits, Maritz Loyalty Marketing found a preference among rewards card members for cash back (62% preferred) rather than statement credits (38% preferred). Of course, even though it's simply human nature to want cash in hand, Sneed says that card members should always choose the statement credits to help reduce future interest payments.

"Both customers and credit card companies need to be smart about choosing their rewards," said Sneed. "Thinking long-term as opposed to instant gratification is always the best choice - for banks and card members."

Other findings
Other findings from Maritz Loyalty Marketing's rewards redemption data included:

  • Portable MP3 players broke into the top ten merchandise items redeemed (9th place), behind other popular items such as DVD players (1st place), Omaha Steaks (3rd place), and golf balls (6th place).
  • Electronics (including video games, televisions, stereos, DVD players, and similar items) accounted for approximately 40% of the overall redemptions in the merchandise category;
  • Home Goods (e.g. appliances, furniture, art, and so on) accounted for almost 20% of merchandise category redemptions.
  • Entertainment (e.g. home video, music, and magazine subscriptions) account for around 14% of redemptions within the merchandise category.

Maritz Loyalty Marketing designs and operates full-service loyalty marketing systems that drive preferred customer behaviour to help achieve true loyalty. The company also provides rewards-based loyalty schemes and one-to-one communications programmes that identify, retain and grow best customers.

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