Loyalty schemes - worth the bother?
I see that my home phone company is pulling out of FlyBuys, the leading NZ multi-vendor customer loyalty scheme. I’m not surprised - I never understood why they were in it in the first place. Loyalty schemes seem to have an impact only when frequent repeat purchase decisions are made, not one-offs or “once every few years” decisions. Selecting your phone company is a “once every few years” decision. After that you don’t think very much about which phone company to use to make your call, at least until you move or get fed up with them for some reason. Likewise, buying a car, or a major household appliance, or a house. Yet there are businesses in those fields who are part of the Flybuys family.
Loyalty schemes for frequent travellers, supermarket shoppers, motorists buying fuel, and coffee drinkers all make sense; as does deciding which credit card to use. I generally use the one that gives me the most air-travel points with my usual airline, because I use my card a lot and I travel a lot (distance-wise). I rarely use the credit card that offers me shopping vouchers - it’s there only as a back-up in case of loss of my preferred card.
I accept that at the margin, earning loyalty points on major infrequent purchase decisions may be a small factor in selecting from competing vendors with identical offerings, but I’d lay odds that for most people, the presence or absence of loyalty points is largely irrelevant. I’d need to see some solid empirical market evidence to persuade me that the cost of supplying loyalty rewards to all customers is amply outweighed by the profit on the marginal business.
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October 28th, 2008 at 7:21 pm
Jim
the key reason companies loyalty schemes is they entice the consumer to identify themselves to the retailer and thus enable the retailer to track that particular consumer’s spending
as such they are then able to market specific offers to the loyalty member
eg I regularly receive targetted emails from Woolworths based on my OneCard usage
for that reason there is dubious value to Telecom, they already know who their customers are, what their spending patterns are and can therefore target marketing at them
Gavin
October 28th, 2008 at 10:01 pm
Exactly. Major item vendors, utility suppliers, etc already know who you are.
December 9th, 2008 at 10:56 pm
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