min read

Love or money? What makes a compelling loyalty scheme?

by Ian Davis , 05.06.2014

As a nation, whilst we’re officially feeling more confident and making our way out of recession our desire for rewards, loyalty schemes, cashback and discounts shows no sign of fatigue.  Making customers feel they’re “worth it” (or ‘buying’ their loyalty through discounting depending on your point of view) has been a feature of financial services ever since the Air Miles credit card schemes began in the 1980s. Recent analysis of GfK’s Financial Research Survey suggests 30% cite incentive schemes as a purchase driver.

The use of these incentives has spread like wildfire and can take some surprising forms. Another £15 off the motor insurance renewal, or adding a Baby Oleg to your family of toy meerkats is seemingly a no-brainer for many of us.  And now most of the high street banks are starting to reward their customers for spending on their debit cards. For many consumers this will mean a further layer of potential incentives to complement traditional card-based schemes from petrol stations, retailers, supermarkets, the ubiquitous coffee shop and food offers and the new web-based initiatives such as vouchers, cashback and daily offers.  The reward space is pretty crowded and it will be interesting to see what traction these schemes gain and the extent to which they reflect publically stated intentions to place customers’ interests first. Can they deliver compelling reward propositions which bear comparison to the wider ‘reward’ ecosystem, demonstrate that their rewards are appropriate for their customers and build brand affinity in the world of everyday banking?  Ahead of our client event ‘For love or Money’ on July 3rd, I wanted to take a step back from financial services to explore what makes a compelling loyalty proposition.

Whilst not seeing myself as a discount fanatic, I seem to have accumulated a fair selection of cards and schemes in recent years ranging from straightforward cashback to the more complicated but it’s the one from the local farm shop that most effectively does its job.  Unlike all the chunky plastic-based cards, it’s made from paper and is stamped in person each time I spend £5.  In the age of big data driven personalised marketing, why does this simplistic retro approach appeal to me?

Although there is something beguilingly un-‘global.com’ about the paper card system, the real key to its success comes down to four fundamental principles:

  • Simplicity and Transparency - it’s pretty obvious how it works. I always know how many stamps I’ve got, and how many to go until my next reward
  • Tangibility – a choice of £3 off the next shop or a cotton shopping bag with a stylish  graphic of  strawberry,  raspberry or asparagus
  • Relevancy - who doesn’t want £3 off somewhere they shop regularly? We may all be feeling more confident about the future with unemployment falling and house prices rocketing but incomes have stagnated whilst the cost of living has spiralled over the last five years. Every little still helps as they say. And what self-respecting farm shopper wouldn’t want a statement ‘I’m not a plastic bag to put their fresh fruit and vegetables in?
  • Value - £3 off every £45 of shopping is 6.67% cashback. No confusing points worth fractions of a penny that I have to save up in their thousands before achieving an ungratifingly small discount once I’ve worked out how and where to redeem them.  No penny or half-penny back in the pound but a clear £3 off every couple of weeks.


I suspect the other reason I like it is that actually I rather like visiting the farm shop so it’s something of a virtuous circle reinforcing my affinity to the whole experience, rather than something attempting to conjure affinity from a wholly functional relationship.

The paper element might seem a bit odd coming from someone frequently involved in researching the impact of digital on financial services but in truth what matters is not how the scheme is delivered but the fact that it meets the key elements that attract and retain customers.

For love or money…?
If like me you’re interested in rewards and loyalty and what they say about customers’ relationships with brands or how they impact everyday customer behaviour please join me on 3rd July at our next Financial Services seminar: For love or money…