Loyalty schemes - how rewarding are they?

I've noticed recently a number of new brands from various categories trying to implement some of the thinking behind reward schemes to increase the consumption and loyalty levels of their consumers. We've had Coke Zone, the Telegraph subscription model and today I read about Nuts TV creating a rewards card for Sky viewers. http://www.brandrepublic.com/News/846153/Nuts-TV-links-MiCard-interactive-loyalty-card-offer/

Now it is understandable that brands such as these want to find a way to increase frequency of consumption whilst gathering data about their consumers, both incredibly valuable objectives. Coke is constantly battling against new brands eroding their share of throat, the Telegraph like all newspapers is desperate to find a way to stem the long-term decline and Nuts TV will never really show up on BARB so needs another way to prove to the media buying world that it does have an audience after all.

There's nothing new in this either - Loyalty schemes have been around longer than any of us, well before Boots, Tesco or Nectar. When I was a kid, pretty much every piece of glassware in the house was from Esso - I can still remember the collector's catalogue now, and my Mum always had a few books full of Co-op stamps. And they work - I know plenty of people who will only use Boots for anything that is possible to be bought at Boots.

However, I'm not sure that all of these new entrants are getting it right - the Nuts TV and MiCard idea is a nice one but I'm not convinced it is going to work, ditto Coke - so here are a few pitfalls I think companies need to watch out for and few pointers for how to make such schemes work.

1) The biggest and most obvious one is "MAKE IT SIMPLE".

This sounds like a no-brainer I know, but as companies try to maximise their data acquisition, minimise fraud, minimise cost per user and maximise PR-ability (and breathe...!), they end up putting in a huge number of steps and hurdles to take up which turn people away in droves.

With CokeZone you have to find a unique code under the label, then keep hold of the bottle, take it to your computer and then plug in the code. In the post MTV generation your typical Coke consumer just doesn't have the attention span to go through all that. The genius of the supermarket loyalty scheme is that collecting fits so naturally into your normal shopping habits and require no real effort on the part of the consumer.

If Coke Zone had a free-text number or even a mobile java photo application that could read the code, suddenly it would be so much easier for the consumer to do the collection

2) Make the rewards a real reward.

Don't make people collect large numbers of points just to get a money off voucher for something they didn't really want anyway. Most consumers are savvy enough to realise that they could probably get those discounts through online vouchers anyway or find the product cheaper elsewhere so won't feel like they are actually being rewarded by your brand, merely being shepherded towards one of your partners. The more cynical amongst them might even assume you're making some profit out of it. For example - "collect 5 points for free delivery on consolesandgadgets.co.uk" sounds like a bit of a non-offer to me.

If you are giving people a reward for their loyalty, don't make them spend more money to get it, actually give them something they would want for free.

3) Know your audience -

Nescafé have run a loyalty scheme for a number of years called "Pick-me-ups" where you collect stamps on the back of packs, stick them onto a collectors card and send them in to claim gifts from a catalogue. It's all very 1970s, but then the average Nescafe drinker is over 50 and this method of interaction works very well for them. They are investigating an online collection method, but if they know what is good for them they won't eliminate the paper and glue option because it is working and the collectors love it.

This point also extends to the rewards - make sure that you are giving people what they actually want. Give them a forum to feedback on the rewards, make suggestions or just say hello.

4) Don't mistake scheme participation for brand or product loyalty.

No reward scheme can be a replacement for true brand development, otherwise as soon as the reward scheme stops, the loyalty stops. A reward scheme should just be viewed as a way of maximising the share of pocket of someone who is already a consumer. It will never be motivating enough to convince a non-consumer to start consuming.

5) Give it time to succeed

You are trying to build a whole new habit in your consumers and one which requires extra work. It's clearly not going to happen overnight.

That's all I've got for now - I might add more later