Blog | 12 October, 2018

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Why brands are starting to reward behaviour over spend

The success of Tesco Clubcard in the 1990s and 2000s quickly created an established model for discount-based brand loyalty in the UK, but increased competition has since made it more difficult for loyalty schemes to cut through, with retailers seeking to balance customer incentives with the cost to the business.

Many businesses have been forced to scale back their rewards by reducing their value or increasing the spend required to earn each loyalty point – Sainsbury’s and Tesco have both indicated there could be radical changes to the Nectar and Clubcard schemes, respectively, confirming a wider trend of encouraging long-term usage and deeper engagement, rather than short-term sales and deal-hunting.

Sainsbury’s is currently testing a new model that will see customers receive points based not just on how much they spend, but also how frequently they shop and how long they have been a customer. In a nutshell, the more loyal someone is to Sainsbury’s in the long-run, the more they will be rewarded.

One thing is clear, consumers do want to be rewarded for their loyalty. According to a recent study by Mando-Connect and YouGov, more than three-quarters (77%) of Brits are subscribed to at least one loyalty programme, while 59% believe all brands should offer one.

Unsurprisingly, the main reason people sign up is to benefit from in-store/online coupons, discounts and offers (87%), followed by getting discounts and rewards from other retailers or brands (55%) and free products, services and experiences (52%). Less than a quarter of people show an interest in either exclusive access or premium service rewards.

Do marketers have a challenge on their hands to change perceptions of what loyalty schemes are for? This is especially evident in the retail space, where competition is fierce and consumers are tightening their purse strings as they hunt for the best deals.