Rather than immediately sharing my thoughts on rewards programs, I’d like you to assess whether or not they are a good idea?
Here are a few questions to make the task a little less onerous:
- Do you participate in rewards programs?
- Do rewards programs make you a more loyal customer?
- Would declining quality, friendliness or service cause you to leave despite the existence of a reward program?
- Do you buy more frequently because their is a reward?
- Do you enjoy participating in rewards programs or do you resent the additional effort required?
Let’s discover what your answers indicate about rewards programs’ effectiveness…from a business owner’s perspective.
Participation
If you regularly participate in rewards programs, it’s likely that you:
- Are a price buyer.
- Feel that the offering is overpriced.
Either way, it’s highly unlikely that you’ll buy without some sort of deal… reward or discount. And, you’re more likely to leave for a better deal.
If you don’t participate in rewards programs and you’re still buying, you are an ideal customer for this business. You value what they offer so much that you’re willing to pay full price to get it. You’re less likely to leave for a better deal and forgo other spending during difficult economic times to get what this business offers.
More loyal
If you are more loyal as a result of a reward program, it’s an indication that you’re a price buyer and you’ll only remain loyal as long as the price remains low or the reward program continues.
If the reward program doesn’t make you feel more loyal to the company, it indicates that you place greater value on other things…things like quality, service, friendliness, integrity, care and concern for your well-being.
Declining value
If you remain loyal despite declines in quality, service, etc., it indicates that you are a price buyer…that price is the most important factor in your buying decision. Having said that there is still a threshold below which you won’t remain a customer. As someone who values the reward, you notice that less price-sensitive buyers have been leaving making you more sensitive to the decline in value.
If you aren’t utilizing the rewards program, or are using it because it’s easy to use, you’re likely to communicate to management that your current experience wasn’t up to their standards. You want to give a trusted, appreciated vendor a chance to fix a problem. After all, they can’t fix a problem they don’t know exists.
Frequency
If you’re a price buyer, you may buy more frequently with a reward program…until you find a better (lower-priced) alternative.
If you’re a value buyer, you’re only going to buy when you have a need…for items that you consider needs rather than wants. With wants, you’re only going to buy as often as the want arises. In other words, a reward program does not increase the frequency with which you buy.
By the way, Jay Conrad Levinson, in his earliest release of Guerilla Marketing said that his company’s survey showed that only 14% of the buying public are price buyers; 86% base their buying decision on value-based factors like friendliness, integrity, knowledgeable salespeople,
quality and service.
Enjoyment or resentment?
If you enjoy rewards programs, it’s likely that you consider yourself frugal…that accepting the reward makes financial sense. It is an indication that your primary reason for buying is price.
If you resent the additional effort required from the reward program, it’s an indication that you value your time highly…and that you are willing to pay full price for the value you’re getting.
You especially resent a company’s adoption of a reward program when, shortly after, they raise prices…apparently to offset the revenue loss their rewards program has created. Some of you may even feel that you’re currently overpaying…that you’d prefer to be offered a lower price than to participate in a rewards program.
Your thoughts
Please share in the comments, your thoughts on my assessment of the possible responses to the opening questions. I realize that my preference for a premium-price strategy includes a bias which is evident in this post. Your thoughts help me be objective in my assessment, something I aspire to be.
Takeaways
Having admitted my bias, here are the takeaways from this post. Rewards programs:
- Primarily attract price buyers…who, from a business owner’s perspective are the least-loyal, most-demanding, most difficult-to-please customers.
- Leave those unwilling to participate feeling that they are overpaying…or at least being penalized for not being a frequent customer.
- Gain loyalty only from price buyers…and only until a better deal comes along.
- Do not increase the frequency of purchases with the majority of customers (roughly 86% of the market according to Levinson).
- Result in extra effort on the part of the customer…which some resent more than others.
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