Consumers would rather save dollars on their shopping than collect points

Is your wallet full of loyalty cards? A coffee card, a Onecard for Countdown?

Marketing researcher Valentyna Melnyk, of Massey University, predicts that within 10 years, loyalty schemes as we know them may be a thing of the past.

She said companies around the world spent billions on the programmes, but customers loyalty had been declining since 2008.

Melnyk has looked at the effects of loyalty programmes and her results will be presented in a paper in December.


She said many businesses found it difficult to end an unprofitable scheme. Shell in the Netherlands tried to drop a paper stamp scheme and was hit with a boycott that cost it €4 million ($6.3m). The company had to reinstate it and apologise.

Melnyk studied almost 10,000 consumers to look at the effects on a company of introducing and terminating a loyalty programme.

The most effective schemes were those that gave customers preferential treatment, such as Farmers cardholder days, Melnyk said. "It's a simple but effective feature."

She said it was better than offering a discount because people did not calculate how much they were saving.

Countdown had a slow rate of savings compared to a scheme such as Whitcoulls', she said. At Countdown, shoppers earn one point for every $10 spent and have to earn 200 points for a $15 voucher, so they get a return of 75c per $100 spent. Whitcoulls offers $5 per $100.

Consumers were most aggrieved when they were collecting points for a discount and the scheme was cancelled without any way to redeem the points. Melnyk expected many companies would drop their loyalty schemes within 10 years.

Why wouldn't you want to shop more regularly in a shop that's going to reward you?
Ben Goodale, JustOne managing director

"It started in the late 1990s when it was decided it was cheaper to keep existing customers than recruit new ones. Initially it was successful because only a few companies were doing it. Now everyone is pretty much doing the same thing and people ignore it. If they want to save money, they go to Pak'n Save, where there's no loyalty programme."

She said many consumers would respond better to a low-prices strategy than a loyalty programme.

"Promotions and food demonstrations would be of more value. Consumers would get more out of that than higher prices and a loyalty scheme."

Ben Goodale, managing director of marketing firm JustOne, which specialises in customer relationship management and loyalty programmes, said the schemes would probably change but they would not vanish. "They're getting smarter and database marketing is getting more sophisticated."

Companies were better able to use data about their customers to target advertising as technology evolved, he said. "They can be more selective about who gets sent what."

Smartphone loyalty programmes would become more common, he said, and would use technology similar to contactless credit cards. "You could have your smartphone near the sensor and won't even have to turn it on."

Customers would get reminders about a sale that was on or a voucher waiting for them.

"Why wouldn't you want to shop more regularly in a shop that's going to reward you? You need groceries, it makes sense to go somewhere that's going to reward you."

Swipe plastic, get freebies

Sara Reid would spend more money to get a store credit.

Whangarei shopper Sara Reid has a purse full of loyalty cards.

"Smiggle, Variety Discounter, FlyBuys, One Card, Farmers Card, Whitcoulls card and I just picked up a Pita Pit card."

The 37-year-old doesn't go out of her way to shop at places that have loyalty cards but she does love freebies and would miss the schemes if they weren't around.

"If I am shopping at, say, Farmers, I definitely give them my card and I am also usually swayed to spend a bit more if I know I only need to spend another $10 to get my free $20 credit redeemed as my points have reached that point."

Marketing researcher Valentyna Melnyk, of Massey University, says women are slower to latch on to loyalty programmes. "Once [men] get the card they adjust their behaviour more quickly. But if you terminate the programme, men are the first to jump, too."

Women tended to be more connected to personalised loyalty programmes. "That's consistent with research that shows women are more attached to individuals and men to groups.

"Anything that gives the feeling of a personalised relationship is something women don't want to lose."