Marketing power of rewards

Marketing Basics

 

As rational consumers we always tend to want more and more products or services for any amount paid. Producers/Vendors on the other hand want to create large consumer base so that they continue to reap profit for an elongated time period. So, the expert marketers came up with a new strategic marketing policy of Loyalty/Reward programs. Reward programs are structured marketing strategies designed to encourage customers to continue to shop at or use the services of business providing such programs. Basically reward programs schemes help in building existing consumer’s loyalty and attracting new consumers. Latest research shows consumers in the United States account for more than 3 billion memberships in consumer reward programs. In retail business a loyalty card, reward card, point card, advantage card or club card is a plastic or paper card which looks same as our normal debit/credit card with the name of the retail shop mentioned on it. Moreover, other than reward schemes now we also have cash-back offers when we make payment through credit cards, Paytm and MobiKwik, etc. While accepting payments through credit card or Paytm merchants typically pay a percentage of the transaction amount in commission to their bank or the respective merchant service provider. The bank shares such commission with the cardholder by providing him certain points. Accordingly, these strategies make consumer think they are getting a lot benefits and continue to shop with the vendor.

Now, we should understand how these marketing strategies work. Starting with the various reward programs we get at leading chain-store retailers like Big Bazar, Pantaloons, Shoppers Stop, Lifestyle, Club Mahindra, Reliance, etc. Whenever we shop at these retail chains they ask us to fill a form and then issue us a card and from that point whenever we shop next we either get a chance to earn certain discount on the purchase made or get some points that we can use for further purchases or can purchase special products which can be bought only with reward points. While filling the form the information so provided by the consumer is kept confidential. One can consider loyalty programs as a form of Centralized Virtual Currency. Coming to cash-back offers, these are available only when consumer makes purchase of certain amount using the credit card which is predetermined by the vendor. Normally, banks put up a maximum limit with respect to cash-back. Thus, cash back option can be very beneficial if used smartly. Same is the case when payments are made using Paytm and other wallets. These wallets are easy to use and less time consuming with no interest charges and exciting offers.

The marketer must keep the following points in mind while designing their reward programs so that these actually turn out beneficial for them.
• It is frequently observed that although the consumer sign up for the loyalty programs but do not remain loyal to the shop. So, the program so designed must be appealing enough to make the consumer shop repeatedly from the shop. There should be some consistency.
• Every consumer who has signed-up for the reward program wants to be treated like a VIP. Therefore, the shop must try to provide them some exclusive privileges over non-members. It could be access to deeply discounted items or hosting special events for them, etc.
• Lastly, surprising the reward consumers when they least expect can act as another tool to build healthy and long term relationship.

Below is the list of some of the well-known loyalty programs functioning in India:-
I. Shopper Stop – First Citizen card
ii. Payback is the largest loyalty program in India (Almost all Future Group Outlets fall within this program like Big Bazar, Central, Pantaloons, e-zone, BookMyShow, etc.)
iii. The TATA card which can be used against all purchases made at any of TATA outlets including while buying a car.
iv. Jet Airways provides Jet Privilege where one can even get a free air ticket.
v. Life Style – inner circle
vi. Reliance One (where one earns points equivalent to rupee every time a purchase is made.)
vii. Van Heusen Loyalty plan
viii. My Starbucks Rewards (you earn stars, 1 star = 1 free drink or food on your birthday)

It’s time to finally list down how the reward programs are actually beneficial for the business and consumers. Listed below are few such benefits:-
i These help in providing a boost to the growth of business. It is an integral tool in expansion of business.
ii These programs are not as expensive as they may seem. An article in Forbes states that keeping an existing               customer in 7 times less expensive than finding a new one. Usually the expenses incurred by the business over reward programs is overshadowed by its benefits in long run.
iii Reward programs improve customer satisfaction towards the business. This in turn is beneficial because the happy consumer shares his joy with his closed ones thus bringing new consumers.
iv The offers of getting points and cash-backs induce consumers to purchase more than they have planned because who does not want to get discount and vouchers. Thereby sales of business rises exponentially.
v By trying different offers the marketers also conduct an indirect survey as to which offer is liked much and which is disliked. The one which is widely preferred by the consumer is opted more often by the business. Customer loss is reduced when the business knows what is liked and no liked by the customer.
vi It is true that starting with reward program requires a lot effort at the early stage but once it is well established it yields profits continuously. The best example is that of Payback which is enjoying profit in ascending order over the years.
vii Lastly, a business’s growth and level of profit generated depends on its consumer’s happiness and level of satisfaction. Reward programs surely provide this. They make the consumer happy and show that the business cares about them and as a result the goodwill of business gets improved.

Surely the marketing power of rewards cannot be taken lightly. They have the power to change the shape of a business overnight. It is a tool which is not only apt and beneficial for the business but is also useful for the consumers at large.

Summary
Marketing power of rewards
Article Name
Marketing power of rewards
Description
Making your customer is very important for the growth of business. reward programs is the one of the most efficient tool in this case.
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The Buzz Stand
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