Loyalty for Less?
In recent times, the companies behind several leading loyalty schemes have faced criticism for diluting their points values. Here we look some of the brands making these moves, why they are reducing reward value and whether we will all get less for our loyalty in future.
Tough times but is scheme dilution a solution?
Businesses in many sectors are struggling with the challenges of the current economic climate: rising costs, staff shortages, aggressive price promotion and wobbly customer confidence leading to lower spending. Loyalty programmes have unfortunately provided a way to cut costs with the value of loyalty points issued being an obvious target. But is scheme dilution really a solution when it risks reputational damage, a drubbing on social media and customer defections? Reducing costs and points liabilities is clearly a motivation but what will it mean for loyalty in the long term?
Where to shop when points values drop?
Tesco has perhaps received the biggest battering for reducing the value of its Clubcard points, one of the most popular loyalty currencies in the UK. In June 2023, Tesco experienced technical glitches due to the sheer volume of customers attempting to redeem ‘triple value’ points for partner rewards prior to the deadline reducing them to ‘double value’. Customers complained loudly and an extension was duly granted – a small triumph on the road to shrinking value and enough of a story for the Mirror and others to cover. This follows previous dilution of points values by the goliath so often considered the vanguard of retail loyalty. Now Clubcard points are the source of social media rants with customers threatening to swap their grocery shop despite the company’s claim that they have the biggest and most generous reward partner scheme.
Just where though can customers still feel the ‘loyalty love’? Lidl suffered a similar fate in Autumn 2022 according to Money Saving Expert, with greater spend required to trigger Lidl Plus reward vouchers. And while the retailer claimed this as part of a ‘re-design’ that would benefit more customers, it looks like Lidl and many in the sector are looking to reward shoppers less for loyalty. Having scrapped points completely in 2021, Morrisons More now again awards points on selected products, along with instant discounts and money off offers, citing customer feedback as the catalyst for change.
Even Nectar (the coalition scheme which includes Sainsbury’s) made changes to its redemption value in 2022. Previously, 500 Nectar points were worth £2.50, but the revised scheme reduced the value to £2. The rationale behind this adjustment was apparently to align with changing customer preferences, ensure long-term sustainability of the programme and allow for more personalized rewards. The scheme’s strapline doesn’t lie: ‘For little shopping rewards, every day.’ This is a large scheme offering plenty of utilisation opportunities but where consumer value has again diminished. And last year, Sainsbury’s Bank itself reduced the value of Nectar points awarded to its credit card customers by a whopping 75%.
Much loved by health and beauty buffs, Boots Advantage Card implemented changes in May 2023 reducing points value to 3p per £1 spent rather than 4p. But Boots is compensating customers by introducing 10% discount on thousands of own brand products – arguably a smart strategy during the cost of living crisis, given the margins Boots enjoys on its own lines. Interestingly, with its first foray into loyalty, Asda Rewards focused on cash as the currency rather than points, aligning with its long term brand strategy, declaring ‘Pounds, not points’. It seems that points plus discounts or discounts alone are something of a loyalty trend.
Our take on why and where next
The brands de-valuing their points or avoiding them altogether are doing so to cut costs and liabilities in tough times for sure. But it is also an effort to maintain a loyalty offer that can be sustained in light of considerable economic pressures for companies and consumers alike. And in some cases, the re-calibration of points values enables investment in scheme re-design with greater levels of personalization - improving relevance and appeal. This is a sound strategic choice because it builds future fit schemes unlike cost cutting alone which is short term and puts loyalty in peril.
Those companies cited here are not necessarily doing anything better or worse than their peers. There are many more examples proving that points are now worth less in many programmes – the trajectory is towards a value exchange less rich than it once was. And herein lies the problem with programmes that are largely reliant on points. Consumers quickly calculate values and what reductions mean to hard pressed pockets. Disappointment, frustration and criticism follow. It does indeed look like we will all be giving our loyalty for less. But that only applies when monetary calculations are the sole measurement of reward. This is why, at Collinson, we encourage brands to build emotional engagement – whether through special recognition, VIP events, inside track information, privileged access, gamification or a whole host of other techniques. These interactions build brand bonding which goes well beyond functional and transactional scheme elements.
And isn’t that rather the ‘point’? Regular, rewarding and personalized experiences build loyalty that lasts. If points alone are the bedrock of a scheme, expect slashes and shake ups to have seismic effects. Combining personalized rewards, experiences and enjoyment creates truly reciprocal and rounded relationships which are the hallmark of true brand loyalty.