Loyalty schemes have proven a great success in the UK, with the number of schemes increasing by two and a half times in the past ten years, according to recent research from GI Insight.
Yet new research from specialists Arvato Loyalty Services suggests that the future of the industry may lie in brand clubs.
Brand clubs can best be described as loyalty schemes offering exclusive content to their members. Andrew Mitchell of Arvato Loyalty Services said that ‘after the success of loyalty schemes, it looks like clubs might be the next great initiative in customer marketing.’
Existing loyalty schemes seek to reward customers for shopping at a particular place by offering discounts on future purchases. The theory is that this will encourage consumers to consolidate their spending at one company, rather than its competitors, as well as providing valuable information on spending habits.
Yet because of the popularity of these schemes, many consumers will now have a range of loyalty cards. As a result, loyalty schemes will have less effect on encouraging consumers to shop in one place rather than another and will simply discount their existing behaviour.
Where loyalty schemes primarily allow people to do the same things for less money, brand clubs are about creating unique opportunities. Perhaps the most important aspect of brand clubs is the change they propose in how people interact with the companies they buy from.
For example, members of a club linked to an automotive brand might get the opportunity to go to Silverstone for a day to test drive the company’s new car before it is sent to dealerships.
Brand clubs enable a company to have a more sophisticated relationship with their customers. Rather than simply offering a discount on products they are interested in, they can offer exclusive experiences related to their customers’ interests.
The response to this may be that it sounds useful, but costly at a time when the economic downturn is likely to see marketing budgets under strain. Yet the report also found that 40% of people would be willing to pay to be a member of a brand club.
Even more interestingly, 29% would pay up to £40 and 21% would be willing to pay over £100. This shows thatthese schemes have not only the capacity to be self-sufficient, but also to make a profit.
While companies will have to offer strong incentives to attract consumers to join their club, it offers the chance to form exceptionally strong relationships with people who have a special interest in the brand.
Furthermore, the fact that the highest level of brand membership is among wealthy people (‘A’ social class) shows that this can be a useful way of reaching a lucrative but elusive market.
What is it that encourages people to join these clubs? The research found that people were attracted to clubs first and foremost by discounts and special offers. Yet people were also attracted by exclusive and advance access to products and special offers from similar companies.
The report also notes that ‘we have become a nation of avid points collectors’ and it could be said that club membership is something inherent in British culture. As children we are told that ‘Blue Peter badge winners get in free’ and as adults we collect air miles and supermarket loyalty points.
People were most enthusiastic about clubs linked to supermarkets, but also expressed a high level of interest in clubs linked to leisure venues, holiday destinations and restaurants.
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