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Consumer Reward Schemes - Are They Really Worth It? by Adam Singleton
Fifty years ago, the concept of reward schemes was almost non-existent. However, nowadays you'd be hard pressed to find a big business that doesn't offer some form of point card, club card, advantage card or premier point scheme for loyal customers. But are these schemes really worth signing up for, do they really save you money and have you ever wondered what's in it for the companies that offer them?
Indeed, there has been some criticism of reward schemes by various consumer groups. They have championed evidence that reward schemes do not actually increase sales, and instead just cost companies money which is ultimately added to the price of shopping.
Firstly, let's take a look at the advantages a consumer can gain by signing up to various reward schemes. Generally, shoppers earn points every time they purchase goods or a service from any participating business. These points are accrued over time and can then be exchanged for discounts or cashed in for freebies. Such schemes can also offer members lower prices on certain products that aren't available to those outside of the schemes.
Some companies even provide joint reward schemes that offer double or even triple rewards when you buy a certain product or service. For example some [http://hhonors.hilton.com]hotel loyalty schemes offer the chance to earn air miles as well as their own hotel reward points - so, for regular travellers, it does make sense to sign up.
But reward schemes don't just benefit the consumer. They must offer the company some return on investment for them to be worthwhile. By giving a small financial incentive to consumers, the company can use such schemes to gain a greater insight into their customers' shopping habits. Perhaps the most valuable information for the company is the identification of customer behaviours - i.e. who is buying what, when, where, how much are they spending and what trends, if any, exist. Companies who offer reward schemes can also win business from competitors who offer an inferior scheme, or don't offer one at all.
But reward schemes are expensive to run. When Safeway, a major supermarket chain in the UK discontinued their loyalty scheme, they acknowledged that they had been spending $70 million in annual operating costs. This was money that had to be redeemed from somewhere - the customer. The American group CASPIAN (Consumers Against Supermarket Privacy Invasion And Numbering) claim that supermarket reward schemes offer no higher savings to the consumer than before the program was implemented.
That said, if you are going to regularly buy goods or use the services of a company that already has an established a reward scheme, it does make financial sense to join up. After all - you might as well take advantage of discounts, freebies, bonuses and benefits if they're up for grabs.
About the Author
Fifty years ago, the concept of reward schemes was almost non-existent. However, nowadays you'd be hard pressed to find a big business that doesn't offer some form of point card, club card, advantage card or premier point scheme for loyal customers. But are these schemes really worth signing up for, do they really save you money and have you ever wondered what's in it for the companies that offer them?
Indeed, there has been some criticism of reward schemes by various consumer groups. They have championed evidence that reward schemes do not actually increase sales, and instead just cost companies money which is ultimately added to the price of shopping.
Firstly, let's take a look at the advantages a consumer can gain by signing up to various reward schemes. Generally, shoppers earn points every time they purchase goods or a service from any participating business. These points are accrued over time and can then be exchanged for discounts or cashed in for freebies. Such schemes can also offer members lower prices on certain products that aren't available to those outside of the schemes.
Some companies even provide joint reward schemes that offer double or even triple rewards when you buy a certain product or service. For example some hotel loyalty schemes (http://hhonors.hilton.com) offer the chance to earn air miles as well as their own hotel reward points - so, for regular travellers, it does make sense to sign up.
But reward schemes don't just benefit the consumer. They must offer the company some return on investment for them to be worthwhile. By giving a small financial incentive to consumers, the company can use such schemes to gain a greater insight into their customers' shopping habits. Perhaps the most valuable information for the company is the identification of customer behaviours - i.e. who is buying what, when, where, how much are they spending and what trends, if any, exist. Companies who offer reward schemes can also win business from competitors who offer an inferior scheme, or don't offer one at all.
But reward schemes are expensive to run. When Safeway, a major supermarket chain in the UK discontinued their loyalty scheme, they acknowledged that they had been spending $70 million in annual operating costs. This was money that had to be redeemed from somewhere - the customer. The American group CASPIAN (Consumers Against Supermarket Privacy Invasion And Numbering) claim that supermarket reward schemes offer no higher savings to the consumer than before the program was implemented.
That said, if you are going to regularly buy goods or use the services of a company that already has an established a reward scheme, it does make financial sense to join up. After all - you might as well take advantage of discounts, freebies, bonuses and benefits if they're up for grabs.
Adam Singleton is an online, freelance journalist and keen amateur photographer. His portfolio, called Capquest (http://hubpages.com/profile/Adam+Singleton) Photography is available to view online.
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