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Are loyalty points now pointless?
The global loyalty management market was valued at US $2,617m in 2018 and is expected to reach a value of US $9,280m by 2024, according to Mordor Intelligence. Loyalty programmes have long used points as a way of rewarding customers and our whitepaper in association with YouGov - “What the British think of Loyalty” - found that 91% of loyalty programme members collect and actively redeem points they have earned.
Increasingly, however, we are seeing brands thinking outside the box and implementing other ways to reward their loyal customers. In loyalty in 2019, are points, pointless?
Historically, loyalty programmes consisted of a piece of cardboard that had a hole punched into it, or a stamp stamped on it, each time a purchase was made. After the 10th purchase (or thereabouts), a free product could be redeemed. The system was extremely basic and treated everyone the same, but many successful programmes still exist on this premise, being particularly prevalent in sectors such as informal dining and beauty.
Next came points, powered by sophisticated data systems and plastic cards. These programmes began to target customers individually and, through the accumulation of points, reward and motivate purchases in more sophisticated ways. Tesco Clubcard (which was the first major points programme to launch in the UK) and Boots Advantage Card are great examples of companies that use points-based loyalty programmes. Points tend to dominate in sectors such as grocery, hotels and airlines.
In recent years, though, the range of mechanics available to a brand in “loyalty” has grown exponentially. Here are some programmes who are doing things a little differently.
Using Milestones to engage… In probably the biggest news in points in a decade, Shell is abandoning points in favour of 'milestones'.
Launched in March 2019, Shell Go+ is a new loyalty programme, replacing the globally renowned Shell Drivers Club. The aim is to reward based on visits rather than accumulating points, offering money off fuel after a certain amount of visits, discounts on their own food range, hot drinks, and Shell brand oil among, other things.
In a recent interview with Loyalty Magazine, Pavel Los (Head of Shell Loyalty) explained: “What is revolutionary is the stepping away from points. There will be no points as currency”. Though it's still in its very early stages, the results have so far been encouraging, with a successful trial in the UK meaning that it is being rolled out in other markets.
Using paid-for services to engage… There are many arguments for and against thinking of Amazon Prime as a loyalty programme. We are confident it is one, but in true Amazon style it’s a little bit smarter and more customer centric than the way others do it.
This programme achieves huge things without points, and it even makes people pay for the privilege. From the start Amazon have rewarded all Prime customers with perks such as free next day delivery, Prime Video and access to Prime Events, for instance tickets to exclusive concert). 46% of Amazon Prime members shop at least once a week and 75% check Amazon first before looking elsewhere. In this case we don’t think points would have been so effective. What Prime does is lock people into the Amazon ecosystem, by offering them benefits they soon can’t imagine living without.
Using partner rewards to engage… American Express is a third brilliant example of a loyalty programme that offers partner rewards, not points. Our whitepaper found that 63% of those that are part of a bank’s loyalty programme want partner rewards.
For the first time, American Express partnered with Wimbledon this year, and have a brand-new lounge. It offered American Express card holders a place to rest and recharge. With phone charging points, free in-ear radios, and branded fans for customers to take away, it was a place to get away from the hustle and bustle of the tournament.
Customers also get access to reserved event tickets available before they are on general sale and can save money at the restaurants and shops with great offers and savings with Airbnb, Lidl, British Airways, BP, Deliveroo, Nando’s, Hacket, PayPal, Sainsbury’s among others. Partner Rewards over points every time, for Amex.
Using experience to engage… This is an app that people use to “check in” places. It uses gamification to incentivise users to check in to different places and share that information with friends. With Swarm Perks, users can get discounts for locations they check in to, such as 20% off coupon at Best Buy. There are also sweepstakes challenges where users enter into a draw after a check-in at a particular location to win prizes. Gamification is proving to be a great way of delivering loyalty through experience, not points.
Many forms of loyalty
These four loyalty programmes are all hugely successful and operate entirely without points. They don’t stand alone. It is possible to find successful points free programmes in every sector, from giants like Hotels.com disrupting traditional hotel points programmes with the iconic Hotels Rewards through to smaller brands such as Paperchase’s 'Treat Me' who base their programme on “perks not points”.
Brands can effectively reward customers without needing to use points. It no longer defines the loyalty category, but is now just one of a range of mechanics and, perhaps, for your brand, not the most effective option. We don’t think the tide has turned completely yet (unlike Aldi who actually created an entire campaign in Australia on how points are pointless), but marketers should ensure they consider a range of loyalty mechanics when designing a new programme.
Perhaps you could even be as brave as Shell, and, if you are the leader of a points programme, ensure you re-evaluate if points are actually working for your brand, your business and your customers. If points really are pointless for your brand, be bold enough to stop using them and create something new your customers really want.
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