Sales & Marketing

Customer reward schemes are best left to the high street

3 min read

27 March 2013

Ian Cowley advices e-tailers to think before implementing a customer rewards scheme. What if all you need are some low prices and good customer service?

Competition to secure consumer spend is greater than ever. Long established names are disappearing from the high-street at an alarming rate. Some retailers have managed to keep hold of customers through the effective use of reward schemes, giving them a reason to come back. Internet retailers are increasingly attempting to imitate these models, thinking that it’s best practice.

We, on the other hand, think that a customer reward scheme is best left to the high street. 

Here’s why:

1. Blind loyalty

Are you an internet retailer considering a customer reward scheme? Ask yourself why you need one. We often see that companies blindly start rewarding customers without considering how to utilise the loyalty they generate to maximise additional benefits, such as cross-selling or driving repeat visits to their site.

While high street stores may need them, e-tailers don’t actually need customer reward schemes – certainly not for data. E-tailers already have an advantage; with every purchase made we gain vital customer data. So it’s not a case of e-tailers using customer reward schemes to gather important data, it’s that they aren’t analysing or segmenting the data they already have available.

2. Whom to reward?

Success entirely depends on your customer base and knowledge of who your customers are. For instance, we have customers who bulk buy for offices, as well as single purchase customers. We’d have to operate two reward schemes, one for large orders and another for everyday customers – an admin headache and a flawed meritocracy. The alternative is a unilateral scheme, but this adds cost to your every day customers, who would have to subsidise larger reward amounts for business customers.

So, who are you actually rewarding? By offering incentives to businesses, you only reward the person who orders. This becomes problematic should they move on. If your focus has been detracted from offering competitive prices, you’ll struggle to win new business.

3. Everyday value

Loyalty schemes are most successful in driving repeat visits. We know we can secure repeat visits, however, by ensuring the lowest possible price. In the “real world”, consumers have the choice to visit different shops and their spending is defined by variables such as convenience, time to browse and in-store marketing.

Price points, especially for commodities such as cartridges, are what drive online consumers. We aren’t offering a lifestyle choice they can buy into. Instead, our customers purely want the best deal. We also place customer satisfaction on a level pegging with commercial success. Both combined factors negate the need for us to implement a reward scheme. Instead, we recommend you concentrate your efforts around two pillars to drive repeat business – low prices at all times and excellent customer service.

Ian Cowley is the managing director of www.cartridgesave.co.uk.