Monday, September 15, 2014

Reward Cards - Good or Bad for Retail Stores

These days it almost seems like every business has initiated a reward or loyalty card scheme. From big retail stores to small grocery stores, everyday restaurants and pharmacies, each business is coming out with a better and more attractive customer loyalty program. So, yes you know this already, and you must be enjoying all the benefits of it, but have you ever stopped and think about why retailers provide customer reward card programs?

Sure, you do make the most of your shopping when you participate in different customer reward programs, you get good cutbacks, discounts on your favorite items, cash back opportunities and special offers. But the thing is even with all those discount programs and special offers, retail companies and other businesses also stand to greatly benefit from this strategy. Even though the reward schemes cost businesses a considerable amount of money, they still get to win in the end.

Mentioned below are some of the reasons why this is true and why you should start thinking about incorporating a reward card program for your business:

Excellent Customer Data Tracking

Each time your customer swipes a reward card to make a purchase, you stand to benefit by gaining valuable insight on the types of products he/she buys. This information can help you considerably to improve judgment calls and decisions pertaining to your business. Plus, you will have the edge of meticulously analyzing the shopping data of all your customers.

Better Marketing

Locked and loaded with the valuable information you have gained from customers who use your reward programs, your chances of designing tailored marketing strategies aimed at particular groups will increase tremendously. You will be better able to provide your customers special offers and personalized deals based on their age group, past purchases and shopping interests.

Heightened Customer Retention

Remember that a couple of customer incentives can contribute significantly in building a loyal customer base. It is important to realize that if your customers think they will benefit more by coming to you for shopping, they will keep coming back. For example, by simply offering your customer a coupon that allows them to buy another product with $2 off, you will significantly increase their chances of coming back to shop from you.

More Frequent Business

Frequent shoppers avail reward programs regularly. In fact, don't be surprised if a customer shows up the next day. For example, a customer who's just $5 shy of getting a $25 reward or gift card will find a reason to come shop from you so that he/she can avail the reward card as soon as possible.

Although there are many advantages of introducing smart customer loyalty programs, as with all things, this strategy also comes with some risks:

Risks of Providing Reward Cards
  • The cost of reward card promotion and implementation can run high.
  • The cost of efforts put in, for example leading human resources away from other important marketing tasks.
  • Reward schemes last for a long time because the customers expect it. This makes it difficult for retailer to back out from such schemes.
  • If the results expected from customer benefits and output is not achieved, the reward program may turn out to be a failure.
  • There are chances that customer information can be misleading.

The benefits in the case of rewards card programs can and may outweigh the risks if put in motion intelligently. Reward cards are a gamble, but you should always take a calculated gamble.