A large trend—a decline in the value of points across various programs - is investigated. The trajectory is clear: the exchange of value in loyalty programs is becoming less generous. The predicament lies in programs heavily reliant on points. Consumers quickly grasp value changes and the impact on their wallets, leading to disappointment, frustration, and critique. However, this perspective focuses solely on monetary calculations, disregarding the broader spectrum of rewards.
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GLOCollinson publishes an overview article diving into devaluations (e.g. dilution of points) in leading loyalty schemes. In recent times, several prominent loyalty program providers have come under scrutiny for devaluing their points, sparking discussions about the future of loyalty programs. The article examines the motives behind these actions, identifies the brands involved, delves into the reasons for reducing reward value, and explores the potential consequences for customer loyalty down the line.
In today’s economic climate, businesses across various sectors are grappling with numerous challenges—escalating costs, staffing shortages, aggressive price promotions, and wavering consumer confidence, all of which lead to reduced spending. Regrettably, loyalty programs have emerged as a tempting target for cost-cutting measures, with loyalty point values often taking a hit. However, one must ponder whether devaluing these programs genuinely serves as a solution, considering the potential repercussions such as damage to reputation, negative reactions on social media platforms, and even customer attrition. While the motivation behind this strategy is clear—reducing expenses and points liabilities—its long-term implications for customer loyalty warrant deeper consideration.
Retail Giants Take a Hit
Among the brands experiencing backlash for lowering the value of their loyalty points, Tesco stands out as a prime example. Renowned for its Clubcard loyalty program—a UK favorite—Tesco faced a significant public outcry when it attempted to downgrade its ‘triple value’ points to ‘double value.’ Technical issues during a high-volume redemption period further exacerbated the situation. The company’s reputation took a hit, and even though an extension was granted, the incident underscored the challenges of diminishing loyalty value.
Tesco is not alone in this trend; Lidl faced similar circumstances in late 2022 when it raised the spending threshold for earning Lidl Plus reward vouchers. While the company portrayed this as a beneficial “re-design,” it seems clear that loyalty rewards are dwindling across the sector.
Morrisons More, which had completely eliminated points in 2021, reintroduced them for select items, combining them with instant discounts and money-off offers based on customer feedback.
Even Nectar, a coalition program including Sainsbury’s, revised its redemption value in response to evolving customer preferences and the need for sustainability. However, these changes decreased the value of 500 Nectar points from £2.50 to £2, indicating a consistent trend of diminishing customer rewards.
Boots Advantage Card, a favorite among health and beauty enthusiasts, also reduced its points’ value, offering 3p per £1 spent instead of the previous 4p. To offset this, Boots introduced a 10% discount on its brand products, a savvy move given its profit margins.
The Rise of a New Loyalty Paradigm: Beyond Points
As the value of loyalty points dwindles, brands are embracing a multifaceted approach to customer engagement. Asda Rewards, for instance, chose to focus on cash as its loyalty currency, aligning with its overall brand strategy of “Pounds, not points.” This shift underscores the growing trend of blending discounts with rewards or even replacing points entirely with innovative models.
Devaluing Points: The Why and What’s Next
Brands that are reducing points’ value or transitioning away from them are driven by the need to manage costs and liabilities amid challenging times. This approach also allows them to create sustainable loyalty offerings amidst economic pressures. Some companies are recalibrating their points systems to facilitate a more personalized approach, aiming to enhance relevance and attractiveness. This strategic choice aligns with long-term objectives, ensuring loyalty schemes stay robust and customer-centric.
The Larger Trend: A Paradigm Shift in Loyalty
The companies mentioned in this article are representative of a larger trend—a decline in the value of points across various programs. The trajectory is clear: the exchange of value in loyalty programs is becoming less generous. The predicament lies in programs heavily reliant on points. Consumers quickly grasp value changes and the impact on their wallets, leading to disappointment, frustration, and critique. It appears that loyalty will indeed come at a reduced cost. However, this perspective focuses solely on monetary calculations, disregarding the broader spectrum of rewards.
Source: Collinson
