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Rewards For The Holidays
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Consumers have long become accustomed to heavy discounting during the end-of-year shopping season. In a game of retailer "one upsmanship", the discounts seem to get larger and arrive earlier every year. But some marketers are rethinking this strategy and are putting a bit more though and creativity towards planning their sales promotions, as old tactics threaten to lose their ability to excite buyers. This is especially true with regard to loyal customers who are growing weary of the same old rewards programs.

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A sales promotion is a value-added incentive to buy a product and is best used in a short term capacity. This means that consumers shouldn't always expect to get a sales promotion as a matter of course, and discounts are perhaps the most expensive promotion of all for a marketer, since these cut directly into a retailer's margins. But what about offering rewards points to loyal customers? Do these tactics still work?

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Rewards do work. Credit card companies, airlines, hotel chains and many other service providers have long favored offering promotions that go beyond the traditional discount and points programs used by retailers. But now that loyalty programs are ranking so poorly among consumers (second from last among 15 industry sectors), it might be time for a change. Fending off online competition from Amazon, whose Prime membership program ranks near the top, and others, simply can't be done through discounting.

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Members-only event opportunities have become popular perks for many marketers, as have "first-look" opportunities for new products. Loyal customers at Macy's in New York can expect a private tour of its flower show as well as VIP seating at its 4th of July fireworks celebration, cooking classes and a preview of an upcoming Broadway show. All for spending more than $1,200 a year. Nordstrom and J. Crew have also been making aggressive efforts to make the loyal customer feel recognized.

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Of course, these sorts of programs cost money and cut into margins, but when you consider that keeping existing customers is many times less expensive than acquiring new ones, it makes sense to think about offering more valuable promotions to current customers. The same old rewards programs are losing their effectiveness. Not every retailer can offer VIP experiences, but in the age of Amazon domination, retail marketers will have to come up with better ideas on how to reward loyal customers and effectively attract new ones. 

 

 

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