The Secrets Behind Store Cards: Are They Worth It?

In recent years, store cards and customer loyalty schemes have become increasingly prevalent in the retail sector. They provide customers with many perks and incentives, ranging from discounts to exclusive offers. But do these loyalty programs genuinely offer value to consumers? Let’s delve into this topic with some statistical insights.

The Consumer Perspective: Attractiveness of Loyalty Programs

According to a 2021 report by Bond Brand Loyalty, 79% of consumers were more likely to show loyalty towards brands with impressive loyalty programs. Similarly, Nielsen’s study revealed that 72% of global consumers would pick a retailer based on their loyalty program. These statistics show the profound influence loyalty schemes can have on shaping consumer behaviour.

Customer Retention and Profitability: The Business Angle

From the business perspective, a Bain & Company study found that a 5% increase in customer retention could propel a company’s profitability by 25% to 95%. Hence, companies are motivated to devise appealing loyalty schemes that foster repeat patronage. Plus, with incentive schemes, there are many other angles to take – it’s not always the consumer you need to motivate to buy. Sometimes you need channel incentives to entice the sellers to sell before the consumers can buy. Store cards are suitable for the consumer, whereas incentive schemes can target the entire supply chain.

Store Cards: Boon or Bane?

Store cards offer immediate discounts and rewards but come with a catch. A CreditCards.com report revealed that the average store card offers a 26.3% discount on first purchases. However, WalletHub reports that store cards carry an average Annual Percentage Rate (APR) of 24.4%, considerably higher than the typical credit card rate. Consequently, if not handled wisely, the interest cost could potentially eclipse the rewards or discounts gained.

Customer Loyalty Schemes: A Win-Win?

Unlike store cards, customer loyalty schemes are typically free to join, with rewards that aren’t counterbalanced by hidden costs. Accenture’s 2020 study found that loyalty scheme members spent 12% to 18% more than non-members, indicating the power of these programs in boosting customer spend.

The Reality Check: Why Loyalty Programs Might Fail

Despite the potential advantages, not all loyalty programs are successful. Forrester’s research found that almost 60% of consumers abandon loyalty programs due to slow points accrual and the long wait to earn substantial rewards. This insight underlines the need for companies to craft their loyalty schemes with meaningful and attainable rewards in mind.

Personalising the Benefit: One Size Does Not Fit All

It’s crucial to recognise that the value derived from loyalty programs depends significantly on individual spending habits and lifestyle. For example, a store card or loyalty scheme from your preferred supermarket could prove beneficial due to frequent shopping. However, infrequent shoppers might find limited value in the same scheme.

Final Takeaway: Navigating Store Cards and Loyalty Schemes

In essence, store cards and customer loyalty schemes can provide value, but they’re not devoid of drawbacks. High APRs associated with store cards and the need for frequent shopping to gain substantial rewards from loyalty schemes are notable considerations. The “worth” of these programs is subjective, hinging on individual consumer behaviour and preferences.