Loyalty schemes<\/a> These are long-term campaigns aimed at customers purchasing the promoted products or services. In return for their purchases, they receive rewards in the form of items, discounts or partial refunds. Another type consists of incentive programmes, designed for businesses involved in sales (or which influence the sales of specific products). In this case, the reward is for the sale itself, and the campaign also involves the creation of an educational and communication platform.<\/p>\n\n\n\nWould you like to find out more? Read the article below to discover how loyalty and incentive schemes affect sales, as well as what other techniques are worth trying.<\/p>\n\n\n\n
An important classification criterion in marketing practice is the categorisation of loyalty schemes according to their target audience, that is to say the group of people for whom they are intended<\/strong>.<\/p>\n\n\n\nProfessor Philip Kotler distinguishes between sales promotion techniques aimed at individual buyers and retailers, and business promotion techniques. Techniques aimed at customers (so-called consumer promotion) include, amongst others: discounts, vouchers, bonuses, samples, competitions, or packaging sold at a reduced price or bundled with another product (so-called. price packs<\/em>). Among the marketing techniques, he lists, amongst others: price reductions, free products and subsidies. This classification is determined by the objective of the campaign.<\/p>\n\n\n\nClassification of loyalty schemes according to their impact on price<\/h3>\n\n\n\n
Loyalty schemes (understood as sales promotion techniques) can also be categorised according to impact on the price of the promoted product<\/strong>. In the specialist literature (L. C. Huff, D. L. Alden, 1998), they have been classified as price-related (leading to a reduction in the retail price) and non-price-related (adding some value).<\/p>\n\n\n\nPrice-based sales promotion techniques include: price reductions, discount vouchers, multi-pack offers, free samples, etc. Non-price-based techniques, on the other hand, include, amongst others: selling products as part of a set with a free gift, loyalty schemes, promotional prize draws and promotions where a prize is revealed upon opening the packaging.<\/p>\n\n\n\n
This classification is so universal that, in the study in question, the same framework was successfully applied to the analysis of marketing issues in Asian countries, even though it originates from the American and Western European markets.<\/p>\n\n\n\n
The classification of sales promotion techniques into price-based and non-price-based categories, as a starting point for research into the benefits of organising such campaigns, is also used by other researchers (P. Chandon, B. Wansink, G. Laurent, 2000). The conclusions drawn from their analyses allow us to distinguish between two types of benefits arising from participation in sales promotions \u2013 hedonistic (the opportunity to satisfy curiosity by getting to know the product, as well as an element of entertainment) and utilitarian (including savings, convenience and higher quality). A similar distinction can also be found in many other studies, including those by T. E. Shimp, 1990, and R. C. Blattberg and S. A. Neslin, 1990.<\/p>\n\n\n\n
Classification of loyalty schemes based on customer behaviour <\/h3>\n\n\n\n
The third way in which loyalty schemes can be classified as sales promotion techniques is to categorise them as follows: due to buyer behaviour<\/strong>.<\/p>\n\n\n\nMany factors influence the responses of participants in sales promotions. The most important of these, however, is the influence of time pressure. His research (N. Spears 2001) identified promotional techniques that encourage earlier purchases, as well as those that allow payment to be deferred.<\/p>\n\n\n\n
The time pressure stems directly from the short-term nature of the promotion. However, it does not conflict with the long-term nature of the campaign itself \u2013 this issue is analysed in relation to the period from the start to the end of the validity of a given promotional offer.<\/p>\n\n\n\n
The issue of how sales promotions contribute to shortening the interval between successive purchases has also been the subject of research by many other specialists (R. C. Blattberg, S. A. Neslin 1990). It can be concluded from this research that sales promotion works in two ways \u2013 under the influence of specific techniques, customers either decide to make a purchase more quickly or increase the quantity of products they buy.<\/p>\n\n\n\n
The phenomenon of accelerated purchasing is analysed in other publications (S. A. Neslin, J. Quelch, C. Henderson, 1984). The authors demonstrate that a properly organised sales promotion is designed not only to persuade customers to buy a larger quantity of a given product, but also to encourage more frequent purchases. However, they demonstrate that an increase in the number of items purchased in a single transaction results in a more pronounced rise in sales than an increase in the frequency of purchases. This is because consumers are said to be more inclined to postpone their next visit to the shop than to buy smaller quantities of products at regular intervals. This means that customers simply like to buy certain items \u201eto stock up\u201d.<\/p>\n\n\n\n
The literature on this subject also contains other examples of classifications of sales promotion techniques linked to buyer behaviour (D. R. Lichtenstein, S. Burton, R. G. Netemayer, 1997). One such example is a classification based on susceptibility to participating in selected types of promotions. According to the authors, consumers exhibit varying levels of susceptibility to participating in sales promotions, which depends on the type of promotional techniques employed. On this basis, eight groups have been identified. However, this approach differs significantly from the specific classification into passive and active buyers (L. G. Schneider, I. S. Currim, 1991), and is therefore not widely accepted.<\/p>\n\n\n\n
Classification of loyalty schemes according to their impact on the profitability of a product brand<\/h3>\n\n\n\n
The final classification of loyalty schemes (as a sales promotion technique) is based on long-term<\/strong> product brand profitability<\/strong>. Experts (R. A. Strang, R. M. Prentice, A. G. Clayton, 1975) have distinguished between these types based on the effect of applying a given technique. The literature describes the concept of \u201ebuilding brand strength amongst consumers\u201d (. Brand Franchise Development<\/em>). It puts forward the view that certain sales promotion techniques, such as samples, vouchers or demonstrations\/educational materials, have similar effects to advertising, which helps to build brand strength.<\/p>\n\n\n\nSome researchers (Leuthesser, 1988; and R. C. Blattberg and S. A. Scott, 1990) link the concept of brand strength to the concept of brand equity<\/em>. The Marketing Science Institute even organised a special conference aimed at establishing a definition of the concept brand equity<\/em>, with regard to its similarity to the concept of consumer franchise<\/em>. So what exactly is brand strength among consumers? It is influenced by sales promotion techniques that highlight the unique attributes of the products being promoted, which in turn helps them stand out in the market.<\/p>\n\n\n\nTheory Consumer Franchise Development<\/em> sparked a discussion on the impact of price promotions on brand image. These techniques make an impression on consumers who are not yet familiar with a given product or service, for example through a sample (P. Raghubir, K. Corfman, 1999). The researchers assumed that price promotions reflect brand quality, as they highlight a difference from the standard price of the promoted product or from market standards.<\/p>\n\n\n\nAreas of impact of loyalty programmes (as sales promotion techniques) <\/h3>\n\n\n\n
One of the aims of a loyalty programme is to increase sales of the promoted products, which is achieved by using techniques that encourage buyers to make purchases and by improving the effectiveness of sales agents. Loyalty programmes are implemented over the long term; consequently, they are not characterised by the short-term nature of sales promotion activities.<\/p>\n\n\n\n
Loyalty schemes have a direct impact on supply and demand. Increasing the willingness of distribution channels to purchase and resell affects supply. Consumer interest in the product and persuading them to buy it, in turn, lead to an increase in demand.<\/p>\n\n\n\n
Loyalty schemes are targeted at specific audience groups, in a standardised format, with separate schemes for retailers (supply) and consumers (demand). This provides immediate feedback on sales trends, which is extremely important during the purchasing process and also influences decisions regarding the choice of a particular product.<\/p>\n\n\n\n
The impact of loyalty schemes on sales figures for the promoted product<\/h3>\n\n\n\n
When analysing the impact of loyalty schemes on sales volume and value, attention should be paid to the relationship between the revenue generated from sales of a given product and the cost of organising and running the entire campaign. Loyalty schemes affect sales performance, i.e. revenue levels and profit margins. To maintain the same level of revenue as before the promotion was introduced, the rate of sales growth must exceed the rate of price reduction.<\/p>\n\n\n\n
If you wish to maintain the same profit margin as before the loyalty programme was introduced, you must increase sales by an amount greater than the incentive factor in the loyalty programme. In the case of a margin of 50%, the ratio required to return to participants an amount equal to 10% of the price paid necessitates an increase in sales of 25%. Only then can the realised profit margin be maintained at the same level as in the period prior to the introduction of the promotion.<\/p>\n\n\n\n
This point is borne out by the findings of studies published in the relevant literature. According to these studies, sales promotions almost always lead to an increase in sales of the promoted product, but only 16% campaigns and 11% promotions targeted at consumers actually result in an increase in profits.<\/p>\n\n\n\n
In summary, it can be confirmed that there is a link between the costs of running a loyalty scheme, sales revenue and profit margin, and the increase in the number of products sold as part of a promotional campaign.<\/p>\n\n\n\n
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