Long-term reward programs increase turnover
|Date:||September 27, 2012|
'Collect points for luxury tableware now!' These types of reward programs can no longer be ignored in the Dutch retail sector. The programs are deployed by supermarkets to stimulate turnover. But it’s exactly thereof that they could profit even more, notes Klaas van der Veen MSc in his thesis ‘The Impact of Successive Short-Term Reward Programs on Turnover in Retailing’. Current reward programs (running six to eight weeks) last too short to really increase turnover. The real profit namely can be achieved in the final weeks. Van der Veen won the Thesis of the Year Award 2012 of the Faculty of Economics and Business of the University of Groningen for his thesis, presented to him at the opening of this academic year.
Van der Veen researched the effectiveness of reward programs through the years and which factors are actually decisive for their success. The research focused on short-term reward programs aimed at adults, with the possibility to collect points for high quality top brand products. Reward programs aimed at children, such as collecting football cards, were outside of the scope of the research. As part of his thesis Van der Veen worked together with BrandLoyalty, a company that develops international loyalty concepts for the food retail sector. The University of Groningen and BrandLoyalty have been doing research for a while on the effect of short-term reward programs of supermarkets.
Valuable scientific contribution
That short-term reward programs can be successful, is a given for many supermarkets, but Van der Veen also discovered that the regular deployment of short-term reward programs over several years works again and again. Van der Veen’s thesis supervisors prof. dr. Tammo Bijmolt and Jacob Wiebenga MSc of the Faculty of Economics and Business emphasize that this research is a valuable contribution to the current scientific literature on short-term reward programs.
Stop too soon
Determining the ideal duration of a reward program involves the so called Point Pressure Effect (PPE): the effect that occurs when consumers increase their average spending to receive a desired reward product. Van der Veen notes that in the last eight weeks of reward programs there is an average turnover growth of 8,8 %. Before that time there is no significant turnover growth. This implies that shops miss their hold and leave profit when reward programs stop ‘too soon’. However, reward programs are also not supposed to just continue forever. For an optimal PPE there certainly has to be a concrete end date to an award program. In brief, long enough to bind consumers and short enough to keep them enthusiastically.
Supermarkets often choose reward programs with a short duration of six to eight weeks. Van der Veen shows that retailers thus do not use the Point Pressure Effect optimally. These research results are consistent with the practical findings of BrandLoyalty. The marketing company notes that in the retail branch the ideal duration of a reward program is fourteen to eighteen weeks. Of course the duration is not the only critical factor for the success of the reward program. Factors such as the required spending (the amount of points) to receive the reward product, are also significant for a good result. The University of Groningen and BrandLoyalty will research the structure and effectiveness of short-term loyalty programs further in the coming years.
BrandLoyalty is market leader in the field of loyalty programs within the food retail sector. The consultants of BrandLoyalty develop, organize and implement innovative and tailor-made loyalty concepts, which strengthen and deepen the relation between the client and the consumer. Authenticity, reliability, passion and flexibility are core values of the organization. BrandLoyalty has a track record of more than 2.000 successfully executed loyalty programs in about 40 countries. Worldwide 400 professionals are working for the company. The recent fusion of BrandLoyalty with ICEMOBILE, developer of mobile services, is an important next step in the field of innovative digital loyalty programs.
Note for the press
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|Last modified:||October 25, 2012 09:32|