Generic or own loyalty program, which should I choose?

Differences between generic and specific loyalty management systems

 

As mentioned before, there are different loyalty systems. You can join a more generic loyalty system (like Nectar, Air Miles or Payback). The other option is to build your own loyalty system (like Ikea Family). Both choices have different advantages and disadvantages.

 

Generic programs

A generic program is, in comparison, quick and easy to use. The loyalty program has already been created and set-up for you. Such a program is bought/rented from a company you will pay for a certain time (mostly a couple of years). Another added benefit are the costs. You do not have to pay a team of IT personal to develop a program that your marketing and communication team came up with.

 

Although easy and quick to use, a generic loyalty program comes with a few disadvantages. It has to be tweaked so it fits your company but even then the experience is not entirely unique. As a company you are limited to the tools you buy.

Examples of generic loyalty programs are:

  • Airmiles (Dutch): Set-up in 1994 it is one of the best known generic loyalty programs in the Netherlands. It has more than 4 million users (in a country with 8 million households). Supported by several well known (local) brands Albert Heijn (supermarket chain), Shell (gas), Praxis (DIY chain).
  • Nectar (United Kingdom and Italy): The loyalty programme was launched in 2002 with 50 million pounds worth of advertising and direct marketing. A number of organisations joined forces to launch this coalition loyalty programme; Sainsbury’s, Barclaycard, Debenhams and BP amalgamated their existing loyalty schemes under one umbrella brand called Nectar.
  • Payback (Germany): Payback was launched in 2000 by Loyalty Partner and operated initially only in Germany before expanding internationally to Poland, India, Mexico and Italy. In 2011 Loyalty Partner was acquired by American Express. In Germany alone it already has more than 28 million users.

While generic loyalty programs allow companies to share costs and reach more customers, after a while participants already realise the disadvantages. For example after a few years Sainsbury and Barclay left the Nectar program stating the high costs, lack of control over the program and that other participants over the years had become competitors.

 

However, leaving a generic loyalty program often is not easy. Many of these program charge huge fines to companies that leaving to pay for the issued loyalty points. In addition a new loyalty program has to be set-up from scratch.

 

Self created loyalty programs

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