The value of rewards

I first got into loyalty marketing 25 years ago when I was working at British Airways and was responsible for project managing the implementation of a new global frequent flyer programme. Since then Ive seen the loyalty, rewards and incentives industry develop massively and consumers in the UK are avid collectors of points for grocery shopping, flying, cinema-going, getting a haircut, buying on a credit card, gambling you name it, if youre consuming then the chances are you can earn points for it.

At the core of all this marketing activity are the rewards whats the carrot youre being offered to induce you to part with your cash? Is it miles towards a free flight, or points towards an aspirational product like an iPod? Consumers have become savvy and marketeers have had to get more and more creative at providing inducements look at O2 Priority access to star-studded events.

Opportunity

And now councils, with encouragement from central government, have spotted the opportunity and are starting to embrace rewards and incentives as a way of motivating household behaviours, particularly for waste and recycling. This is great news and a very positive development. However, as a practitioner in this market, I am concerned that councils may be over-looking the key lesson from all the consumer schemes in the private sector – the rewards are at the heart of it.

In our experience there are two key success factors for rewards – choice and actual value. We offer over 1,000 products and experiences that people can spend Green Points on, from iTunes to swims at the council leisure centre, as well as an option to donate points to a wide range of local charity projects. Providing a wide choice means there is something for everyone. Also, our Green Points are an actual value reward currency, and were quite transparent about the fact that 400 Green Points = 1. That means you can redeem 1,520 points for an adult swim. This is very different to offering points that can be spent on discounts with a notional value (ie spend 90 points and get 5 off when you spend 35 at Marks & Spencer).

In private sector incentive schemes its unusual for companies to offer discounts as rewards for the simple reason that consumers wont be very impressed! They are savvy and they will know that the discounts have been sourced for free and its unlikely they will work hard to collect points for freebies, particularly as taking up the freebie requires them spending their own money.

However, several council recycling incentive schemes are offering discounts as rewards. Whilst this may be the cheap option for councils as they dont have to pay for the discount offers and therefore it appears theyve got a great deal because theyve got rewards to give away to residents for free, unfortunately its unlikely their residents will be so excited about the discount offers. Weve been carrying out some live research on our own members and from January have been offering some notional value rewards (eg spend 500 points and get a 30% discount when you spend 5 online at Marks & Spencer); during this period, 53% of points spent have been on value rewards, 47% on donations to charities, and not one single person has opted to spend their points on notional value discounts. This has reinforced our belief that people want attractive, real value rewards and if you can give people what they want, theres a good chance they will recycle more and throw out less.