• by Sean Hargrave , Staff Writer, March 5, 2020

There's some very interesting research out today from the DMA on the future of loyalty. It sums up something I think we have all felt for quite some time -- there's a lot more to loyalty than "points win prizes."

I'm not sure about you, but I have a tonne of points on several schemes, and because I had no idea what those points mean, I have given up. It's just not worth handing over real estate in my wallet to carry a separate card around. The only scheme I am actively engaged with is collection Avios with British Airways, because there is a very clear outcome from those. The more points you collect, the further you can fly. As for a Nectar point? I really have no idea what it adds up to. 

These spend money and get some points you don't understand schemes are under serious threat from cash back bank accounts which offer a small percentage of purchases credited back to your bank account. It may be a low amount but it's simple and people understand it and there's no need to carry around individual store cards, it's just automatically applied. 

This is shown in the DMA research, which shows that men and women have seen roughly a 10% drop in the value they attach to loyalty schemes over the past five years. 

However, at the same time, the opposite is happening with paid-for loyalty schemes such as Amazon Prime, which has now apparently been taken up by a third of UK consumers. This sounds incredibly high to me, but the graph shows a massive uptick from one in four in 2017 to one in three in 2020 rising to a forecast of nearly a half of consumers by 2025.

The reason? It's obvious, really. People clearly understand the proposition -- a year's worth of included (next day) deliveries. 

The DMA could not be clearer -- it is these paid-for subscription loyalty schemes where they expect to see growth as people struggle to see the payoff for collecting a points they don't understand.

The other interesting takeaway is that if you are a brand offering points that people may not grasp, you would do well to consider that 60% of consumers choose a brand to be loyal to because of ethical reasons.

Hence, if people don't understand what the points mean, a brand could try to pivot schemes to turn them into worthy gifts for third parties, such as donations to charities.  

The overall finding is probably one that we probably all intuitively suspect. Points winning prizes is no longer enough on its own to engender loyalty, or at least such schemes are losing their appeal while those that you actually ask a customer to pay for are increasing in popularity.

The difference is understanding the value exchange. Carrying around cards to amass points you don't understand is losing its appeal. Paying for something you do understand is faring better.