Readers here may be interested in discovering that not everyone liked my article on loyalty programs, in particular, one small part that dealt with Discount Vouchers. I presume everything else they agree with.
Let first start off with the obvious, I would be delighted if Discount Vouchers worked. It would be a good for my clients, and I am in business to make my clients better. Furthermore, I do not appreciate name calling or rudeness. I am not trying to divert anything, and I have done a significant amount of research on this question.
Now this scheme is not new. Discount Vouchers have been used by merchants since Noah brought his wood for the ark. You can read up on it in the Wikipedia here. We have had it for years, just doing a search on our website.
This states for over a year so we are looking in 2012, and we never claimed it was new or unique. Actually, we did it for a book shop client of ours to their specifications! I am sure that many software suppliers to bookshops like us would also have this or something similar.
Now all the data that I submitted on Discount Vouchers came from publically released information released by a competitor of mine from their system. So it is not my system or what facilities it does or does not have that is in question with these figures. It is their facilities and systems. Click on this image below which is the data I worked from.
At the time I released this report, I noted that their users felt that the results I got were consistent with their results. You can read yourself the comments. Not one person said, "hey my results using Discount Vouchers are different to these figures."
Additionally, at the time, this critic offered to release more data and then withdrew that offer immediately. See here for the formal withdrawal.
This report as such I believe is the most accurate analysis done of what is publicly available. If more data is presented, we (and I mean all here as not only I) would be happy to review the information.
That I feel that this loyalty program is expensive, well most reward programs in a retail run at about 1% of sales see here. The Discount Vouchers scheme as you see from the above image run at $4,475.89/$98,299.79 = 4.6%. It is expensive! My immediate thought when I first saw this figure is that it is worse because it lacks any form of targeting, so it would find it hard to get any suppliers to help. This supplier help is a great help to almost any other marketing programs such as the Lucky Charm program.
I would like to see what evidence that this discount voucher scheme attracts “a valuable shopper delivering bonus margin dollars at the high GPO end of the range offered in the business.”
This brings up another problem with the scheme, how could a retailer know that it delivered a “valuable shopper," this scheme has minimal measurements! The biggest question with this scheme is trying to figure out what business you would have got without the program compared to what you would have gotten with it. A VIP rewards program has an A/B testing facility. You give part of your VIPs a benefit, and you see whether it makes a difference compared to the rest. This is simply easy, straight forward and it works. Unless something can be measured it is vapour, and it cannot be controlled.
Finally, a Discount Voucher scheme, gives a voucher for every sale, if I have never brought anything in a shop, how does the shopkeeper give me a voucher? To give me a voucher the retailer needs some means of giving me a voucher, e.g. a pamphlet, an email message, a letter, etc. This is what a VIP rewards program does. So we are back to a VIP rewards program of some type.
I remember one client of mine that ran for a while a Discount Voucher system, told me that a customer came in and took two magazines. He then purchased one and promptly used the discount voucher to buy the other one. What he felt was that Discount Vouchers produced no incremental sales lift but caused a cannibalisation of his existing revenue by selling at a discount, product that would have been bought anyway. This was the first sign, I had that something was not right.
I leave it to you the reader to decide whether I have raised valid questions and reply hopefully without rudeness and name calling.
