In the ever-evolving world of rewards marketing, companies are constantly searching for the most effective ways to attract and retain customers. Two popular methods that have emerged are coupons and points schemes. At Loyale, a leader in digital marketing loyalty company based in Malta, we provide both options to cater to different needs, each with its distinct benefits. However, when evaluating cost-effectiveness and long-term benefits, points schemes often prove to be the superior choice.
The Appeal of Coupons
Coupons have long been a favoured tool for marketers due to their simplicity and immediate impact. Consumers are naturally drawn to the instant gratification that coupons provide. They see the discount, apply it to their purchase, and walk away feeling like they got a deal. This kind of instant reward can be a powerful motivator, driving quick sales and encouraging short-term action. From the consumer’s perspective, coupons are easy to use—there’s minimal effort required other than presenting the coupon at the point of sale.
From a business standpoint, the immediate spike in sales during a promotional period can be enticing. Coupons can create a sense of urgency and drive traffic quickly, which can be particularly useful during slow seasons or product launches. However, while coupons can boost short-term sales, they also have notable downsides that can impact long-term profitability.
The Hidden Costs of Coupons
Despite the initial surge in sales, coupons often come with hidden costs that make them less favourable over time. For one, they erode profit margins. Every time a customer uses a coupon, it cuts into the profit per sale. This may not seem like a significant issue in the short term, but when coupon usage becomes frequent, the cumulative loss can become substantial.
Another issue with coupons is that they don’t necessarily encourage long-term customer loyalty. Once the discount is used, many customers may not feel any strong incentive to return. Furthermore, relying too heavily on coupons can weaken your brand’s perceived value. When customers associate your brand with frequent discounts, they may begin to expect lower prices and become reluctant to purchase at full price.
Points Schemes: A Deeper Value Proposition
In contrast, points schemes offer a more sustainable and engaging approach to rewards marketing. With points schemes, businesses are able to incentivise repeat purchases by rewarding customers for their ongoing engagement. Instead of offering an immediate discount, points schemes encourage customers to earn rewards with each purchase, creating an incentive to return and accumulate enough points for a future reward.
This ongoing earning potential helps to foster deeper customer loyalty. The more a customer interacts with your brand, the more invested they become in accumulating and redeeming points. In turn, this drives repeat purchases and builds a long-lasting relationship between the customer and the brand.
The Cost-Effectiveness of Points Schemes
One of the most significant advantages of points schemes is their cost-effectiveness. Unlike coupons, which provide an immediate and often large discount, points schemes spread out the cost over time. This allows businesses to defer the impact of rewards until the points are redeemed. More importantly, the value given in points remains within the company’s ecosystem, since customers must spend their rewards with your brand. This contrasts sharply with the flat discount of a coupon, which is essentially lost once the sale is completed.
Additionally, points schemes are more focused on customer retention rather than acquisition. Retaining existing customers is generally more cost-effective than constantly trying to attract new ones.
Points schemes provide valuable insights into customer behavior. By tracking points accumulation and redemption patterns, businesses can gather data on customer preferences and buying habits. This data can be used to tailor future promotions and marketing strategies, ultimately making your efforts more targeted and efficient.
Long-Term Gains with Points
The long-term benefits of points schemes are clear. By encouraging repeat business, points schemes increase customer lifetime value (CLV), which is one of the most critical metrics for any company. The more often a customer returns, the greater the overall value they contribute to your business. Additionally, points schemes help to keep customers engaged with your brand over time. Unlike one-off discounts, the continuous accrual of points provides customers with a reason to stay connected and to continue their journey with your brand.
Explore Loyale’s range of rewards solutions to discover how we can help you build stronger, more loyal customer relationships.
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