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In my previous post, "Buying customer loyalty," I railed against reward programs. One restaurant chain, Panera Bread, has proven my point via the type of rewards it offers. Yes, I have a Panera card. I'm not above taking discounts offered even though I don't advocate discounting to my clients.

In the earlier post I stated that customers' need/desire for offerings don't increase just because they're receiving a reward. What does that mean for sellers? They're giving discounts to customers who would have bought anyway - at full price. Unfortunately this reality doesn't hit home until the reward program is already in place.

What I've noticed recently with the Panera program is that the rewards offered aren't what I typically purchase. Based on the rewards offered Panera is encouraging me to try new things or to visit at times I don't normally visit. That's not a reward, that's a marketing strategy.

While I don't have a problem with marketing strategies that encourage buyers to try new things or to return more frequently, I resent a "reward" program that tries to accomplish the same goal. Maybe I'm too stringent in my definition of reward, but to me it's something that has value to the recipient. When that reward places the welfare of the presenter over the recipient it loses the right to be called a reward.

The question is, "How do you offset the revenue losses your reward program created while maintaining credibility with your customers?" Keep your marketing efforts and reward programs separate. It's all right to announce new offerings, encourage customers to visit at times they typically don't, to explore alternative uses of your offerings in your marketing materials in any media you choose, just not in the rewards program.

Converting a reward program to a marketing program is a violation of your customers' trust. Losing their trust is one of the quickest ways to drive your customers to your competitors. If you've fallen victim to the temptation of reward programs, don't compound the problem by converting it to a marketing program.

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User Comments – Give us your opinion!
  • Ed Personius
    I abhor the supermarket "rewards" programs. I don't want to have to sign up for a card for the very reasons you point out; I know it is a trojan horse marketing program designed to gather info about me and my buying habits and then annoy me with more trojan horse offers in the future.
    If you want to reward me for loyalty, then do it, and make it something I won't regret. When I walk in your store I want the best price, service and convenience I can get without having to get in your "system".
  • michele sarkisian
    Interesting emotions around Consumer Engagement Programs. It is easy to opt out if you don't like them and if the marketing and promotions are targeted (and I find they are getting better in many programs I belong to), they are personally relevant. I also like the surprise and delight rewards I am seeing more of, particularly in Hospitality programs.
  • Dale Furtwengler
    Ed, I couldn't have said it better. I don't feel appreciated when I have to do extra work to get a 'bonus.'
  • Dale Furtwengler
    Michele, if I may I'd like to ask a question. Let's assume that the company was doing the data tracking and knew very well what your interests are and targeted their offerings based on your preferences. Here's the question "Would you buy an interesting offering without the discount?" My experience has been that if it's important enough you will. If not, the discount doesn't make that much difference.
  • George Seitzinger
    While I appreciate the "purity" of your point, I would argue that the consumer joins a rewards program for their self long as the offerings are meaningful and of value to the recipient, they are (generally) appropriate "rewards". However, they should be reserved only for members of the program....not openly available to all. Consumers understand that the main reason any service or product provider creates a rewards program is to give their customers a reason for continuing (and increasing) their level of business with that entity. If a provider is smart enough to offer attractive enough "benefits" to keep a customer coming back (and out of their competitor), I would argue that both win.
  • Dale Furtwengler
    George, I'd suggest that if a provider is smart enough to offer attractive benefits (something the market wants or needs that it can't get elsewhere), they don't need a rewards/loyalty program to retain them. If they're not, then they're asking their customers to fill the gap with extra effort vis-a-vis carrying a rewards card, monitoring their rewards and also slows the transaction causing longer waits in line.

    I'm certain that I'm not unique in having this experience. I enter Panera to meet someone only to find a long line. I delay the purchase to honor the meeting partner's time, then realize at the end of the meeting that I'd never made up to the counter. That's an uncomfortable feeling because, like most people, I make it a point to make a purchase to reciprocate for the use of the facility. But when I have to run to my next meeting, I don't get a chance to make that purchase causing me discomfort and costing Panera a sale. That result could be mitigated by not having offered a reward program.

  • faith chardonney
    The Panera rewards program never used to be that way until Panera realized they were losing money with the mypanera card. That's why the strategy is as such.
  • Dale Furtwengler
    Faith, it's not surprising to hear that they were losing money on the rewards program. Most companies do. There revenues are declining and the cost of managing the rewards program continues to go up. Sounds like a prescription for lower profitability to me.
  • Kristin Komar
    I have become disillusioned with the "Rewards" program at Panera Bread. If I do get a reward, I do not know about it. They have my e-mail address but they insist on e-mailing my mother with my rewards. Today is my birthday and if I have a reward, I do not know about it. This happened before too and I thought that getting a new card would change things but it did not.
  • Kristin Komar
    The comment just posted was made by Kristin Komar.
  • Dale Furtwengler
    Kristin, rewards programs do, indeed, open the door to additional opportunities for mistakes and customer dissatisfaction. Sorry to hear of your experience.
  • Emil B
    I use my Panera reward card. I have tried things I normally would not try because of the reward card. Inhave enjoyed every reward. I eat carrot cake but never tried it at Panera. My reward was a carrot cake cup cake. I loved it! What is wrong with that? Sounds like a perfect reward program. You don't take a risk of trying something that you might not like. Today aim going to get a free smoothie. I would never try it, but because it's free I am going to enjoy it.
  • Dale Furtwengler
    Emily, I"m glad to hear that the reward program is working for you. What I'm surmising from your comment is that the reward program reduces your risk--allows you to try things that you might not otherwise try if you were paying for it. The reality is that you are paying for that 'reward' in the price of other products and services you're buying. If that works for you, it's fine with me. I prefer not to have the company's I frequent make that choice for me.
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Dale Furtwengler
Dale Furtwengler is a professional speaker, author and business consultant. His latest book, "Pricing for Profit," is dedicated to helping organizations break the bonds of industry pricing.
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