Community Reward Programs

(Below are also the following topics:  “What Can A Community Reward Program Do?”, “The Value of Community Reward Programs”, and “Why Community Reward Programs Now?”).


What Are Community Reward Programs?

A community reward program involves businesses in a specific neighborhood (or sector) pooling their resources together to promote themselves and reward their customers.  They are a type of affinity marketing tool, not unlike Community Currencies, membership benefit programs, and other affinity initiatives.  In a community reward program the community can be a small single neighborhood, a shopping district, a small town, a city, or even an entire province; it can also be a community of sector or activity-specific members across the country, like a coalition of arts groups or members of an organization like the Canadian Automobile Association.  Typically though it will involve a group of businesses with common values and complementary services within a specific region (like within a business association district or shopping village area).

Community reward programs are a growing phenomenon and can come in many different forms.  They can be simple or sophisticated, while being very affordable at one end of the spectrum and more expensive at the other.  Programs can be as uncomplicated as a stamp card, take the form of an instant discount program (e.g., North Van Rec Playcard or BCAA member discounts), involve a basic electronic card system (e.g., Live Local Alberta), or be highly sophisticated along the model of Air Miles.  A coalition reward program can have as few as just two participating business members and realistically up to several hundred (or potentially even thousands).  The program’s organizational and legal ownership structure can be in the form of a sole proprietorship, partnership, corporation, non-profit, cooperative, or joint venture.  Reward programs can be designed to collect little or no personal data (which is more inexpensive to manage and less intrusive for the consumer), or collect extensive data and market information (which costs more and needs to be managed securely and ethically, but can have significant benefits for participating businesses and the customer experience).

A community reward program can involve a network of green, socially-responsible, values-aligned, local community-based, sector-specific or any other coalition group of participating merchants, where consumers can collect and redeem points from a broad range of places.

Different businesses and organizations have varying objectives, and different kinds of reward programs have their own sets of advantages and disadvantages.  The challenge is for a business to (1) identify its objectives and capabilities, (2) evaluate the many design, feature and operational options available, (3) identify potential partner businesses with compatible products and values, and then (4) create a program that is profitable to the business participants, aligned with overall strategy, and of value to the consumer.  A well-designed reward program can be a very profitable investment (both financially and from a blended-value perspective).  The problem, however, is that far too many programs (in general, not just of the community-kind) are poorly designed and poorly implemented.  When investing in any kind of affinity marketing initiative, it is important that the project be thoroughly planned and well executed.

What Can A Community Reward Program Do?

A community reward program can do everything a regular reward program (like Air Miles) can do for business participants (like keep customers from defecting, prompt additional purchases, yield customer insight, facilitate communication, etc.), but it can do it on a smaller scale and for the benefit of smaller, community-based businesses.

A sophisticated community program can be similar to Air Miles, except that instead of involving major corporations like Safeway, Shell and BMO, it can involve local, independently-owned stores, social enterprises, cooperatives, arts groups, community organizations or any other collection of businesses with a complementary customer base or shared values.   If designed and implemented well, dozens or hundreds of like-minded local businesses in a collective reward program can have the advertising dollars, marketing capabilities, customer relationship management (CRM) tools and brand power to effectively compete with large multinational competitors.  The program can also offer merchants a tool for providing their employees with discounts at other participating businesses, identify business members as “locally-owned and community-based” (or however the group defines itself), be affordable because of the economies of scale involved, and provide participating business members with marketing data, advertising and other services on a scale they could not otherwise afford on their own.  A community loyalty program can (and should) be about far more than just points.

(Click here to learn more about what reward programs in general can do).

The Value of Community Reward Programs

A community reward program can strengthen member businesses, keep consumer dollars in the community (or sector), and provide multiple other community economic and social benefits.  It can also be rewarding for customer participants as well as profitable for member businesses.

Any single business can have its own single propriety reward program, but a community coalition program can allow consumers to concentrate their point collection all on one card, promote “buy local” or intra-member purchasing, and provide a means of identifying member businesses within their collective brand.

From a consumer’s perspective, there is value in a reward program that allows members to collect points and earn rewards from a broad range of businesses close to their home.  Instead of needing a wallet full of reward cards for all the small local businesses they patronize, with each card accumulating points slowly for only marginally valuable rewards, the consumer can consolidate all their point collection on one convenient card (or virtual membership number).  The loyalty program rewards the consumer for shopping at member businesses and helps identify those businesses to the consumer (as local, “green”, community-focused, or whatever the theme of the program might be).

The creation of a coalition community-focused reward program can be a powerful tool for community economic development as it can promote economic, social and environmental sustainability and strengthen community assets.  A program that rewards consumers for supporting local merchants and promotes community businesses will help keep consumer dollars within communities.  By rewarding consumer members with local rewards like a nights’ accommodation at a locally-owned hotel or bed & breakfast for example, both the environment and community will benefit much more than if the points are used for a trip abroad.  As part of its community-branding component, the program can also be involved in the sponsorship of local events, teams and community organizations.  Sponsorship of such things provides promotional value for the program, enhances its community brand image, and improves quality of life in the community.

Why Community Reward Programs Now?

There is a lot of interest today in the concept of community reward programs, but very few presently exist.  With technological advances in the industry, however, that will soon change.  Sophisticated reward card IT systems are no longer affordable only by major programs, like Air Miles, Aeroplan, and major department stores.  Today any business can have its own affordable electronic reward card program, and the benefits of modern technology mean it is now easier than ever for businesses to work with other similar businesses to enhance value for the consumer and profitability for business members.

Examples include programs like the North Van Rec Playcard in North Vancouver where residents showing their membership card at participating businesses receive discounts on purchases, much the same way as members of the BC Automobile Association (BCAA) receive discounts at hotels and other affiliated businesses.  Live Local Alberta is an example of a non-profit social enterprise involving over 130 businesses from around the Edmonton area (including 60 retail businesses, over 60 food establishments and 15 entertainment or “other” related businesses including a ski hill, insurance agency and hotel (or at least it did when we wrote this article).  Consumers using the Live Local reward card receive the equivalent of a 1 or 2% credit in rewards that can be used towards purchases at participating merchants.

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(Copyright PR Loyalty Solutions, 2012)