Loyalty: what are the advantages of kitty programs?
Published on 13 April 2022
Allowing customers to credit a card when they make a purchase, kitty-carding is a loyalty technique that is doubly relevant since it meets both the requirements of retailers and the expectations of consumers. As a proof, in 2021, 73% of the customers elected the kitty as their favorite loyalty program, ahead of promotions and coupons. Let's decipher a loyalty lever that cannot be ignored today.
A monetary tool with many faces
Based on the "earn and burn"(1) principle, cagnottage is now a must in the retail world. Thanks to this system, customers benefit from "discounts" when they make purchases, the amount of which is credited to a loyalty card or a payment card that can be used within the store. This transactional type of loyalty technique can be used in different ways:
- a sum is earned from a certain global amount of purchase (5 € from 100 € for example);
- the prize pool is calculated according to the amount spent (2% of the invoice amount for example);
- an amount is "kitty" only for the purchase of certain products (0,50 € for the purchase of a certain brand of coffee for example).
However, if kitty can be used as a "discount" by deducting the amount to be paid, one must keep in mind that kitty used as a payment method generates a different and positive sensitivity for the customer.
After accumulating monetary benefits, customers can use their loyalty card linked to the kitty in full or in part to pay for their purchases with the accumulated balance.
Kitty programs: a successful loyalty technique
At a time of health and economic crisis, consumers are more than ever looking for monetary benefits, especially in order to improve their purchasing power. In this respect, the loyalty program with a kitty is the most popular reward tool for the French, to the detriment of other techniques perceived as less relevant: promotions, coupons, vouchers or even point programs.
The kitty is also perfectly in line with the spirit of the dematerialization of tickets and coupons. Indeed, from January 1st 2023, unless otherwise requested by the customer, are prohibited
- the systematic printing and distribution of tickets in sales areas and in establishments open to the public;
- the systematic printing and distribution of bank card tickets;
- the systematic printing and distribution of vouchers and tickets aimed at promoting or reducing the price of sales items in sales outlets.
The relevance of dematerialized coupons is not obvious, whereas the kitty, provided it is easy to read for the customer, will remain very relevant.
73% of French customers declare that tokens are their preferred type of loyalty program, ahead of promotions and coupons(1).
These results are not a surprise since, already in 2018, kitty programs accounted for 22% of promotional spending in the retail sector(3). It has to be said that cash prize programs are particularly popular in the food and discount sectors(2). However, it is important to keep one thing in mind: in the absence of additional means (personalization of the relationship, etc.), such a system cannot be a guarantee of long-term loyalty, as customer volatility can be high.
An easier-to-use "reward" for customers
There is an obvious reason why cash pools have gradually replaced coupons and other promotional programs: they meet customers' desire for flexibility and simplicity.
- Freedom of use: consumers are free to use their kitty or, if they prefer, to increase it. In-store and online, they can also choose to use part or all of their balance, with ease (selecting a box on the Internet, presenting the loyalty card at the checkout, etc.).
- Simplicity of use: in the framework of the kitty system, the customer does not have to do anything to credit his loyalty card or his payment card. In fact, their benefits are automatically accumulated when they make purchases. Unlike other types of programs, there is less effort required and no risk of losing or forgetting the kitty, as can be the case with coupons for example.
- An omnichannel reward: most of the time, the balance of the kitty can be used in all the stores of a brand, regardless of the city where the customer is located. But the customer can also use it to pay for their purchases online, whether they are delivered or picked up at the drive-through.
Are you interested in the challenges of omnichannel? Discover this dedicated content: Retail: how the Covid-19 has transformed your loyalty levers in your omnichannel journeys
- Better visibility: if they wish, customers can consult their balance very easily, notably by logging into their loyalty account or by presenting their card in store. Usually, the information is even displayed on the receipt.
An à la carte loyalty program for retailers
It is not only advantageous for the customers, but also for the brands as it allows to manage the loyalty program more efficiently, while limiting the costs.
- A preserved turnover: the kitty should be perceived as a means of payment which, unlike coupons, does not reduce the turnover of the brand. Not only does this device invite customers to consume again, but it can also help to promote private label products.
- Simplified management: totally dematerialized, the management of the kitty is more flexible than any other type of loyalty program (coupon, promotion, etc.). The retailer also has an overview of the available sales, allowing him to adapt his reward strategy in real time if needed.
- A customizable lever: in addition to choosing the products that can be "kitty'd" and the way the reward works, the retailer can decide to make the brands participate in the financial effort, thus making them bear part of the promotion. But it can also offer the possibility to customers to contribute to their kitty themselves (through a gift card for example), thus contributing to their commitment.
- A better management of the relationship: above all, the kitty encourages customers to communicate their personal information, to create an online account and to communicate with the company. This way, the company has a wealth of information that it can use to better follow its customers and optimize its relationship, in particular by setting up personalized marketing actions for example (discount, exclusive advantage, complementary service, etc.).
As you can see, social media is above all a win-win tool, as it meets both the expectations of customers and the strategic needs of brands.
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(1)Consumers earn (earn) points or credits on their purchases before burning them (burn) by taking advantage of gifts, free services, or discounts.
(2)Loyalty & Engagement survey - Ifop for Comarch - 2021
(3)Trends in consumption and retailing P02 2018 - Kantar - Worldpanel panel - 2018