Online Auctions in Customer Loyalty Programs

Loyalty Programs have come a long way in the last decade and recent innovations have managed to broaden the appeal of loyalty reward platforms. Auction reward platforms are one of the most interesting ways to engage customers and to promote either a new loyalty platform or create an additional feature for your existing reward platforms. Here we take a look at auctions as a loyalty reward platform and their advantages and disadvantages.

Since the IFRIC 13 introduced its loyalty liability changes companies operating loyalty reward schemes have had to ensure that some profits go towards the rewards they offer and that these funds are not released as profits until company’s obligations to their loyal customers are met. This changed the way loyalty programs could operate significantly and has meant that new innovations and strategies were necessary. Reward auction platforms have become one of the most cost effective ways of running a loyalty scheme and have a number of advantages we now turn to.

The core advantage of using an integrated auction reward program is that it is incredibly cost effective. You can offer a variety of rewards; from luxury holidays to your own range of products. Points bidding means that users will often compete heavily for the higher end prizes and you can expect high competition for prizes; which brings down the costs of running the program considerably. Having minimum bids and starting bids enables you to control the loyalty points people will spend within the program while you retain control of how often prizes are added and when bidding ends. The relative costs of the prize pool are lower than the reward points value in more traditional reward platforms. You can also integrate cash and points in many systems so that users aren’t limited simply by the points they have to spend – increasing direct sales in itself.

However, the financial advantages can often take second place to the other advantages that auction platforms offer. You can integrate a reward platform with your existing marketing and promotion efforts to drive further sales and to conduct relationship marketing and other research. An auction site increases your customer’s exposure to your brand by making them visit your site regularly to place bids and check bids. This gives you additional opportunities to engage with your customers, promote offers, collect customer data and increase customer retention. An online auction platform therefore creates a new space for customer engagement and you can use it to effectively promote your services in addition to fulfilling your reward obligations.

In terms of disadvantages there are actually relatively few. An auction system does require updating from time to time but within a well-structured program this isn’t a considerable drain on time or resources when compared to the myriad of benefits it offers. The only other real disadvantage is that you may need to hire a third party to develop and sometimes run the reward program. Again, though, the cost benefit ratio makes this a very strong choice for larger businesses.

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