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It operates via a 'piggy-back' reward points system alongside general and targeted offers, and joins a range of incentive schemes on the web, including IPT's MyOffers and Wanadoo site Wanadoorewards.co.uk.

Salem Lassoued, corporate development manager at Virgin Wines Online, says the benefits for brands are obvious: "We find that we get a better redemption on vouchers when customers get something back."

The wine company emails customers with an introductory £20 discount voucher through third parties such as Nestle and 192.com. Something like this will see a three per cent redemption rate of vouchers, says Lassoued.

This slides to 0.25 per cent for offline-to-online promotions, such as via a print ad. The brand is exploring the introduction of a mobile text system that allows customers to receive a voucher and password via SMS to convert online. When running the same promo on Pigsback.com, the brand notes a redemption rate of up to six per cent.

Jo Malvern, marketing director of the site, reckons the success of reward sites, "is not rocket science. The key point is to put the consumer in the centre of the relationship."

Wanadoo Rewards offers a 'walled-garden' club for members, working with brands like HMV and Ibis Hotels. Mediator works with the ISP to unite suitable brand partners.

Laura Outhart, account director at Mediator, explains: "There is brand endorsement and credibility from the host brand and the wider 'family of brands'. This includes access to another brand's switched-on customer base. As we offer exclusivity, we can leverage a better value offer, leading to a better response rate from customers."

Fun element

Online reward schemes target different needs to their offline equivalents, such as store loyalty cards, says Malvern. "There is the back-up of a transactional nature with those things - they fulfil a functional need. We offer differentiation by introducing a fun element and looking at the emotional side to a brand."

She feels a major part of this is the ability to build communities online, which works well for Pigsback's female-skewed audience. "People like to feel they are helping their peers through sharing recipes or tips." Aggregating brands in one community also ensures regular traffic as customers are lured by this revolving buffet of exclusive offers.

Malvern finds the alternatives limited. While a brand can benefit from an offer on its own site, it has to be based on something the customer needs, such as a cheap flight. For brands that do not do that, especially FMCGs, it may be beneficial for them to associate themselves with something the consumer is interested in, like music. But that requires a big investment.

Martin Kiersnowski, chief operations officer at IPT, owner of prize draw site MyOffers.co.uk divides the online rewards sector into three categories: points redeemed against goods; loyalty and discount offers; and prize draws. But he sees pitfalls with point schemes.

"It means bribing people to do things," he says. "That's all very well if they actually want to buy the product, but, more often, they visit for the points when they aren't interested in buying. This gives a high response, but a terrible conversion. You get a starburst effect, where people click to get their 10 points.

Visitor value

"A lot of these are schemes where the affiliate pays 10p a click. It's a false economy. If you are paying 20p a click in the search engine to get someone to a site like this, what's the value of that click?" he asks. Instead, prize draws are a "tried and tested incentive," he adds.

Malvern responds: "Yes, there is an extent of people visiting for piggy points, but we've found a very low level do this. A lot take us up on offers without claiming the points and come back."

THE ADVANTAGES OF REWARD SITES

- Clear-cut permission: people opt-in for every single email they receive. There are no hidden terms and conditions.

- Relevancy: ensures offers are relevant to users.

- Edge: brands may choose to run the same offer or competition across many different sites to collect emails from as many people as possible, but making it exclusive raises the consumer relationship.

- Frequency of communication: people opt-in and we tell them when we are going to contact them - the same day at the same time every week.

- A mix of soft and hard messages: consumers aren't stupid - they can tell the difference between a soft and hard sell. If you keep trying to sell them an offer for a credit card, it will turn them off, but if you offer two-for-one cinema tickets, it's easy to see the benefit for a brand.

- Emails are messages, not ads: we use the brand's creative, and then put the ad into our own words in a way our customers will respond to.

Thanks to Jo Malvern, Pigsback.com.