Perspective | Loyalty programs in India, a hit or a miss...?
A retailer providing personalized offers to a handful of his loyal customers, or offering additional benefits to retain them is all now a passé. Today, in this competitive world, it's important to understand why ‘loyalty’ as concept is booming and the reason for customer loyalty programs to have become an essential part of most of the marketing programs planned by companies and brands.
We have seen and experienced how different companies use different methods to ensure customer loyalty programs; some instances being those of supermarkets which have now begun offering loyalty cards, credit card companies offer free points on every purchase and recently companies have also started selling free coupons of equivalent value on every mobile recharge.
Considering these programs as powerful tools for increasing existing customer base and maintaining engagement that helps in gaining profit in business, do these programs actually work?
In today's edition of Adgully Perspective, we got some industry experts Vijay Bobba, CEO and MD, PAYBACK India, Anirban Dutta, MD, LoyaltyOne India and Sundeep Nagpal, MD, Stratagem Media to share their thoughts on the same and help us try and understand that how despite the efforts of brands and companies and consumers being aware about loyalty programs, certain loyalty programs are still unsuccessful? This is what they had to say:
The purpose of every loyalty program is to help marketers acquire new customers, retain the existing loyal ones and increase wallet share of spends.
Bobba is of the opinion that loyalty programs have to deliver meaningful value for customers to be interested in the relationship dialogue. “For a loyalty program to be effective, it has to mirror a consumer’s daily lifestyle by delivering relevant options through which they can accumulate loyalty points, being available across shopping activities which are convenient and simple to use. Else consumer fatigue is bound to set in, leading consumers to drop-out of the program”, he said.
Citing aspects that limit a loyalty program’s success, Dutta, “We need to understand two things here. First one being internal to an organization wherein companies need to clearly define their key loyalty program objectives and what is the baseline on ROI and financial profitability. The second aspect is to do with the end consumer where the organization needs to create a clear value proposition in the consumer’s mind answering the simple question – ‘What is in it for me?’”. He said that both these aspects need to seamlessly come together to bring about a change in customer behavior and improve financial profitability for a brand / company.
Still, there are majority of standalone loyalty programs who are unable to provide effective programs, given the inherent loopholes of their business model that confines their understanding of consumer behavior. Thus, coalition of loyalty programs that interact with the consumers through all their purchase activities, through multi-category presence and capacitated with the infrastructure are able to map consumer buying pattern and provide them value at every step of their purchase transaction, therefore creating a meaningful value proposition for them.
Nagpal believes that it is rare for customers not to accept loyalty programs because they are happy when they are layered with offers. Supermarkets, stores, banks and other companies convince and offer so many discounts that the customer readily signs up for loyalty programs. “But there is a catch in it, as nothing comes free. Companies access your database or ask you to be a member, or even merge you with that particular program. The continuous approach and binding a customer to a specific program disturbs him/her and they ultimately choose to discontinue the program, thus creating a notion in the customer’s mind which is not fruitful for companies”, he added.
So, does that leave us to agree that there is still a ‘disconnect’ in terms of acceptance of loyalty programs? If so, how does one improvise or build better engagement with customers which will allow loyalty program to sustain in the market in the near future?
Sharing his thoughts on the same, Bobba said that, “Retailers belonging to the old school of thought perceive that consumers are attracted to loyalty programs for its saving benefit. Whereas consumers of this day and age look at loyalty programs for the extensive value they bring to them for being loyal, with the advantage of saving being only a small component of it”. He states that factors like relevance, availability, convenience and services will help loyalty programs to be successful in future.
“By giving consumers an opportunity to make the most of it, a good loyalty program should include four major aspects of a consumers day-to-day spends viz. banking, fuel, telecom and groceries which essentially take 70% of his wallet share. Otherwise the pace at which loyalty points (the most popular form of rewarding consumers) accumulate becomes redundant and also loses the share of consumers mind”, added Bobba.
While Dutta said, “At the end of the day, organizations at an enterprise wide level should make customer centricity as the heart of their business to add more and more loyal customers all the way”.
Bobba also holds a belief that a good loyalty program should have presence across market and not have the consumer wait to use the loyalty card. “The coalition based loyalty programs, that are present in the market through multiple brands and stores offer this benefit of proximity to consumers. Loyalty points should not be hard to redeem. They should be acceptable across markets and easily redeemable for products of their choice and the expiry period should be long enough to encourage even the point-holders to draw benefits from them”. He further stated that there is a misconception that loyalty program is a discount initiative and it needs to be clarified. “Discount initiatives are an absolute cost to the retailer when the purchase transaction is made whereas the cost variable of loyalty program comes in only when consumers redeem loyalty points. This is mostly done at a later date when points from various transactions are accumulated”, he said.
According to Dutta, to strengthen loyalty programs and make it successful in future one should use data effectively and it is important to know who your consumers are, how and when they spend and what they look for; create a comprehensive mix of rewards to meet their various needs. “Identify your high value customers and who have the maximum potential to deliver on your business objectives of growth and profitability. Treat each and every customer as unique, as in India there is a great risk in treating consumers as one homogenous group. It is important to segment consumers by their transaction behavior that you capture during their purchase cycles across festivals and special occasions. Use multiple one-to-one communication channels by leveraging multi-channel marketing services like direct, digital and mobile marketing to effectively reach and connect with your customers. This will help create a 360 communication environment to convey your key messages through various consumer engagements touch points”, he stated.
We are in the most diverse times, as, though the nation is undergoing a hi-tech make-over there is a large chunk of consumers who do not have access to technology or are not savvy; and neither of these markets can be ignored. Thus an effective loyalty program should have multiple touch-points both in-store and online mediums. As studies have it, 78% of consumers who are not happy with services received during a purchase transaction don’t complain, they just don’t come back! Hence providing seamless and effective services is essential for the health of loyalty program. Also, a loyalty program is a bonus initiate therefore simplicity and easy usage will go a long way in charting its success story.
From this exchange of thoughts, it is clear that money spent on loyal consumers only adds to the top-line of business entity while providing the consumer with that extra value which makes shopping decision smarter and more rewarding. To underscore the role-play of loyalty program is to highlight its inherent ability to ‘give something in return’ by means of either instant or gradual gratification to the consumer for being loyal to their brand.