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Making Loyalty 3.0 Happen

Brands need to evolve along with the consumers and be ‘Always Consumer Ready’

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The first recorded instance of loyalty program dates back to 1793 in the US. A merchant started giving out copper tokens which could be exchanged for free items in the store. Gradually, the customer engagement efforts moved through time and space to create newer medium to reach out to customers. Today, loyalty programs have come of age and can form a “winning strategy” in building a profitable brand.

How important is loyalty?

Gaining consumer loyalty is a no brainer. According our estimation (Capillary powers loyalty programs for more than 100 marquee brands across Asia), 75% of the shoppers are engaged in at least one loyalty program and 1/3 of them are are involved in multiple loyalty programs! It means your consumers are UP for a loyalty program.

58% of the sales of a marquee apparel brand in India comes from loyal customers. This is massive! Who doesn't want great sales numbers from loyal customers when cost of new customer acquisition is 5 times the retention of an existing one? Think profitability!

The house of cards and the power of mobile 

There was a time when I used to have a ‘stack of cards’ in my wallet (I will retain them for nostalgia!) issued by brands. These physical cards became obsolete as they are clunky. We used to spend endless time in filling paper forms to get hold of a card. Who wants a long check out queue! I call this loyalty 1.0

Then came loyalty 2.0 when mobile phones (before smartphones) changed the game. Mobile numbers became much more than an identification for loyalty program.

The age of Loyalty 3.0

It's a generation of IWWIWWIWI (I Want What I Want and When I Want It). Consumers want everything at the push of a button and expect brands to provide easy and convenient experience.  One might take minutes to decide rather than days of ‘thinking through’ like in the past. Here are a few interesting things brands have to consider while thinking of loyalty.

Explosion of Screens: Social Chatbots, Mobile Apps, Smart watches, Netflix, In-Car Screen Every new channel has immense potential to connect and engage the new age customer 

The rise of Digital Screens: The average consumer in India spends an average of 8 Hours a day on digital screens (which is 4X higher than TV)- YouTube, Netflix, and Amazon Prime videos

Social Love/ War:  Gaining and losing loyal customers is easier in Social world (like v/s shout)

It's not just about purchasing: Customers demand a great customer service not only during purchasing a product, but also post purchase

Walled Gardens: Closed group communities (like WhatsApp, Hike) are powerful channels to spread brand loyalty

Learnings from world’s most successful loyalty program

Cashing on the customers demand, Amazon launched rather one of the most successful loyalty programs in the world- Amazon prime. The success of the program can be understood by the fact that Prime members spend 2X more than non-prime customers and member retention rate is 90%+ YoY (2016 v/s 2015).

Taking a closer look at the Amazon Prime’s success reveals rather interesting insights.

Offer what customers want: Firstly, Amazon Prime not only solves the key pain points, but also offers significant ‘tangible value’ to customers. 

In a world of ‘instant gratification and unexpected delivery promises’, they made a bold promise of ‘Free Priority Delivery’.

Unlimited video streaming with Amazon Prime Video

Early access to deals

Jeff Bezos in one of the quarterly calls said "We want Prime to be such a good value, you'd be irresponsible not to be a member".  

Embrace loyalty as a strategy: Secondly, as a company, Amazon has embraced loyalty as a Strategy rather than a program (which has a limited focus). From Tagging ‘Try prime’ in Amazon logo to Jeff Bezos talking about it in every quarterly earnings, shows the brands’ commitment to the loyalty program.

Make it fun and engaging: Thirdly, they have gamified it. Customers take free subscription and get addicted to prime video. Hence one ends up renewing the subscription and maximizing shopping spend from Amazon.

Making Loyalty 3.0 happen

The future of loyalty is at the convergence of AI and Omnichannel. Today is the time to embrace the consumer phase shift and transform Loyalty from being just a program to a strategy. Here are a few suggestions ace the game.

Make your program suitable for the omnipresent consumer. Understand the needs of your customer and present what he needs at the right time and through the right channel. For example, high repeat category such as Food can implement reorder idea on a bot.  

Personalization is the key. Traditionally, the redemption rate of the coupons sent via SMS have been dwindling by ~20% YoY (Capillary estimation). Limit the usage of SMS to make a contextual engagement rather than a generic communication.

Gamify the loyalty program, make it fun and curious for consumers to unlock incremental benefits.

Traditional Loyalty is dead and Loyalty in its current form may not yield incremental results. Brands need to evolve along with the consumers and be ‘Always Consumer Ready’. Brands should build loyalty strategy cantered around omnipresent customer and offer them irresistible value. Most importantly the mind-set shift can be a game changer. Brands need to embrace loyalty as a ‘strategy’ rather than a ‘program’.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


Tags assigned to this article:
consumerism consumer behaviour loyalty programs opinion

Ashwin Krishna

The author is Global Marketing Head at Capillary Technologies, a pioneer of Omni-channel Engagement and Commerce in Asia, loves all things Digital, Mobile and Retail. He has 12 years of professional and entrepreneurial experience across APAC, Middle East & Africa markets

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