Loyalty Programs — Making Those Points Count

Written by Raj N Phani, Founder — ZAGG Protocol

Building customer loyalty isn’t easy, but it’s worth the effort!

Yes, undoubtedly, it is. But say this to the millions of companies out there who spend some zillion hours wooing the customers, selling them products and services that are best-in-class and then spending another zillion hours and dollars trying to figure out how to retain them. Is it then still worth the effort?

Well, their business depends on it!

It is said that businesses with loyalty programs are 88% more profitable than competitors who do not[1]. This is probably why there are as many loyalty programs around in the world as there are companies.

There is also one hard-hitting fact that companies need to face — loyalty programs rarely create loyalty these days! Where then lies the gap?

In a world where customers are rarely loyal to anyone or anything, building brand loyalty needs to be a multi-pronged affair. If you evaluate a loyalty case study, chances are that Amazon will turn up at the top of the list. What puts them there?

Simple — their efforts are too big to fail!

With a motto of doing simple things better and adding utility and entertainment to the deal as Amazon Prime does in giving their customers the widest variety of choice and flexibility, Amazon has an unbeatable record of retaining over 95% of their customers after just one year[2].

Starbucks is said to have revolutionized the business of coffee and its not just the wide range of lip-smacking coffees and short eats that goes towards making them one of the best in their industry, it is also their 3-tier loyalty program, which has now been acknowledged as a best-in-class program. Post implementation of the Starbucks Rewards customer loyalty program, the company reported an increase in revenue of US$2.65 billion[3]. They also offer an outstanding mobile app experience, generating around 6 million sales per month[4].

When one is talking of state-of-the-art loyalty programs, it is not possible that we omit the program First Citizen. Crafted by Shoppers Stop, this loyalty program speaks eons of the retail giants focus on digitizing their customers’ journey. A part of their broader omnichannel strategy to expand their reach further, customers have said that the mobile app experience that the First Citizen program provides them is the best in business.

If you, as a business, want to make your loyalty programs work and keep your customers with you, say this and believe it — I need to evolve!

Most businesses have progressed from the previous era of spend-and-get models and have come into the new generation of online rewards or emails. They are adopting omni-channel and multi-channel programs that reward customers for every interaction they make with and for the brand — spend, referrals, shares on social media and more. As many as 64% of brands reported an increase in their loyalty program memberships due to the level of sophistication that they had added to them[5].

Businesses are entering into partnerships and affiliate programs to spread the net of their loyalty programs wider. Customers are also willing to enter fee-based premium loyalty programs such as Amazon Prime for better value-add. Amazon Prime works on a subscription model with the added lure of shopping perks such as early access to the best offers, exclusive products and cheaper rates, expedited deliveries, and much more. Members of Prime are said to spend 250% more on shopping deals by encashing on these perks that the model provides them.

The world of loyalty programs or the Gifts, Benefits, Rewards and Loyalty (GBRL) programs as it is otherwise known is evolving. However, the age-old conundrum of accumulated points around versus the number of benefits realized from these innumerable loyalty programs by the consumers persists. It will continue to do so unless there is a way to make those points count and add value.

As per a Deloitte Consumer Review, only about 47% of consumers take advantage of the loyalty programs that they are offered[6]. There are several reasons why the remaining programs end up unused, forgotten, and eventually not serving the purpose that they were made for. These include:

a) Companies, more often than not, are unable to sell the value proposition of the program to the customer in the first place

b) The customer is already part of several other programs, domestic and international, each having their own point systems and different means of access (name, mobile number, email ID, etc.) and they lose track of them

c) The customers’ personal data lies on disparate systems, making them vulnerable to security breaches

d) Each program has a different system of points and varied redemption options, which are cumbersome to keep track of

e) Customers are able to estimate that the potential to earn real benefits from the particular program is not worth the effort

f) Most programs are maintained on the businesses’ database, and the customer is only left with a card or an email to keep track of them

g) Once the programs are rolled out, companies rarely follow up on their redemption with their customers

h) Companies seldom build a good program that can be accessed on mobile, providing ease of access

i) Businesses are not investing in data analytics to gain insights into what the customers may expect as a part of the programs, which means that the benefits of the program are often random and without any real or personalized value

j) The redemption process is long winding and time consuming

k) Most programs demand that the redemption happens only at a specific store/stores, curtailing the customers’ reach

Looking at this list of inefficiencies in the current customer engagement system, naturally anyone would ask — are loyalty programs still doing the job that they were designed for in the first place?

Need of the hour is to focus on gaining a 360° view of the customer and creating personalized customer experiences, which, in turn, is bound to create better engagement from the customers. What is helping the program creators in this evolution? Technology.

Not only can technology create a single innovative platform to consolidate all the channels and service providers in one place, it can also help them evolve. Some of these technologies are Customer Relationship Management (CRM) systems, Data Management Platforms (DMP), social listening tools such as Hootsuite and Sprinklr, the use of gamification, mobile wallets, online chatbots, in-store clienteling using technologies such as Artificial Intelligence (AI), Internet of Things (IoT) and Chatbots; leading to a higher level of personalization in customer engagement.

However, blockchain may be key to resolving most of the inefficiencies that affects the GBRL space. A disruptive technology, blockchain creates a unique algorithm-generated token when a loyalty point is either issued or redeemed. Grouped into blocks, these tokens become a ledger of transactions that can be accessed across a network of businesses, customers and merchants. These blocks are decentralized and secure and act as one single wallet and app for the customers to view and access all their loyalty programs from, without having to keep track of disparate terms and point systems. Companies can also add one many more affiliates and partners without added complexity and enable the customers to redeem their accumulated points from a wide range of stores. They can leverage these technologies to also gain meaningful insights into the customers’ behaviours and create more specific, personalized programs. While companies lack the technological know-how and the resources bandwidth to bring in the power of blockchain into their evolving loyalty space, there are solution providers such as ZAGG Protocol who create an interoperable, decentralized and multi-tier platform for companies to interact with their customers and keep them constantly engaged to their brand.

[1] http://marketingmag.ca/brands/turnkey-retail-loyalty-programs-on-the-rise-125220/

[2] https://www.geekwire.com/2016/amazon-primes-us-membership-grew-35-percent-in-2015-research-group-says/

[3] https://zetaglobal.com/blog-posts/starbucks-reward-customer-loyalty-program-study/

[4] https://blog.smile.io/loyalty-case-study-starbucks-rewards

[5] https://marketingland.com/7-biggest-trends-driving-customer-loyalty-232518

[6] https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/consumer-business/deloitte-uk-consumer-review-customer-loyalty.pdf

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