A New Paradigm of Loyalty Programs Provided by MiL.k

“Would you like a coupon?”

How do you answer to this in your daily life?

Most people would shake their heads or merely say “No, thanks.” without any interest.

Why is that? Why would they say no to something free?

The reasons are quite simple.

Just not interested.
A bit interested but don’t really see its worth.

This can be narrowed down as follows.

‘I Don’t know how much benefit the coupon or mileage point would offer, but I’m not willing to ask about it.’
‘The coupon or the point should be gathered over time to be used, but I’m not sure whether I would be able to do so.’
‘I’m not coming here often and not sure whether I would use it again.’
‘It doesn’t seem like a huge benefit after all.’
‘It seems like I need to remember/recognize my point status to benefit from it. But there are so many services and places with these things, and I’m confused.’

I’m not saying the whole loyalty program is ineffective. Many people are gathering their mileages, and service companies are reinforcing their programs to differentiate their services.

Having been told those 5 reasons, some of you might have recognize one important fact. It is about ‘remember/recognize’ part of the fifth reason.

Having to remember and recognize the program can be a burden to customers. But as for service companies, that is the very factor for customer loyalty; to be remembered.

This is what companies should think about for their loyalty programs;

How to entice more customers with positive recognition of their programs?

And the answer is easy,

“Give away better, more convenient benefits to customers.”

But actually executing it can be very hard because companies have limited resources to release points as ‘accounts payable’.

How have loyalty programs been integrated?

Companies have chosen 4 strategies to increase effectiveness of their loyalty programs.

A. Increase usability by integrating points of group affiliates

Only goes for massive conglomerates with a number of affiliates.

B. Purchase external points and provide to customers

Can have higher usability with various services and industries, but the effect of maintaining and improving customer loyalty can be limited because customers get to use their points at other services.

C. Operate own mall for point usage

Often used by companies like airline operators whose customers normally use their services only once in a while, but the usage amount is big. Operating own mall can be a channel for customers to spend their points, but the companies don’t really benefit from it because there are only ‘outflow’ of the points and no customer maintaining effect. As for customers as well, there can be complaints about the exchange rate between their points and products in the mall.

D. Operate alliance-points

Used by massive airline operators with relatively large volume of mileage points and high customer sensitivity about the points. It is normally not used by other industries for the issues of high costs for system integration, needs for settlements between aligned companies, and burdens of auditing the settlement and maintaining credibility within the alliance.

These having been said, point integration can be a key for increasing effectiveness of loyalty programs but also has limits with the issues mentioned in D. above.

MiL.k team’s deliberation started here.