Building on the trust factor

Building customer loyalty essential for a sustainable business model.
Loyalty

Loyalty, an alternate way of doing business, needs to be woven into the fabric of the business. Building customer loyalty is not just another marketing programme. Today, the double digit growth areas are retention and loyalty management and social media direct marketing. Of course, loyalty management depends on having a robust customer data and today, more and more companies in India are investing in knowing their customers better. The key change and evolution have taken place in the disintegration of integrated services and the emergence of players who are strong in each element of the loyalty delivery process.

Rajat Sethi, Executive Director, Direxions, says, “We have strong players like Cartesian and Cequity in the Data Analytics space; Direxions and Loyalty One in the Relationship Management space; and Red Box and Accentiv in the Rewards Management space. Each of these elements (that make up the whole) is growing at varying paces, but all are growing fast and I do believe that client budgets will increasingly be spent on these areas.”

Various loyalty programmes

According to Sethi, there are essentially three different types of loyalty programmes – proprietary (where it is a closed loop programme of the brand and earning and burning is of the brand products and services); partner (proprietary brand but currency or discounts are licensed to select external earn partners and marketing costs are mainly borne by the proprietary brand); and coalition (one coalition currency and brand name of the programme but with multiple earn/burn partners – with no dominant player and marketing costs are shared).

At the same time, it might be counterintuitive to think about loyalty programmes for e-commerce retailers, given that they are at a stage where a huge aspect of their strategy is about price discounts. Ajay Kelkar, Co-founder and COO of Hansa Cequity, opines, “The question is whether consumers need any other benefit apart from a clear and obvious price discount. The issue actually is that discounts don’t have a memory. So consumers forget discounts pretty fast and tend to not forget special privileges! The goal of a loyalty programme would be to deepen the relationship with the consumer on dimensions other than just price.”

For instance, Groupon has just launched a priced loyalty programme called ‘Groupon VIP’ and it will give members a preview of the discounts it negotiates with businesses, access to closed or sold-out deals, and a one-click anytime exchange for unused vouchers. “I am actually surprised that nothing significant in loyalty has yet appeared from Indian e-retailers,” adds Kelkar.

According to Sethi, we are now witnessing the birth of ‘coalition loyalty programmes’ in India. He holds the opinion that coalitions help to mitigate costs while expanding rewards in an accelerated environment. According to a study, 50 per cent of the points earned on credit cards go unredeemed. In response, we are definitely likely to see the emergence of companies that will combine or bundle the points earned from different loyalty programmes and allow them to be traded for larger rewards. Kelkar says, “Coalition loyalty will grow and loyalty programmes will give more core operational benefits for customers, for example, special price list only for loyalty members, etc.”

A few years back, we witnessed the launch of the ‘i-mint’ (popularly known as ‘Payback’ today) coalition programme. Now, experienced companies, such as ‘Loyalty One’, will soon launch more state-of-the-art coalition programmes in India. Sethi says, “There is no one programme that is most suited to e-commerce sites, but generally in a B2C scenario, a coalition or partner programme would work better, whereas in a B2B scenario, a proprietary programme would be more relevant.”

He explains that any loyalty strategy has to cover four key areas – listen, build, engage and measure. We need to listen, track and identify conversations across digital media and then speedily identify and understand their relationship needs. We then need to build our relationship with them via communities, blogs and media sharing and then develop online engagement – loyalty campaigns. Finally, we need to measure the loyalty impact in terms of increased sales, cross-sales and up-sales, retention and tracking satisfied or dissatisfied customers.

Some tips

The foundations of any loyalty programme are based on three universal beliefs:

> Some customers are more valuable

> Dialogue is the foundation of customer-centricity

> Relationships with customers can be managed and enabled

Some thoughts on what to be careful about while launching an e-loyalty programme:

1: Don’t overcomplicate your relationship programme Overly complex, difficult-to-figure-out awards and rewards schemes are bound to turn people off. Customers are less likely to participate in programmes where the rules are too complicated or the response mechanism is too long-drawn.

2: The law of the last transaction What is uppermost in the customers’ mind is their last experience with your product/service. They may have had a positive experience the last 10 times, but if the 11th experience with the brand has been a negative one, it will subsume all the good ones that came before. That terrible meal you had last night at your favorite restaurant will make you forget the 20 excellent meals you have had over there previously. What’s more, a dissatisfied customer will tell as many as 15 others about this negative experience.

But still, don’t make the mistake of ignoring or writing off this dissatisfied, complaining customer. The very fact that he has taken the trouble of complaining means he is a loyal and concerned customer.

3: Feedback surveys showing ‘satisfied’ are just not good enough Most companies are extremely happy if more than 60 per cent customers say they are satisfied with the relationship programme. But a rating of ‘satisfied’ can lull us into a misplaced sense of complacency. All ‘satisfied’ means that you’re doing okay! We need to redefine norms in today’s competitive world and strive for customers who are ‘very satisfied’.

4: Avoid the temptation to segment without intelligence It is true that a good database allows companies to identify those valuable customers who account for the majority of profits and the launch of relationship programmes directed at them. However, the temptation is to segment and then super-segment – like introducing a silver card, and then a gold card and then get tempted to launch a diamond card and then, hey, how about a platinum card!

5: Don’t reward customers for what they would do anyway This is crucial, particularly from a profitability standpoint. You need to ask yourself whether you are truly achieving ‘incremental’ results overtime with your relationship programme. Your programme has to either get you more customers or increase usage. If, for example, a segment of credit card owners are using that card four times a month, there is no point in rewarding them for using it three times a month. And this is quite likely if you are not collecting and analysing your customer transaction history.

*As shared by Rajat Sethi, Executive Director – Direxions

Banking on prior research

It is understood that for a loyalty programme to be successful, one must understand customer behaviour and the need to bridge the gap between expectations and deliverables. In today’s context, ‘one-size-fits-all’ does not work.

Sethi avers, “Customers’ expectations from loyalty programmes have undergone a sea change and we can’t just launch a loyalty programme without researching on the 4 Ws – Who, Where, What and When.”

It entails to – for whom are we developing the loyalty programme? Is it for the entire customer base or for our high value customers? Do we have enough data on them to understand their purchase and usage patterns? Where should the programmme be launched? Should it be online or offline? Are the majority of the customers online? For instance, if I am an insurance company, I would be careful on launching an online programme unless it is only for my high value policy holders. What is the nature of rewards that we should offer as part of the programme?

A well rounded programme proposition would not just include monetary rewards, but a combination of benefits, including over-delivering on basic hygiene services such as complaint responses to priority service, etc; hard benefits, such as rewards based on purchase patterns, incremental rewards for long term behaviour change and a combination of personal and business rewards; soft benefits given to members for being valuable customers; and benefits for business building or relationship building. Here, relevance is the key. The key objective is to engage the members into a dialogue, recognition and community. One needs to recognise member contribution as well as exceptional members and build buzz and aspiration.

One needs to create chances for big wins. Any member stands a chance to win big rewards. This is the ‘wow’ element of any programme and creates excitement and selling point.

Finally, one needs to understand and determine when to launch a loyalty programme. Unless one has a critical mass of customers, it does not make economic sense to invest in a loyalty programme.

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