A customer loyalty program is based on a simple premise - as a retailer develop stronger relationships with its best customers, profitability is ensured more. The process upgrades gradually from driving repeat purchases to converting a customer an ardent loyal to a brand.
Nowadays, almost every retail and service industry seems to be offering some sort of incentive and rewards programme to encourage customer loyalty.
“The emphasis is towards identification of loyal consumers and transferring marketing efforts in a much focused manner towards this smaller set of very loyal consumers and pampering them with exceptional privileges. If this promise is executed as per the plan and the resultant offer is much better than your competitors’ offer, then it should help in customer retention,” says Mr Shailesh Chaturvedi, CEO and Director, Tommy Hilfiger Apparels India.
While explaining the advantages of such programmes, Mr Ashutosh Garg, Chairman and Managing Director, Guardian Lifecare comments that this will enable customers not only build relationship with the brand but also get regular updates on offers / discounts. They also get value added services, that is, tie ups from loyalty and redemption against his choice, which results in picking up a free gift.
“A customer gets that ‘EXTRA’ benefit of being a customer of the establishment. The differential treatment is not only a boost to the customer’s ego but also fills in the coffers with some incentive points. These incentive points can then be used to redeem for products which the customer aspires for. At imint we have over 1000 products on our redemption catalogue waiting to be redeemed by our members,” says Mr Neeraj Kapoor, Chief Marketing Officer, imint. Imint offers reward programmes to the customers on behalf of multiple retailers and service providers.
Importance of technology
Technology support must provide instant information on past sales data and consumer profile and history. If it is a point system, then there should be real time information on accumulated points. Technology should also support data analysis, data-based profiling and decision support systems. But loyalty programmes can be expensive to maintain, which is one reason why small retailers are often hesitant to establish them.
“We provide technical and operational solutions for loyalty programmes, which can be customised to meet the needs of any industry vertical”, says Mr Piyush Khaitan, Managing Director, Venture Infotek Pvt Ltd. In the loyalty programme supported by the company, reward is instantaneously made available to the customer of the retailer on a real time basis and there is no accumulation of loyalty points as is the case with normal loyalty programmes.
Single brand v/s Multi brand loyalty card
Multi brand loyalty or a coalition loyalty programme awards the customer at not just one establishment but at multitude of brand partners. Therefore, the customer can redeem his/her points across a spectrum of choice that is available to him from attainable to aspirational. “This results in a complete win-win for both the retailers and the customers”, explains Mr Kapoor, whereas Mr Khaitan begs to differ. “The economic impact of such programmes is questionable, and do not appear to have taken off. Even in India there is a large effort by a well known financial institution to back such a programme but the feedback has not been encouraging”, he opines.
Point accumulation can become fuzzy with unclear knowledge on points. Clarity of consumer interface process, genuine and meaningful privileges for consumers, selection of a like minded loyalty service provider with sound technology, high quality training at front end, involvement of top management and adequate resource backing would be some elements of a check list for a successful loyalty programme.
“I must add that direct benefit poses many operational challenges and back end needs to be very well oiled,” says Mr Chaturvedi.
Checklist for technical support
- Regular update of points
- No problem of packet communication
- Data updation to be done on daily basis
- Speedier service
- Online support to check points
- Automatic updation to the next level
Checklist for redeeming the points should clearly mention
- Validity of earned points
- The last date when the points would lapse
- The products against which customers can redeem
- Can his family member redeem points?
The card should
- Be simple to understand
- Offer attainable rewards: get the customer trust
- Be attractive to consumers
- Carry the promise of aspiration
- Be unique enough to differentiate & generate consumers’ participation