Copying a programme from another company might be costly: Siddharth S Singh

Interview with Director, Fellow Programme in Management and Associate Professor of Marketing, ISB

With international brands entering the Indian market in various categories, the importance of loyalty programmes, feels Siddharth S Singh, cannot be undermined. There will be challenges and opportunities for various sectors but eventually, a sound loyalty programme will benefit the consumer and the brand equally.

What is the ideal loyalty programme for companies/brands?
A good loyalty programme is one that is designed well to enhance customer loyalty towards the company and its offerings. It should allow the company to analyse its relationship with each customer and take actions to increase the value of its customer base. Further, it should reveal opportunities for the firm to leverage its relationship with loyal customers for important functions such as customer service and product development.

How do some sectors manage successful implementation?
Experience, experimentation, and research collaborations have provided some sectors (hospitality, airlines, retail) with a better understanding of loyalty programmes.

How should sectors proceed with an ideal loyalty programme?
It is important to understand that a company must be clear in its vision regarding the programme. It should know where the programme fits in its overall strategy. Once these high-level decisions are made, a suitable loyalty programme can be designed. Simply copying a programme from another company on an ad hoc basis might be costly both in the short- and long-term without providing the desired benefits.

What will be the next trend in India as far as loyalty programmes go?
Many more companies in India will try to develop loyalty programmes in the near future. Eventually, I see these programmes providing a complete view of a customer. This includes their interaction with the company and other behaviour, such as on social media.

New metrics will come up that allow a firm to evaluate a customer better. The concept of customer value itself would become multidimensional and companies will learn to identify and exploit their relationship with customers along these different dimensions for various benefits. For example, a company might value some customers because they are influential on social networks, while it might value others because they spend more.

Ultimately, it is about a firm’s relationship with its customers, customer behaviour, data available about customers, analytics using this data, and leveraging this information for benefits.

What’s the main goal of a loyalty programme?
To strengthen customer loyalty towards the firm and its products. This loyalty allows a firm to understand the customer better, and increase the value of its relationship with the customer by providing more and better products and services to the customer.

Do all sectors require it?
In some cases, a firm might deliberately choose a strategy that does not focus on leveraging customer relationships. For example, the everyday low price strategy of some retailers in the developed world focuses on providing products at the lowest possible price. Companies following this strategy want to keep all unnecessary costs down and do not typically have a loyalty programme. A good example is Walmart.