 "Gautam Kaushik")
Core customer expectations have remained unchanged, but the expectation levels are getting recalibrated, Gautam Kaushik tells Alokananda Chakraborty. Edited Excerpts:
In what ways are multi-brand loyalty programmes superior to traditional, standalone customer loyalty schemes?
In what ways are multi-brand loyalty programmes superior to traditional, standalone customer loyalty schemes?
Multi-brand loyalty is a very successful concept as it works for the customers and the partners beautifully. Let’s talk about the customers first. They can join the programme with any one partner and use their membership across all participating brands (more than 100 in the case of Payback) to earn or redeem loyalty points and to avail of all other privileges. It offers them a lot more value for a very small effort and that keeps their engagement high. For the participating brands in the network, it is great as they have access to a diverse set of customers, the cost burden of point issuance is lower vis-à-vis standalone programmes as they get a ready set of customers who hold points, which are earned from multiple brands within the loyalty network. So, instead of crafting their customer engagement plan in a silo, they work in a collaborative and intelligent ecosystem, and that shows in the results too. To ensure that this concept is widely successful, the most critical factor is to create the network by onboarding large brands from key consumer spend categories.
Let me also address the issue that standalone programmes face. For success of any loyalty programme, relevance, value and frequency of interaction are important indicators. Standalone programmes generally fall short on relevance and frequency, and the cost of offering value single handedly is very high and unsustainable. That’s the reason we see very few successful standalone loyalty programmes around.
Loyalty programmes per se have evolved over the years in terms of design and their attractiveness, but are there any newer ways of measuring their effectiveness?
The design of a loyalty programme needs to ensure that there is a clear and defined objective, there is transparency in the point value and the amount of points issued is commensurate with the effort required by the customers and the financial objectives. The core expectations of customers around value, convenience and consistency over time haven’t changed, just that expectation levels are getting recalibrated. In terms of measurement, the core concept remains around retention, followed by the ability to get more wallet share of the customer. Simply put: How often are the customers coming back to your brand, for how long and is their cart size increasing over time? In some way, that by itself is the factor that defines the success and sustainability of any business at an overall level. Thankfully, in today’s digital environment, measurement processes have become precise and you get to hear the customer voices almost in real time to carry out any course correction if required.
How much should brands ideally spend on loyalty programmes? What customer actions should they encourage?
While there is no single yardstick for this, there are some guiding principles. Loyalty programmes must be as a strategic and a long-term initiative. It is not a tactical campaign that most of the cashback offers tend to be. The investment appetite comes from the returns that the programme is going to deliver in the long run.
When we work with our partners, we build estimates on the incremental sales and the value that will accrue from customers who are actively participating in the programme versus those who do not. That analysis throws a good estimate on the investment size and the expected returns.
On the softer side, you would want to ensure that your loyalty programme offers the best value than your competitors. Loyalty programmes must be designed for the discerning customers, so it must provide superior experience and exceptional value. There is no point in cutting corners as it has been proven time and again that a loyal customer is far more valuable to the long-term success of the business.
The typical customer actions that brands encourage are around upsell and cross-sell, which ultimately lead to a higher wallet share. So, if you are a retail bank, you would want your bank account holder to also take a credit card or personal loan, hence that activity is rewarded. If you are a hypermarket, you want your grocery shopper to also buy more of store brands possibly, so you would offer promotional points for these. Success is easily measured via the conversion achieved.
Can loyalty programmes keep people engaged in the long run? How must brands optimise their loyalty programmes based on feedback?
A well-rounded programme not only acknowledges and rewards every transaction, it also increases the frequency and value of purchases. Personalised offer creation using past data about customer’s preferences, has the power to get the customer out of home to the store/app, when there wasn’t any real intention in the first place. As you can’t make people alter their spending habits completely, the best you can do is figure the formula that nudges them further and further along the journey. The only way to do this is by tracking your efforts, tweaking campaigns, pivoting your strategy when necessary, and repeating the process. The adoption of data-driven marketing with hyper-personalisation shall remain the key to maintaining consumer affinity to a brand.
All said, how do I know if any loyalty programme is right for my business to begin with?
The answer to this depends on what kind of a business category you are in and what are the expectations from the loyalty programe. There are cases where customer base comprises of value seekers while in some other cases the customers may be looking for experiences and privileges. Another factor to consider could be the frequency of customer interaction with your business. Yet another, could be digital versus offline.
Depending on the answers to the above, the brand should choose a programme that is most suited for its customers and the one that is likely to fulfill the objectives, which, almost always, are around delivering higher frequency of repeat purchases, incremental cart values, customer delight and brand advocacy.
Many say customer loyalty programmes are more important than ever. Do you subscribe to that view?
In the last few years, a lot of new entrants and established players focussed on activating new customers. Several platforms have claimed their customer base to be higher than 100 million. All this has come at a huge cost, which is apparent when you look at the losses that they have been declaring. We have always believed the product and experience are the most fundamental drivers. Customers would always expect a brand to deliver value in a convenient manner, and consistently over time. A loyalty programme is not a substitute to that. Loyalty programmes sit on top of that and can greatly influence customer engagement by targeting the right customer, incentivising the right behaviour and customise the offering basis preferences using analytics. A well thought through and carefully executed loyalty programme will surely build sustainable growth.
Last but not the least, why will people do what you want them to do?
Unless what you want them to do is in sync with what they really want to do, it's not going to work. Customers are likely to do something if there is value to be derived, it’s easy to operate and it works seamlessly at multiple places, basically high on relevance.
