Loyalty programmes back in focus and firms scramble to retain customers

Topics loyalty program

Deloitte India’s recent 'Know your consumer: What you see is what you get' report says that “a majority of Indians (74 per cent) prefer participating in a loyalty programme, especially digital loyalty programme attributes or features”. But a competitive marketplace and information overload mean that companies need to be more flexible with their offerings and still attain a balance between offering customised solutions and widening the base.

From picking cues from a consumer’s personality to their kids’ diaper sizes and from using a customer’s presence in the periphery of an outlet to another’s browsing patterns on the company website, players in the grocery retail and aviation sectors are using data to design newer loyalty programmes and tweaking them to satisfy newer consumer demands. That is imperative in a scenario where consumers are tightening their purse strings as they deal with the tailwinds of a slow economy.

It’s not as if these are the only two sectors experimenting with promotional offers to create a captive buyer base. But considering the frequency of sales that organised grocery retail (online or offline, B2B or B2C) generates and the history of airline companies that were among the pioneers of loyalty programmes based on customer insights, these two sectors' strategies in a tight economy make for interesting case studies.

Ramakant Khandelwal, chief marketing officer of multi-brand loyalty programme company Payback, says gaining loyalty is more challenging in formats where the customer interaction is too high or too low. The challenge in a high frequency format is that any bad interaction can lead consumers to switch brands. In the case of retail, what is really important is that some value has to be given to the customer in every purchase. "So if you give a certain value in every transaction, the customer is noticing that something is coming to me. Then you start noticing that what kind of offers this customer is going for and when you go for a mega promotion later, you know exactly whom to target without giving the same discount to everyone. That’s where you align your customer strategy with their marketing strategy.” That means less wastage in carpet-bombing offers -- a crucial factor when growth is hard to come by.

Anil Talreja, partner at Deloitte India, says the steady rise of ecommerce and many online aggregators jumping into the fray have led to the adoption of tiered loyalty programmes, that is, if people are loyal and continue to remain so, they climb the ladder and reap added benefits. He mentions the case of a large retail store which incentivises a loyal member's spouse if introduced by the latter and offers benefits to both.

Vinay Bhatia, chief executive officer, loyalty & analytics, Future Group, agrees when he says the membership programme he has for Big Bazaar or Easyday buyers today is very different from the loyalty programmes of the past and have been formulated using data and actionable intelligence. Indeed, unlike in the past these programmes are central to the business of the company, given today's volatile times. He says Easyday Savings Club members account for 75 per cent of its business. He adds that with assistance of its partner and big data company Palantir Technologies, Future Group uses analytics to understand what the customers are buying and more importantly, not buying.

“So someone might be coming to buy one product or two or someone can buy the whole basket. Once you make someone a member, you can take him cross category or cross format. We see the frequency of visits, buying patterns in terms of brands or categories and even predict their possible family size with things like how much salt is being bought or what are the diaper sizes to estimate the number and possible age of children, and put all of this together to come up with a relevant plan,” says Bhatia.

Objectives also determine the kind of offers one provides. If Future Group aims to increase the amount that those availing of its membership programmes spend per visit to a store, Bigbasket, a player in the same category but operating mainly through delivery and online channels, has acquisition as its primary strategy and that resonates in its membership programme BB Star too, which was piloted last year and rolled out nationally in early 2019.

Looking back at the experience in these seven-eight months during which it got over 700,000 customers to sign up, he says the biggest barrier was the delivery charges even though it was as low as Rs 30-40. So, the members were given free delivery for shopping for an amount up to Rs 600, down from the earlier floor of 1,200. This also ensured the frequency of purchases going up. An indirect benefit from more frequent orders was customers trying new categories, says Arun Jayaraman, head — marketing, payments, site merchandising and loyalty, Bigbasket.

On the other end of the spectrum are airline brands. When organised retail was taking baby steps in the country, airlines were awarding frequent flyer miles which awarded customers reward points for flying, and which could be redeemed during future air travel. Now-grounded Jet Airways introduced the concept in the country and even went on to create a separate entity JetPrivilege just to manage loyalty programmes. Are its loyal customers now weary of loyalty programmes in general? Has its experience given others in the space some new ideas?

Airline brands today have diverse loyalty programmes and have also reimagined the manner in which these reward points can be used. A Vistara spokesperson says the company has recently taken the Adobe marketing cloud to leverage the power of data and that is helping it create prorgrammes tailormade for each customer. “We are still at an early stage. We observe things like when is a customer flying more, that is, during the weekends or the weekdays, or whether one is going for a round trip. Another attribute that we have started using is ‘clickstream’ behaviour where we observe whether a customer is completing a transaction or not when he visits our website, which sectors are they using and how can we give them offers to try other sectors.”

At the Lufthansa Group, says George Ettiyil, the company’s senior director sales, South Asia, the airlines makes extensive use of data and digital technology to deliver the most personalised experience to their customers across all touch points. “For instance, we use AI-based algorithms to assign each customer a ‘persona’ buckets. These in-depth ‘personas’ are based on multiple factors such as the traveler’s requirements, as well as their environment, influences, personalities, expectations and aspirations etc.”

Curiously enough, the industry leader IndiGo doesn’t have any loyalty programme, said the company while choosing not to elaborate on why it did not feel the need to come up with one.

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