In the last two years, the battle between the cash-rich e-commerce players has turned around from customer acquisition to customer retention. Marketplaces have started adopting huge cashbacks, promo codes et al over and above discounts to retain valuable customer base. Further, digital wallet players are getting traction from offline retail giants too to scale up sales and woo customers.
Although cashback has become the buzzword and is seen as an effective way for customer acquisitions vis-a-vis discounts in today’s volatile or hyper-competitive market characterised by swift customer churn, brands need to look at loyalty and rewards as a long-term sustainable strategy. It will help keep focus on continuous customer engagement and personalised experience for attaining customer retention and building brand loyalty.
The practical reality of cashback is temporary gratification which is short-term and involves purely transactional experiential behaviour. With every e-tailer and brand going all out to woo customers, the long-term way forward is to adopt well formulated customer relationship or loyalty reward programmes to ensure repeat purchases and thereby customer retention or stickiness.
Such loyalty programmes work on customer insights, apply business and data intelligence to come out with the right personalised shopping offers and deals for customers. Gift cards, frequent purchase programme, point programme, rewards, offers, schemes, value added services are all ways to strengthen the bond between the customer and the brand. In long-term, loyalty programmes have helped thousands of brands boost their sales and profits.
A successful loyalty programme thus will ensure new customer acquisition and in keeping them for longer period.
Simultaneously, companies need to find new ways to engage and reward existing customers. This will encourage customers to remain on board and attract further recommendations for the brand through social media, word of mouth, effectively enhancing brand recall and value.
Along with market dynamics, the ever-changing government policies also play a key role in steering business strategies, especially in consumer-centric sectors such as retail, e-commerce financial services.. The recent policy changes in e-commerce regulations announced by the government with a focus on foreign-owned marketplaces have taken a hit on the popular cashback and deep discounting practices of marketplaces to lure customers. This has forced big players to review business models and think of novel ideas to work in line with regulation aiming at fair play.
It is a basic fact that the implementation of loyalty programmes directly results in a rise in sales automatically boosting revenues. Remember, it is far more cost-effective to retain satisfied customers than to consistently acquire new ones, as it can cost the company or brand up to 25 times more than keeping the current ones. Furthermore, existing customers spend 67 per cent more than new customers. In short, customer loyalty really pays off — and customer loyalty programmes end up paying for themselves.
With customers spoilt for choice owing to innumerable brands and offerings out there, customer retention will be the key to success rather than new customer acquisition.
Ramakant Khandelwal is CMO of PAYBACK India