April 2022 - CapillaryTech

Ramadan marks the most auspicious time of the year for the Middle Eastern community. It is not only about peaceful fasting, familial gathering or extravagant feasting, but also generous gifting and donation as well. A joyous occasion that brings people together for rewarding experiences. Over the course of this 4-week festival, apparel, footwear, and luxury brands, in particular, find an opportunity to not only improve customer loyalty through personalized messaging and rewards but, in fact, use it as a key lever to efficiently optimize high-spend marketing campaigns.

In the MENA region, while the purchase volume or basket size hasn’t increased in the pandemic’s aftermath, the average transaction value (ATV) has, and that too incrementally. Consumer behavior has shifted to valuing the quality of products over quantity, making people willing to pay more. This is a ripe moment of truth for leading high-end retail brands to capitalize on through the right kinds of loyalty programs. In fact, nearly 25 of our own brands benefited from dynamic voucher-based rewards and recognition that factored in real-time personalization to increase engagement. As a result, Ramadan marketing campaigns proved to be successful exercises in celebrating customer loyalty by doubling the sales by highlighting the festive aspects of targeted communication.

Tracing the Week-on-Week Impact of Loyalty Programs during Ramadan

The first week of the festival is always about connecting with family and friends at home first. Hence, the frequency of customers visiting brands online is low. This, however, increases over the second week leading up to the fourth where there’s an evident spike in the normal consumption pattern (see the charts below). While 2020 was a year of stagnation due to COVID, 2021 saw a significant uptake in high-priced items being sold more even as the basket size didn’t grow in comparison to the pre-pandemic spending.

Brands, therefore, need to progressively build their interactions with customers during this time (weeks 2 to 4) with personalized messaging across the right touchpoints and with the right kinds of rewards.

Overall, we observed that while Dynamic Voucher Schemes (DVS) were the most effective from an engagement standpoint, point-based loyalty programs with the right notifications drive sales like nothing else. Here are four crucial factors that must be considered while designing these programs:

1. Acting as per Changing Consumer Preferences

After COVID, most consumers in the Middle East have become more certain of their preferences. They have had the time to reflect on past purchases, and are now more discerning about the quality or the value of products rather than experimenting with too many constantly. This is a unique opportunity for brands to increase affinity by building loyalty. In fact, we observed that in 2021, the purchase power steadily increased as people began to spend less time in lockdowns. As people readjusted to working remote and supply chain issues began to be resolved more smoothly, spending increased. But it was primarily to make better buying decisions that customers paid more for fewer products than before. Here, the point-based system offered brands the opportunity to build trust among loyal customers who are coming back during Ramadan 2022 to avail the accumulated shopping benefits.

While earlier push notifications were the norm, in 2021 it is clearly hyper-personalization through points’ promotion that works best for UAE’s leading apparel and footwear brands.

2. Building Behavioral Loyalty

This brings us to the next factor of trust-based repeat purchase that is an outcome of previous positive experiences. Gratification goes a long way during Ramadan, as customers are already in the mood to generously give their loved ones what they like. Thus, gifting-based marketing campaigns that drive behavioral loyalty through dynamic vouchers (DVS) can be major profit drivers. For instance, keeping track of past purchases to figure out the customer’s purchase pattern as well as using real-time search data to figure out his interests can generate personalized coupons instantly. Customers can be targeted with these when they are viewing products and a layer of gifting-based communication can be added to engage them further. This works very well to retain the brand’s most loyal customers, who, as per the 80/20 rule, contributes to sales more than new ones. To acquire new customers through the loyal base, further gratification could be introduced through the ability to earn discounts by recommending the brand to friends who are also looking for unique gifts during Ramadan for their own circles. This leads to the formation of an engaged community that is very much attuned to the spirit of the festival at large.

Beyond WhatsApp sharing notifications, coupons are way more effective in terms of driving engagement.

3. Reactivating Lapsed Customers

The right loyalty program – with Flat Offs and Coupons – allows the brand to re-engage with lapsed customers who return during Ramadan. They may have had pending cart items in the past based on which they can be targeted with the right discounts during this period. By nudging them with targeted communication and adding bonus loyalty points can inspire future purchase by sustaining the customers’ interest in the brand. It makes them feel more valued – laying a strong relationship foundation at the very start. These bonus points are a great way of attracting some new customers as well, even if the new registrations are relatively low during the festival. Even if the customer doesn’t avail the discount, the festive time allows for higher levels of consideration and increases the probability of return. This is a great way to target lapsed customers who would have otherwise easily switched over to competing brands in the category. Showing an interest in such customers is a responsibility that can drive long-term results and build a strong case for CRM where it did not materialize before.

4. Retention of Active Repeat Customers

Point-based promotions such as ‘500 Points added worth 100 AED, as a token of gift for Ramadan’ can be executed to improve the retention of active repeat customers. Moreover, targeting one-timer (OT) customers with Coupons or Flat Offs will encourage them to revisit the brand and become repeat customers.

Ramadan marketing campaigns are, therefore, crucial exercises in building a loyalty-based ecosystem that facilitates the future purchase of high-value items. Discounts and coupons with personalized festive messaging can go a long way in terms of building customer retention as well as retargeting previously disengaged customers and making them feel valued enough to become new loyal customers. The spirit of the festival encourages a solid reciprocal relationship between brands and shoppers that is a lasting one if marketing engagement is consistent with well-timed messaging as per changing consumer needs in the post-pandemic era.

“Every contact we have with a customer influences whether or not they’ll come back. We have to be great every time or we’ll lose them.” – Kevin Stirtz, author of More Loyal Customers

In today’s economy, it has become imperative for businesses to shift towards customer-centric models to gain market leadership. Customer retention through omnichannel engagement is being touted as the most preferred path as loyalty programs become strategic investments for every organization. Undoubtedly, consumers are highly appreciative of businesses that give them preferential treatment, rewarding them for their purchase decisions. The breadth and variety of reward programs are mindboggling, ranging from Shoppers Stop’s card-oriented and tier-based loyalty program (First Citizen Club), which offers exclusive previews of new products, home delivery for alterations, valet parking, etc. to Amazon Prime which is a household name now. And it doesn’t end here! Tata’s recent conglomerate loyalty program allows customers to earn and redeem points across a wider set of establishments. Indeed, the world of loyalty programs is growing faster than predicted.

Reward system in loyalty programs: Then and Now

The loyalty management market is expected to be worth $10.9 billion by 2024. However, customer sentiments across various industry reports paint a slightly grim picture with a whopping 96% agreeing that customer loyalty programs need improvement. 57% members don’t know their reward points balance, and 33% highlight the difficulties in using the rewards because of non-user-friendly terms and conditions. This clearly shows that many businesses have still not been able to meaningfully engage with their customers through a loyalty program.

A possible solution to this could be to integrate different programs into an intercoupled loyalty network, enabling customers to earn points from multiple schemes under one wallet that can be used at multiple outlets. But, this too partly addresses the problem. Moreover, in an industry with inconsistent digital infrastructure and in an attempt to introduce intermediary systems that risk the business proprietary information as well as customers’ PII, this won’t be easy. Adding to that, the solution would come with its own monetary implications as well. Thus, it is clear that the primary shortfall of current loyalty systems is that they are in a closed loop, which means that consumers can only trade value within those systems via limited products offered. On the contrary, there is an open system powered by blockchain for multiple providers where loyalty points could be easily exchanged across industries. Let’s delve more into this.

How blockchain technology could be the pivot in loyalty programs

Popularly known as the technology powering the cryptocurrency world, blockchain, as a distributed ledger can be leveraged to enable transactions across participant networks in a secure and digitized interlinked network. This can eliminate many inefficiencies however, this would ask for real-time integration with multiple applications within a business, mainly ERP, CRM, databases, digital wallets, etc. According to Gartner’s Blockchain Business Value 2017-2030, the value of blockchain for businesses will exceed $3.1 trillion by 2030. This reflects that blockchain is expected to surge in the coming years due to its value-add for businesses. As a remedy to the ailing traditional loyalty programs, blockchain would allow the loyalty stakeholders, (namely loyalty providers, admins, end customers, etc.) to interact in one system without intermediaries and without compromising privacy or competitiveness.

For loyalty program providers, making upfront investments on the blockchain can streamline the execution and management of their programs with near-real-time transparency, resulting in cost savings in the medium to long term period. Large operators with programs that currently have a competitive advantage through scale can adopt new service models and offer value-added services to other businesses. They may join on their own terms, controlling how they wish their customers to interact with their rewards programs and others, while for small operators such a network provides them unprecedented scale. Finally, for end customers, this can be deployed through a common e-wallet that can interact with existing loyalty program platforms through smart contracts, which are protocol that automatically implements the terms of an agreement between parties when the predetermined conditions are met. Let’s take an illustrative example here. The above figure highlights the journey of ‘John’ and his rewards accumulated in the current disparate loyalty landscape. This eventually results in low redemption rates, time delays, high customer acquisition costs, and low client retention.

Now, the same illustrative example re-highlights the journey of ‘John’ and his reward experience, showcasing how blockchain can enable interlinked networks across brands by eliminating friction and bringing loyalty to earn & burn in real-time in a secure environment.

Such a multi-channel network will enhance overall customer satisfaction through easy redemption services and an improved loyalty experience. Simultaneously, this helps brands launch bundled offerings and joint campaigns based on the customer profiles & targeted segments. This also extends brands’ reach to a large customer base, helping cut down advertising and branding expenses, increasing sales, and ultimately improving brand recall and customer stickiness.

The future: Blockchain technology-driven loyalty programs

Building such an interlinked loyalty network has to overcome the challenges of today’s fragmented systems that depend on central administration requiring the coordination of multiple parties through trusted intermediaries as well as would require upfront costs to break down siloed systems, and maintain data security and coordinate multiple intermediaries. While every new technology innately comes with challenges, blockchain has the potential to act as a facilitator to enable a ledger of transactions, interact with legacy systems through smart contracts, and drive improvements in the existing loyalty systems. Hence, today both small startups and large-scale technology companies are looking to innovate around blockchain-based loyalty platforms.

As the world is gearing up for revamping the loyalty programs, organizations need to embrace the blockchain makeover by starting small with a PoC (proof-of-concept) focusing on an internal use case, and then extrapolating to external scenarios, finally broadening the scope.

Monthly Archives: April 2022

Celebrating Loyalty with Ramadan Marketing Campaigns