We are referring to the (erstwhile) frequent traveler’s elite status in glitzy hotel chains worldwide. If you have been a busy business traveler or a globe trotter, you will agree to this. COVID-19 made your top-tier memberships with hotel brands practically useless overnight! You may still have those points in your account, but the truth is, they are expensive to maintain and difficult to dispose of – now more than ever. That’s because post-COVID, the why and how people travel will change forever.
60% to 80% of rooms have been empty in the U.S. STR, which evaluates 68,000 properties and 9.1 million rooms worldwide, found that the U.S. hotel occupancy rates fell from 60% in February 2020 to a stark 22% in March end. And even as of December 2020 (a dominant holiday season), it has only recovered to about 37%.
Consider business travel. Once companies realize how many customer meetings and industry events they can accomplish virtually, flight expenses and hotel reservations will be the first to vanish from their budgeting exercise.
Even for leisure travel, the brand magnet will get weaker due to the harsh limitations on movement imposed by governments. And when people open their eyes to a multitude of unconventional and spacious bed-and-breakfast options for staycations (typically away from the buzzing cities and closer to greens), hygiene, health, and safety concerns will be top priorities. So much so that guests may even prefer do-it-yourself (DIY) housekeeping and kitchenettes. That is, when and if they decide to travel again.
“Over half of Americans in a recent Harris survey reported that they won’t travel at all in 2020, with a quarter not even considering travel until 2022.”
Certain hotel loyalty programs are well poised to leverage this excellent opportunity.
For instance, Accor’s Live Limitless program allows guests to redeem points to enjoy extraordinary stays in 5000 private homes and villas in 50 destinations across the world as part of its onefinestay concept.
How COVID-19 has Changed the Hotel Loyalty Program Landscape
As travelers and guests make the big shift in their expectations, preferences, and behavior, hotel loyalty programs have to follow suit. The greater part of 2020 saw leading hotel chains worldwide continually adjusting and modifying their customer loyalty programs to stay relevant in the COVID-triggered travel bans. Let us take a quick look at some of these notable changes in the hotel and hospitality loyalty landscape.
Extensions for redeeming earned benefits
As early as March 25, 2020, Hilton Worldwide Holdings Inc. announced changes to their Hilton Honors program in a customer-friendly gesture. They extended their elite status and paused points expiration. They also extended night award certificates and doubled the validity to 24 months for new certificates issued between May 1 and December 31, 2020.
A majority of the hotel chains also started offering more flexibility to customers wanting to change or cancel their hotel reservations in the wake of the pandemic. Again, this was a customer-centric approach. It indicated the brand’s sensitivity to the larger ecosystem and their guests’ safety and financial concerns.
Earning points made easier
Marriott International, for example, made it extremely lucrative to buy Marriott Bonvoy points. They brought the purchase rate down to 0.78 cents per point. This move was a win-win since it encouraged customers to continue engaging with Marriott and generated the much-needed cash for the hotel chain.
Accor, the European hospitality giant, allows members to earn and use reward points on their bar and restaurant orders, even when they are not staying at the hotel.
Members can order take away or home delivery and start earning reward points on orders from as little as €1 if they download the Accor All app.
Hotel Loyalty Changes To Continue Beyond the Pandemic
These short-term adjustments made to their loyalty programs by leading hotel chains are not a flash in the pan. Even though vaccine hopes have grown stronger, travel disruptions will continue well into 2021 since there are multiple variables involved – like the economic viability for airlines to continue social distancing on planes, the reliability of antibody tests, vaccine adoption rates, and if immunity is lasting, to name but a few.
In the meantime, travel habits will undergo a huge change. If hotel chains want to spring back to pre-pandemic times fast enough, they will need to stay on their feet in engaging customers beyond the spend-and-stay relationship. Thus, we foresee a shift from the transaction-based hotel loyalty programs to a more holistic, customer-oriented approach – one that will rest on a 360-degree understanding of the customers.
Top Hotel Loyalty Program Strategies in a Post-COVID World
As demand dips (due to safety apprehensions and economic slowdown) and customers’ bargaining power increases, hotel chains will face fierce competition to attract and retain returning guests. A thoughtful, data-driven, and creative approach to loyalty programs will be the key to survive the transition and to lead the way for the entire travel and hospitality industry. Below are some loyalty strategies and tactics hotel and hospitality brands must adopt to stay ahead in this new reality.
What it implies:
Hotel chains will need to look at their customer profiles in a 360-degree fashion. They will need to integrate offline and online interactions, past and plausible future behavior. And they will need to observe demographic, psychographic, and behavioral insights to create micro-segments that can help in delivering personally meaningful offers.
Can you send offers based on geo-locations? Or use the decision-making criteria of the ‘chief travel influencer’ in their family? Say they may want a kids-friendly or a senior-citizen friendly stay experience. Conceptualizing such personalized offers will require you first to know their location at any given point, who their travel and stay influencer is, and have a deep understanding of their decision-making criteria.
The Kimpton hotel’s Karma Rewards program excels at creating personal experiences” for its guests and enjoys a 93% customer satisfaction score. The algorithm tracks member’s stay and purchases, the channel they use for bookings, the events they attend, and more. This allows the chain to treat individuals as individuals and delighting guests when they least expect it.
What it implies:
Think of all the ways your customers could create long-term value for your brand even without making another room reservation. And then get them involved and excited about doing so.
Can you make it fun for members to plan their first post-COVID trip virtually? Can you reward them to publicly share their stay experiences in the form of a blog or photo album on social media? Can you reward them for inviting their travelholic friend to your program? Can you partner with non-hospitality brands and reward your customers for check-ins (QR code scans) at these partner outlets? Can you dispatch rewards/souvenirs of the stay experience to keep their travel fire alive? There are endless ways to make this work and it’s only limited by your imagination and the capabilities of your loyalty program platform.
Marriott Rewards program lets its customers earn loyalty points by merely getting vocal about their stay on Twitter, checking-in via Facebook, or publishing a photograph on Instagram with a specific hashtag. These are incredibly flexible and engaging opportunities for building loyalty and promoting their brand hand-in-hand.
Infuse Experiential rewards
What it implies:
Mariott found in its research that guests are yearning for self-improvement activities such as sports or cooking. It helps increase their self-worth and satisfaction. In tune with this, hotel chains should broaden their rewards and incentives beyond just points. Your loyalty program offers you an in-depth understanding of your guests’ innate drives and desires. Helping them tick off things from their bucket-lists can unlock massive value for your loyalty program.
Can you get guests involved in a social or environmental cause during their stay? Can you involve them in your kitchen as a gesture of letting them take greater control of what they eat and assuring them of your hygiene standards? Can you offer members a free pass to an exclusive event at one of your properties? Can you develop a unique domestic travel package for your patrons where they can enjoy a road trip to open, greener spaces, travel locally in smaller groups, and get acquainted with like-minded folks? How about a complimentary guided tour of one of your historical properties? What about timeshare experiences and vacation rentals? Can you make the check-in and check-out touchless?
An Airbnb rental in Paris roped in an artist from the Louvre museum to conduct classes on sculpting a head from clay. Another one in San Francisco offers classes on making a French macaron.
Conclusion: Checking out of COVID-19 stronger than ever
Undoubtedly, these are tough times for the hotel and hospitality industry. But with creativity and customer-centricity, hotel chains can use this pause to realign their loyalty strategies, program perks, and customer engagement. As Christine Duffy, President, Carnival Cruise Line, says, “what travel supplier CAN control is our response, and new procedures and protocols to build and maintain the confidence of guests, employees and government officials.”
Unfortunately, except for a handful of brands like Sephora, Nike & Walgreens that have employed sophisticated data gathering and analytics to personalize offers to customers’ tastes while providing experiential perks, the vast majority of US retailers have struggled to unleash the full potential of their mobile loyalty program.
This has resulted in a large number of mobile loyalty offerings that are generic, and deliver disjointed and ill-conceived approaches to loyalty
Loyalty programs with native mobile integration with omnichannel features such as messaging, location technology, beacons, real-time offers, card-linked offers, and exclusive member benefits will be the ones to garner real attention and adoption moving forward.
This article analyzes how retailers can leverage dynamic in-app loyalty programs to introduce a more responsive and meaningful approach to rewards, personalization, and customer engagement.
How mobile has changed the loyalty game
Loyalty is not merely about earning and burning points anymore.
In the world of loyalty marketing, smartphones double up as payment enablers, face recognition devices, coupon redeemers, loyalty dashboards, location identifiers, and more. These digitally powered, advanced brand-to-consumer interactions were unthinkable in card-only loyalty set-ups.
Mobile devices have drastically broadened the scope for brands and consumers to connect and engage in creative ways. They have enhanced the user experience and made loyalty benefits more real-time, personalized, and experiential. They have also made it easy for brands to measure, track, and deliver the impact of loyalty programs.
Below are some of the key trends we see in the mobile loyalty program space.
Key trends in the mobile loyalty experience
Smartphones have redefined personalization by expanding its scope and impact. Offers and rewards can be shared with customers based not merely on age, sex, past purchase data but also live location, social media interactions, and in-app activity. Having a mobile-first loyalty strategy leads the way for integrated, cross-channel data collection about every customer. This data further help retailers to craft hyperpersonalized loyalty offers in an omnichannel environment.
Example: Starbucks uses its mobile app to seamlessly blend the physical and digital worlds and offer unique experiences to every individual. Among other things, it thoughtfully notes a customer’s live location to display the music playing in the store they visit. During the 2020 holiday season, the coffee chain giant gave away free air fresheners in a surprise deal for drive-thru customers. The air fresheners come with a QR code that allows customers to access a custom Starbucks holiday playlist.
The smartphone experience is very intimate and wholly controlled by the user. These factors make it an extremely suitable platform to gamify loyalty. Many brands are tapping this potential. The idea is to use gaming psychology to get their customers hooked to your loyalty programs and make them ‘play’ to win rewards.
Example: Nike’s NikePlus offers an omnichannel loyalty program where mobile plays a vital role. Members get rewards for working out. The more active they are, the more points they earn.
Similarly, Uber uses visual progress bars, much like gaming interfaces, to motivate their frequent riders toward securing their next reward.
Since we carry mobile devices wherever we go and are always ‘in touch’ with them, they become a valuable part of delivering experiential rewards – special services, benefits, or member-only privileges. Through smartphones, brands can offer personal shopping assistance via messaging apps, let customers quickly check-in at exclusive events, or unlock in-venue benefits through OTPs.
Kohl’s Yes2You Rewards program is intrinsically linked to a mobile-first loyalty strategy. This program helps Kohl’s engage in a ‘two-way dialogue’ with their customers, send push notifications, and offer unique experiences, such as a VIP trip to the American Music Awards or an opportunity to star in a Kohl’s photoshoot.
Social media engagement has steadily been increasing, with people accessing their network of friends and family on-the-go from their mobile devices. As of October 2020, 79.9% of active Facebook users accessed the social network ‘Only via a mobile phone.’ Combining mobile loyalty programs with social media behavior is thus a recipe for a winning customer retention strategy.
SheFit regularly runs reward campaigns through their Facebook page. Recently, for the holiday season, they invited their community members to enter a contest for a chance to win a $100 SHEFIT Gift Card. Their post got 100’s of comments and dozens of shares within a couple of days. Instant engagement at such a scale is only viable through mobile.
Visual loyalty and contactless checkout
In local stores, even today, the retailer recognizes you by the face and offers benefits like purchase on credit or home delivery. For large brands with a global presence, how do you replicate these experiences? Smartphones are perfect to offer these privileges through facial recognition technology and touchless payment integrations. These can provide everyday conveniences to loyal customers like lesser wait times for checkout, skipping the queues, and priority services.
CaliBurger experimented and launched kiosks powered with facial recognition technology a couple of years back. These kiosks recognize customers as they walk towards it and automatically offer loyalty rewards via their smartphones. It also lets them choose items and pay without pulling out their wallets!
How to design a great mobile loyalty experience
Designing mobile loyalty experience requires a one-to-oneloyalty platform accessible via smartphone, such as a loyalty app. It also requires that the user interface is simple to follow and guides the users towards one thing that matters the most to them – rewards and positive experiences. Below, we have listed four mantras of building a winning mobile loyalty experience.
Capture first-hand data
Your loyalty program rests on personalization, as we have seen in the previous section. It requires having reliable demographic, psychographic, and behavioral data about your customers. With a mobile loyalty program, you can gradually collect this data using progressive profiling, so it doesn’t irk the customers yet enriches your customer insights and data sets.
NorthFace, an American outdoor recreation product company, collects only the bare minimum customer details when signing up and asks for interests and preferences at a later stage.
Simplify the loyalty game
If loyalty is a game, and you want customers to play it, lay out the rules. Customers operate in a noisy environment, and they quickly forget complicated things. Hence your mobile loyalty program requires you to deconstruct the ‘what’s’ and the ‘how-to’s’ of your loyalty straightforwardly. Leave nothing to the customer’s imagination.
Sephora explains its loyalty program structure, tiers, and benefits very clearly to its customers. It says that ‘Beauty Insiders’ – their term for loyal members – earn exactly ‘1’ point for every dollar spent at Sephora stores. It also shows the various membership tiers in a tabular format.
Make it easy to win
According to a 2018 research by CodeBroker, most loyalty program members find it difficult to track and access the benefits. Thus, when designing your loyalty app user interface, it is critical to keep the essential things prominent and easily accessible.
Example: Chick-fil-A One keeps its customers focussed by highlighting the total redeemable points they have and the various ways to earn and redeem them. This no-brainer display makes sure customers can realize the benefits of the program.
Keep the engagement alive
According to a Localytics study, users with push notifications enabled for apps have 53% more monthly sessions than those without them. Push notifications have become an easy and quick way to update users and connect with them on-the-go. You can use this aspect of push notifications to enhance engagement through mobile loyalty apps. Greet customers when they arrive at your stores (through live location capture), alert them about expiring offers, send festive discounts or birthday notes, or ask them to share testimonials socially to earn more rewards.
Cineplicity uses push notifications effectively to attract customers to earn and redeem rewards at the right time. As we see in the image, they have shared a code to watch a free movie early in the day, so there is a lot of time for customers to notice the notification and plan their evening leisure activities.
Chances are, you are reading this blog on your mobile phone. Or have your smartphone close by. It may even have buzzed a few seconds ago. All around us, mobile has become the connecting thread for all kinds of people-to-people and brand-to-people interactions. We also see object-to-people interactions driven by mobile devices. Just think of the popularity of the Internet of Things (IoT), Augmented Reality (AR), Virtual Reality (VR), etc. These were novelties a few years ago, and today are the norm.
Even before COVID-19 shook the world and forever transformed customer behavior and the digital landscape, Customer Data Platforms were generating quite a lot of interest.
*Google Trends snapshot of the surge in search levels for the term ‘Customer Data Platform’
This is hardly surprising, considering that clean, usable data is vital for all functions within a modern enterprise – marketing teams use it for analytics, and personalized promotions, sales teams use prospect data for accelerating deal closures, finance, and operations leverage data to understand vendor payment patterns, etc. Research by MarketsandMarkets shows that the global CDP market is expected to grow to USD 10.3 billion by 2025.
What is CDP?
Customer Data Platforms craft unified customer profiles by integrating data from a variety of first, second, and third-party online and offline sources. This can include your CRM and DMP, POS systems, web forms, mobile apps, email, and social media, website and e-commerce behavioral data, etc. A CDP typically contains three layers: Data Capture (360 Degree View), Decisioning Engine (Smart Segmentation/Personalization) & Delivery (Omnichannel Engagement). Some CDPs offer only Data Capture (usually referred to as Standalone CDP) while others have extended capabilities like campaign execution.
Data Capture :
As the name implies, the data capture layer in a CDP collects data from multiple sources and resolves it under a Single ID. This can include behavioral, demographic, website browsing, campaign data, CRM Data, order data, POS data, ecommerce data, product data, offline data, and any other data related to a customer. Once set up, the platform will be able to recognize existing customers across multiple brand touchpoints (app, website, store, etc.) and enrich the profile based on the new interaction. The biggest advantage of a CDP is that the entire process of data collection, profile merging, and enrichment is done in real-time which elevates the value that can be derived from it.
Decisioning Engine :
Once the data is collected, the decisioning layer in a CDP can leverage AI/ML-based algorithms to create extremely precise and nuanced micro-segments based on multiple attributes like user behavior, demographics, location, average basket value, product preferences, purchase history, etc. For instance, you may want to target your most engaged customers within a 20-mile radius of an event. Or millennial customers near a particular store location, who are interested in red jackets, and visited your website in the past 2 months, and have an NPS score of +75. As you can imagine, the possibilities are nearly endless, and this makes CDPs a key tool in your personalization and customer engagement strategy.
The Delivery layer in a CDP essentially finds the ideal distribution channel and content for a specific segment or a user. This enables retailers to deliver hyper-personalized content across multiple channels like websites, mobile, social media, search advertising, and email marketing. For instance, the CDP can identify segments and deliver campaigns using dynamic advertising content for Facebook Dynamic Product Ads, Google Shopping, and Google Smart Display Campaigns. The campaign and content delivery module in a CDP work on a real-time, positive feedback loop and optimizes the channel mix for a specific user/segment based on several factors like delivery rates, conversion rates, engagement levels, etc. Over a period of time, the system can automatically pick the best channel and content to communicate with a specific user or a segment.
CDP Benefits from a Retail Perspective
Most brand marketers are adept at leveraging marketing automation tools for email marketing, SMS or social media campaigns etc. CDPs can supercharge a brand’s entire marketing ecosystem by empowering marketers with clean, enriched customer insights that translate to personalized, contextual, and high-conversion campaigns and customer experiences. Here are the key benefits that a CDP offers to retailers.
Connect Disparate, Siloed Data
Most retailers currently store their user data in isolated silos. For instance, a customer’s demographic data will be stored in the CRM, while behavioral and online data will be stored within marketing automation platforms, and transactional and purchase data will be stored within a different silo. This disparate data makes it difficult for brands to track a user’s journey and engagement levels. A CDP solves by unifying data from multiple silos into a centralized location that can be easily accessed by multiple teams. The data is then enriched on a real-time basis based on inputs from third-party data platforms like DMPs.
Get a Deeper Understanding of Customers
The Single View of Customer enabled by a CDP allows brands to get a complete overview of a customer’s journey. For instance, when did the customer first interact with your brand and on which channel, what are the products purchased so far, what are the store visit patterns for this customer, what are his/her style preferences etc. These deeper customer insights help brands to craft highly contextual and personalized brand interactions that lead to long term loyalty and higher customer satisfaction.
Deliver Hyperpersonalized Customer Experiences
A CDP with an AI-powered decisioning engine can enable retailers to hyperpersonalized experiences at scale by creating micro-segments based on multiple attributes like shopper persona, time, location, product preferences, channel preferences etc. This 1:1 level personalization contributes to higher engagement, conversion, and overall customer satisfaction.
Agility and future-readiness
CDPs are, by their very nature, connector systems and can quickly integrate with existing systems like CRMs, DMPs, etc, and easily connect to newer systems you might be adding to your martech stack. As the pace of customer behavior and technology adoption (IoT, AR, VR etc.) quickens, a CDP will make it easier to integrate these newer technologies.
Enterprise brands typically run marketing campaigns across multiple digital channels which makes it difficult to track attribution. A CDP creates a flexible reporting and unified attribution framework, which will ready the organization for a more comprehensive view of marketing activities and attribution across channels.
Loyalty Program Use-cases for CDP
Though they followed independent evolutionary cycles, CDPs and Loyalty Platforms are increasingly becoming interconnected to uniquely identify a user, track transactions and customer interactions across channels and devices, and personalize rewards and incentives.
The close integration and synergistic relationship also explain some key mergers and acquisitions in this space. Also, a big part of loyalty program evolution and advancement is tied to data and customer insights. This is where the relationship between CDPs and Loyalty Programs come to the fore.
Here are some of the advantages of an integrated CDP-loyalty system.
Create Seamless Personalization Loops: Loyalty programs offer tangible benefits to brands in terms of profits and revenue growth. However, their biggest advantage for retailers is a deeper understanding of customer behavior. Loyalty programs encourage customers to share more data which is then used to further personalize their experiences. A CDP-driven loyalty program helps brands to drive this feedback loop at scale across complex use-cases.
Improve Cost & Operational Efficiency: From a cost perspective, it makes business sense to have a unified platform for collecting data, segmenting audiences, and managing your campaign/rewards. Operationally, an integrated platform reduces data lag (between the collection, segmentation, and execution), and allows you to adapt faster to customer behavior, most often in real-time. This can be a significant game-changer for enterprise brands that handle millions of data sets.
Future Proof Your Business: As new and emerging technologies like Augmented Reality (AR), Virtual Reality (VR), and Internet of Things (IoT) contribute more data, a CDP-driven loyalty platform helps you craft delightful customer experiences that drive profitable behavior. For instance, the ability to quickly identify a customer cohort that is likely to be interested in these tech and incentivize them with a personalized offer to drive adoption.
Develop a Truly 360 Degree View of the Customer: Loyalty programs offer retailers a massive amount of transactional, behavioral, and demographic data. A CDP-layered loyalty system can quickly sync and unify this data with other non-loyalty-generated sources like POS, email marketing, etc to create a far richer customer profile quickly and easily.
Campaign ROI & Engagement Optimization: A CDP-driven loyalty program helps marketers to analyze the effectiveness of a campaign, promotion, or incentive in real-time. This can help in fixing issues around high acquisition costs or content ineffectiveness instantly. In the long run, the platform helps marketers to make predictive and prescriptive actions to ensure the success of a campaign or a promotion.
Data Quality Management and Predictive Capabilities of CDPs
CDPs can ingest unstructured, semi-structured, and structured data without any data loss and can also dedupe, transform, and enrich this data for easy analysis. CDPs achieve this through a combination of webhooks, standard connectors, and API integrations.
Here’s a typical 3 stage of Data Quality Management employed by CDPs.
Dyson collects, unifies, and enriches customer data from multiple channels like POS, Ecommerce, WeChat, etc. using Capillary CDP. The platform automatically matches identifiers across different channels to merge profiles and create a singular view.
Dyson leverages this Single View of Customer to enhance and optimize its lead management, member/product registration, product recommendation, and overall customer engagement strategy.
Advanced systems like Capillary CDP even offer an Advanced Analytics Dashboard that allows data scientists to execute complex, predictive data science algorithms and run queries using multiple languages such as SQL, Scala & more.
Example of Propensity Modelling Use-cases in Capillary CDP
In a nutshell, a CDP is defined as “a platform that creates a persistent, unified customer database that is accessible to other systems.” For marketers, this unified customer data gives a Single View of Customer’s online and offline interactions with their brand. This comprehensive view empowers marketers to deeply understand customers and serve personalized offers and recommendations via their preferred channels and devices.
How Covid-19 Highlighted CDP Criticality
As we enter the recovery phase, brands should be aware that certain trends like shift to digital engagement are likely to quickly accelerate in the coming days. Re-engaging customers and connecting with them in real-time using personalized content is more important than ever before. We foresee the increased adoption of CDPs, especially by brands and retailers to unify and make sense of the sudden avalanche of data that’s being generated due to higher digital use.
The pandemic has also brought to light some interesting use-cases for CDPs: for instance, quickly determining a segment of customers who would be receptive for location-based offers, subscriptions, buy-online-pickup-in-store, etc., notifications for out-of-stock items that are back in stock, or identification of customers who have traveled to an affected area.
From a marketing perspective, CDP and Loyalty Platforms are two sides of the same coin – they both serve to increase customer engagement and long-term brand loyalty. It simply makes sense to have them closely integrated on a single platform rather than disparate ones. Capillary’s Loyalty+ offers a unified CDP-Loyalty stack that is trusted by 400+ brands across the globe to increase sales, revenue, and business growth. Drop us a line at firstname.lastname@example.org if you’re interested in learning more about our solution.
When it comes to loyalty programs, retailers have not kept up with the times. They have paid way too much attention to customers’ wallets and very little to softer aspects like brand affinity, experience, advocacy, and engagement.
The need of the hour is not just a superficial rebranding of a loyalty program but a complete character overhaul that will transform the loyalty program into a key pillar in a brand’s marketing and engagement strategy. Without a DNA change, it will feel like old wine in a new bottle. Today, customers are smart enough to recognize whether your loyalty program is worth their time or not.
Over the last 10 years, Capillary has implemented 100+ successful loyalty programs and transitioned large-scale traditional loyalty programs into experiential, omnichannel programs for more than 400 customers across the globe.
Here’s what we believe separates the winners and laggards in the loyalty marketing space.
Four characteristics customers want in a loyalty program
When you look at what resonates with customers, we arrive at four (4) winning features of a loyalty program primed for driving higher sales and engagement.
It offers a consistent customer experience across channels
The customer gets the same experience across the brand’s touchpoints, channels, and people.
It leverages and encourages social behaviors.
Customers find it meaningful to exhibit their loyalty socially and participate in co-creating the loyalty program.
It applies gamification to improve engagement
The program makes it fun for customers to ‘do the next thing’ and ‘win’ a recognition or an incentive.
It goes beyond purchases and transactional rewards
The program appreciates and rewards emotional engagement and adds value to the customer’s life.
Engagement, and consequently loyalty-driven sales spike up when customers enjoy participating in your loyalty program. Now that we know the characteristics of a winning loyalty program let us discuss how you can revamp your loyalty program to drive a tangible impact on sales and engagement.
How to revamp your loyalty program to drive tangible sales
#1: Start by building deep customer insights
To be useful to your customers, you must know them thoroughly. You need to understand their behavior, interests and needs across the purchase lifecycle. And you need to look at these insights with an omnichannel lens – across online and offline channels. For example, look at your customers’ social media activity alongside the purchase checkpoints and find correlations (asking for recommendations, reading product reviews, etc.), or analyze their grocery shopping and find ways to add value through personalized offers (eg:- 1+1 on their preferred drink) Such a holistic view will give brands a better understanding of their loyalists and reveal how they may create more value, profitably.
Things you will need to consider:
A CDP to create an integrated view of customer data across different online and offline sources
A strong commitment to upholding customer data privacy
Success stories :
Bata, the Swiss footwear brand leverages CRM and Loyalty insights to create hyperpersonalized Facebook campaigns. The strategy helped them achieve 57X ROI and also unearth social media behavior about customers which were used to further enhance their personalization efforts.
Such dynamic and cross-channel data gives you in-depth information about customers in real-time — not merely when they make a purchase.
The luxury cosmetics brand Lancôme knows how valuable cross channel digital engagement with its consumers is.
It gives its members 10 points for every dollar they spend, but a much higher 25 points for sharing its product posts on Facebook, Twitter, or Instagram pages.
How customer insights drive sales:
Your customers stay with you because they feel valued and feel a sense of connectedness with your brand, And their positive engagement behaviors such as reviews or flaunting a purchase on social media spreads word-of-mouth, which peers trust more than any above-the-line advertising. This word of mouth brings you many more customers.
#2: Adopt integrated platforms and practices
Once you have identified your customers’ needs, you should hardwire the new thinking across your customer touchpoints. Bring different customer-facing teams on the same page, restructure the organization if needed. Get an integrated loyalty program technology that connects the separate dots – point of sale (POS), e-commerce, social media, CRM, ERP, marketing automation, financial, and customer service systems.
An AI layer on your loyalty platform to leverage predictive analytics and to personalize the rewards
Training your customer-facing teams
Malaysia’s leading pharmacy chain, CARiNG* offers its customers a multi-purpose, omnichannel, app-based loyalty program that packs a host of features like news updates, health screening packages, free checkups, workshops, shopping, and management of vouchers all in one place.
CARiNG* customers can use the loyalty app virtually as well as in-store – for instance, redeem digital vouchers in the store through barcode scanning, etc.
Starbucks brought together digital marketing, mobile payments, and loyalty teams to ensure a tighter integration and a seamless collaboration across their customer touchpoints.
*Capillary is proud to partner with CARiNG for this initiative
How integration drives sales:
Charity begins at home. A genuinely holistic and seamless customer experience only comes from a holistic and integrated approach within the organization. Such restructuring ensures different stakeholders speak the same language, have a common understanding of every customer, and see their individual functions as parts of the bigger whole.
#3: Redefine loyalty metrics
The way you measure loyalty also has to change from a short-sighted and transactional approach to a broader, engagement oriented view. You must complement metrics such as Repeat Purchase Rates (RPR) and Average Basket Value (ABT) with metrics like reviews given, QR codes scanned, referrals provided, time spent in stores, engagement on social media, email, ads, etc.
Native integration between your customer engagement and loyalty platform to map the overall engagement score into your rewards equation
Walgreens, the US-based pharmacy chain, rewards its members for adopting a healthy lifestyle.
It lets them connect their digital health trackers to its member app and gives them points whenever they engage in a healthy activity.
How engagement drives sales:
According to Forrester Research, emotion is the #1 driver of loyalty. Capgemini’s study further reveals that ‘Consumers with high emotional engagement’ buy the brand 82% of the time whereas ‘Consumers with low emotional engagement’ buy it only 38% of the time. Thus, by measuring and encouraging emotional engagement, brands naturally create customers for life. For example, Walgreens’ ‘Balance Rewards’ program has 80 million of its 130 million members actively participating.
Conclusion: Unshrink loyalty
It is time to look at the bigger picture when designing, monitoring, and measuring your loyalty programs. It is not one customer but a connected set of customers. Not one purchase transaction but the entire relationship. And not just one point of sale, but omnichannel interactions.
Thinking of the ‘whole’ is the change in perspective needed to revamp your loyalty program and drive tangible value from it.
Customer loyalty is a behavioral characteristic related to the brand preference of a shopper. When a customer repeatedly purchases from your brand despite having an option to opt for products from your competitors, they are said to exhibit customer loyalty. You build this loyalty over a period on the foundation of positive, memorable experiences that the customer shares with your brand. The more delightful the customer’s experience with your brand, the more they are likely to continue purchasing from your brand.
Customer loyalty programs are customer marketing strategies that focus on influencing the loyalty of existing customers. Such programs typically reward customers for specific, explicit behavior such as making a purchase or engaging with the brand consistently and positively. The rewards offered as part of loyalty programs are usually in the form of discounts on subsequent purchases, giveaways or complimentary products, or special privileges such as exclusive access to newly launched variants or limited-edition products.
As consumer purchase journeys became increasingly complex and non-linear, brands are increasingly leveraging loyalty programs as a linchpin to orchestrate and create memorable brand experiences for every touchpoint.
For instance, Tata Group, a global conglomerate with a diverse product portfolio spread across FMCG, Fashion Retail, Hospitality, Consumer Durables, Automotive, etc. is designing a super app-centered, lifecycle-based loyalty program to offer a connected and unified customer experience for every stage in the customer purchase journey.
The Changing Loyalty Marketing Landscape
Over the last few decades, loyalty marketing practices have evolved to remain relevant to the changing customer behavior, time spent on digital platforms, and the 21st-century lifestyle. These changes led to :
Rapidly declining customer attention span due to the surge in digital platforms and content overload
Customers expecting the same benchmark for easy experiences set by tech-driven consumer companies like Amazon, Uber, Apple, etc.
The COVID-19 triggered lockdowns, and the subsequent market conditions further disrupted the consumer landscape, by forcing people to stick to the familiar and the readily available options for their survival needs. Not surprisingly, walking in step with these tendencies, about 30% of the marketers have reallocated their budgets from acquisition to retention efforts.
Thus, we see a shift from transactional loyalty programs towards engagement-based and emotional loyalty programs. We also see gamification, omnichannel approaches, and the use of Artificial Intelligence and Big Data.
Let us look at some of these trends.
Engagement-based and Emotional Loyalty
As consumers become more aware and participative in the categories they shop, brands need to go beyond the spend-to-get rewards model and allow for experiential and emotional engagements with shoppers. So, the idea is to let them ‘do things’ with you, ‘be a part of some cause’ with you, ‘guide and be useful to another shopper,’ ‘co-create branded content,’ ‘voice their product experiences publicly,’ and so on. These are great ways to make your customers feel cared for, worthy, and not merely someone with a wallet. These are also great ways to enhance customer loyalty and to keep your customers engaged between purchases.
A great implementation of emotional and engagement-based loyalty is by Health Promotion Board (HPB)* of Singapore’s flagship program – Health Insights Singapore (hiSG).
The objective of the program is to understand the behaviors and lifestyles of Singaporeans and use the insights to encourage a healthy lifestyle. Participants are offered a free Fitbit Ionic smartwatch that collects lifestyle and behavioral data across various health topics such as physical activity, nutrition, and mental wellbeing.
Members can download the Healthy 365 mobile app and earn HPB Healthpoints for various challenges and tasks like National Steps Challenge, Eat/Drink/Shop Healthy, Healthy Challenge, etc. Participants can redeem the points for shopping and dining vouchers, as well for EZ-link top-ups.
Another good example of emotional loyalty use-case is Sephora. The brand complements their member discounts with offers like ‘facials from skin-care-gurus,’ behind-the-scenes access to their product formulations, and point multiplier events. They are also enabling their customers to use points to donate to charities like National Black Justice Coalition (involved with the Black LGBTQ+ community) and Project Glimmer (working for at-risk girls).
Similarly, the folks at 100% Pure, as part of their loyalty program, Purist Perks, offer their customers loyalty points every time they donate a hand-sanitizer. It leaves their customers with a favorable perception of the brand and makes them more likely to shop from 100% Pure over time because they care for a meaningful cause and do their bit for it. In a nutshell, “members are craving value more than ever.”
*Capillary is proud to support HPB for this initiative.
Gamification of Loyalty Programs
We live in the age of distractions and an insane number of choices. This means loyalty programs have to encourage engagement and ‘stickiness’ to stay relevant. By stickiness, we mean the ability to hold your customers’ attention and interest long enough for it to be valuable to you and them! That’s why Gamification is increasingly being layered within loyalty programs. The idea is to make it addictive to customers and to keep them engaged with the program.
Today, more than two-thirds of the world’s top 2,000 companies have embraced gamification in some way or the other. And research tells us that gamification of customer engagement programs leads to a 20% rise in brand loyalty.
Let’s quickly look at the five essential ingredients of a well-gamified loyalty program. First comes the alignment of the gamified design with the exact behavior the brand is aiming to inspire. Say it is ‘referrals,’ then they would be winning something every time they bring a new customer to you. Second is the program’s simplicity – it should be easy to understand and play at every subsequent step! The third is measurability – ensure that your customers can check how far they stand from the end goal and what they need to do to get there (think progress bars). Fourthly, the joy of participating in your loyalty program must be shareable with peers through fun posts or tweets. Lastly, it should be mobile-first and should allow customers to engage with it on-the-go.
For instance, Bakmi GM*, a famed noodle restaurant chain in Indonesia leverages gamification-based loyalty initiatives like Spin and Win, Pick and Win to improve customer engagement and time spent on its mobile app.
Starbucks is another brand that has managed to blend several gamification aspects into a loyalty app. For instance, customers can earn Bonus Stars for 4,5 and 6 consecutive store visits within a specific time period.
The brand also sends push notifications to keep customers informed of their program status, tells them exactly what to do and how to redeem the rewards.
*Capillary is proud to partner with Bakmi GM for this initiative
Omnichannel Loyalty Programs
Today, customers don’t pay heed to the channel they use to engage with your brand. And they expect the flow of customer data to be seamless across different modes of shopping and engaging with your brand. These could be website eCommerce, mobile app, brick-and-mortar stores, Instagram, or Facebook. Your loyalty program’s effectiveness hugely depends on the comprehensiveness of the customer profile, purchase patterns, and accrued rewards that were stitched together from multiple channels and brand interactions. You may have gathered these data from multiple channels and will continue to do so. But it’s important to connect the dots in real-time, build a Single View of the Customer, and personalize your shoppers’ experience at every touchpoint they use to interact with you.
Dyson* leverages the massive reach of WeChat to create a seamless omnichannel journey for its Chinese customers. It works like this: the consumer sees Dyson’s ad in the offline world, scans the QR code, and starts following the brand’s WeChat account.
He/she receives Welcome Bonus points for following the brand’s WeChat account. Based on the user’s demographic & location, the brand sends a personalized promotion to the customer. Once a consumer makes a purchase, they can scan the product code to earn additional points and rewards which can be redeemed for online transactions and in-store transactions.
Malaysia’s leading pharmacy chain, CARiNG* offers a fully omnichannel, app-based loyalty program that offers the latest news updates, health screening packages, free checkups, workshop invites, shopping, and management of vouchers all in one place. Members can use the app virtually as well as in-store – for instance, redeem digital vouchers in the store through barcode scanning, etc.
Bata* is another brand that has unified different sources of customer information into a unified whole. The brand achieved 57X ROI through precision targeting, by connecting CRM and Loyalty insights with its Facebook marketing efforts. The brand wanted to reach their customers across all channels. And that naturally included social media, where customers today spend the bulk of their time.
The strategy helped them glean vital social media insights about customers which were used to further enhance their personalization efforts. Such dynamic and cross-channel data brings you information that lives and breathes every moment — not merely when the customer exhibits an actual purchase activity.
The 7-Eleven chain in Thailand, comprising of 11,000+ stores (managed by CP Group*) consolidated siloed data of its customers and launched a personalized marketing automation solution across traditional channels and the LINE messenger using the LINE MINI App. The program is currently integrated across the brand’s POS terminals and allows the brand to personalize its customer engagement at scale to improve repeat sales, conversions, and store visits.
*Capillary is proud to partner with Dyson, Bata, CP Group & CARiNG Pharmacy for these initiatives
Use of Artificial Intelligence (AI) and Big Data in Loyalty Programs
The ubiquitous nature of Artificial Intelligence has made it a necessity in your customer marketing and loyalty programs if you want to stay ahead of the curve. After all, it makes life simpler for both the brands and their customers. AI helps brands to analyze large volumes of data points from different sources, track customer purchase and behavioral trends, and uncover profitable co-relations to accurately predict the right product and promotions to showcase to a customer segment, at the right time, and through the right channel.
Apart from personalization, another key use-case for AI in loyalty programs in Churn Forecasting – the system can essentially predict the likelihood of a customer switching to a competitor by analyzing several factors like NPS scores, purchase patterns, latency, and transaction values.
Brands can leverage these insights to create a re-engagement communications plan that remains personally relevant to each customer’s purchase journey and genuinely customized to their needs and preferences.
B2B Loyalty & Influencer Loyalty
Loyalty programs have been the staple of B2C marketing, however, of late it has become a critical channel marketing and relationship management engine for certain sectors like construction, automotive service, pharmaceuticals, manufacturing, etc. where the end-customer is not the primary decision-maker. Manufacturers are increasingly using app-based loyalty programs to identify key influencers like carpenters, painters, electricians, mechanics, etc., communicate product launches/new promotions, and reward the best performing ones.
For instance, Jotun Paints*, a Norwegian chemical company dealing mainly in decorative paints and performance coatings runs a painter influencer loyalty program across 16 countries across Asia and the Middle East. The program is designed around a mobile loyalty app with a QR scanning module. After the painter purchases paint from a dealer, an invoice is generated. The painter opens the app, inputs the dealer name, transaction amount, and scans the QR code on the paint tub.
Both the painter and dealer are offered points for the transaction. This dual-incentivization resulted in a higher repeat purchase rate for Jotun Paints.
*Capillary is proud to partner with Jotun Paints for this initiative
Unified and Coalition Loyalty Programs
Also known as a ‘group loyalty program’, coalition loyalty is a type of “unified loyalty program” where a group of unrelated brands bands together to offer a joint loyalty program. They are becoming increasingly popular amongst customers since it offers them greater flexibility and choice in earning and redeeming points.
For instance, the multi-brand loyalty program TAPTAP by VIG Group* connects more than 32 F&B and Entertainment brands like Jump Arena, Otoke Chicken, Chewy Chewy, The Pizza Company, etc and reaches 30% of Vietnamese customers.
The mobile-based group loyalty program unifies 600+ stores and ecommerce sites to offer a fully omnichannel loyalty experience for its customers.
From a brand’s perspective, the coalition loyalty program increases brand reach by giving them access to a wider customer pool and also unify customer data to build 360-degree views (shopping preferences across different categories, product preferences within each category, overall purchase lifecycle, etc.). This makes business sense for large conglomerates that handle multiple brand portfolios.
However, retailers intending to join or create a group loyalty program need to be aware of a few key pointers. First, the rewards structure should be such that it incentives customers to shop broadly across multiple partners or brands within the group rather than focus on a single brand. Second, the program manager must be able to take into account the prices of individual firms when setting the value of rewards. And finally, the brands joining a coalition must be able to negotiate the share of program costs they will carry based on their value contribution; for instance brands with greater market/brand pull will bear a lower share of program costs.
*Capillary is proud to partner with the VIG Group for this initiative
How Loyalty Program Impacts Customer Behaviour and Benefits Brands
Loyalty programs are growing in popularity for a reason. They make customers feel valued. And when that happens, their purchase values, frequency, and engagement rates see a significant uplift.
Much of it is rooted in behavioral psychology theories and is validated by multiple data-driven research and studies, and it indeed has a real influence on what customers do. Let us look at the many ways in which a loyalty program impacts customer behavior.
Increases Purchase Value
Brands that incorporate loyalty programs in their marketing strategy see a direct positive impact on their revenues. A loyalty program provides brands with rich customer data that can be used to influence purchase behavior and create high impact cross-sell/up-sell opportunities.
For instance, brands can leverage customer insights to generate real-time, rule-based dynamic vouchers during checkout. Each coupon will be unique and highly personalized based on multiple factors like customer’s purchase patterns, product preferences, store location, etc.
Dynamic Vouchers helped a leading hypermarket chain to generate $8.8 million in incremental sales with 3X higher redemptions (compared to text messages). As per research by Frederick Reichheld of Bain & Company (the guys who invented the Net Promoter Score!), increasing customer retention by 5% increases profits by a minimum of 25% to a whopping maximum of 95%.
Customers Trust You with Their Data More Easily
A great loyalty program experience is an opportunity for brands to showcase true brand value and offer customers relevant product suggestions, discounts, and other experiences in exchange for data. Consider the case of ‘personalization.’ Millennials know personalization makes their world more fun, and statistics reveal that more and more millennials expect brands to personalize their communication and messages. The loyalty program plays a vital role in bringing the customer on the same side as you, in curating these personalized interactions. It makes your customers more open about sharing demographic, psychographic, or behavioral insights. For example, they will more readily fill out profiles as part of your research initiatives. Brands can take it to the next level by letting customers participate in product sampling and creating focus groups.
Turns Your Customers into Brand Advocates
Your loyalty program automatically encourages your existing customers to speak well of you among their peers. Happy customers who shop from your brand time and again quite naturally talk about their shopping choices and the benefits they receive to other customers and thereby attract new shoppers to your store. If you gamify the loyalty program and reward non-transactional behavior like referrals, reviews, and social shares, you can easily strike a goldmine.
Here’s a classic example of advocacy accelerating customer acquisition.
Loyalty programs also often have an element of pride associated with the higher tiers of membership. It offers a sense of privilege and gives your customers some bragging points. These then entice new customers to join in and participate in the exclusive experience that your brand designs for its premium clients. It works on a social-proof model and brings you more and more new customers, while you focus on keeping the existing ones happy.
Elicits Honest Feedback for Improvement
With a robust loyalty program, your brand creates a direct and intimate communication line with your customers. It makes members eager to provide useful tips, suggestions, ideas, etc. that can help increase brand equity. Loyal customers who have been members for years and have first-hand experience of what it means to be a part of your world are in the best position to offer genuine and relevant feedback. Thus, your loyalty program can make the ‘voice of your customers’ louder and more authentic! You and they are ‘in it together’ and this way, your customers get to extend their influence over what you do, the products and services you offer, and so on. These can lead to new product developments, service design revamps, and even exploration of new retail and commerce channels.
Multiplies Participation in Omnichannel Campaigns
Your loyalty program also adds jazz to your activation events, digital marketing campaigns, product launches, seasonal offers, etc. Having a reliable database of active and emotionally connected customers gives you access to a pool of people who are many times more likely to respond positively to your communications, campaigns, contests, and more. This display of camaraderie and belonging in a public environment, whether on social media or in the real world, makes for a high conversion marketing cohort. For example, Harley Davidson is known for the ‘fierce’ loyalty it inspires among the ‘Harley Owners Group (HOG)’ – so much so that customers not only purchase and ride Harley bikes but also buy branded accessories and clothing.
Engages Customers as Brand Custodians
When your loyalty program succeeds in making your customers feel a sense of camaraderie with your brand, they naturally become your brand custodians – living, breathing people who defend a negative perspective about your brand.
Today, marketing in a digitally connected world is highly competitive, and prospective customers spend hours researching your brand and reading product reviews. Sites like Amazon, Facebook, and Google Reviews have become extremely relevant, and customers tend to trust them blindly.
Having a reliable and loyal customer base helps you stay ahead of the curve in trying times. Happy customers often answer frequently asked questions on your behalf, pitch in to help a fellow user or shopper out, and offer their two cents wherever they can make a difference. That’s why rewarding customers for non-transactional behavior like writing reviews, sharing social posts, and referrals goes a long way in expanding your reach as a brand.
Brings a Higher Return on Marketing Spends
We all know that acquiring new customers can be too costly, many times more than retaining existing customers. This is where loyalty programs wield their magic wands and multiply your return on every marketing cent invested. Loyalty programs act in a dualistic way to improve your marketing ROI: by giving you access to critical insights (interests, preferences, purchase lifecycle, etc.) on a deeply engaged cohort with reduced purchase friction and through referrals/advocacy etc. As the loyalty program matures, it turns into a self-sustaining and self-managed system (with the use of technology and effective management, of course!), that increases revenue and sales from existing customers while helping you acquire new customers at a reduced cost. The exhibited loyalty also results in a bigger market share and a more stable stock market performance. In short, the loyalty program helps you create wealth for your organization, your customers, and your shareholders.
Cushions you During the Rough Times
COVID-19 has exemplified how vulnerable the world of brand-consumer interactions are to global socio-economic factors. It has also shown that we live in a world where structural changes can happen faster than we can imagine. In this context, the relevance of brand loyalty has increased tremendously. At the same time, the grounds of loyalty have become shakier. Brands with a loyal customer base have indeed found it easier to engage, empathize, allay fears, and go out of their way to offer support. Loyalty programs bless brands with access to real-time, relevant customer data, and insights(decline in-store visits, reduction in average purchase value, shifts in product segments, etc.). It has helped brands leverage cross-channel communication through emails, social media, and WhatsApp to spark relevant conversations with their customers and maintain brand recall. Brands with limited access to customer insights will find it extremely difficult to revive themselves, reconnect with their shoppers, and identify them when they return to normal shopping behavior post the crisis.
How to Create a Loyalty Program?
Since loyalty programs are central to a brand’s operations, they need dedicated resources, time, management, and energy from your organization, especially during the initial stages of charting out the structure and the design specifics of the program. Far too many brands follow a fire-and-forget approach to deploying a loyalty program which results in them becoming liabilities instead of profit centers.
To be successful and have a positive impact on topline sales, loyalty programs need to be synced into the overall organizational strategy, specific business goals, and customer aspirations. Let us look at the main steps in creating a successful loyalty program.
Defining the goals and objectives
Start from your overarching business goals and identify where the loyalty program fits in. Narrow down on the critical business objectives you want to fulfill from the loyalty program. And then, evaluate the financial return on investment you would expect from your loyalty program. Going through this process can feel a bit like going back to your business basics, but that’s the intention here. It sets you free from biases and outside influences and lets you focus on how and why a loyalty program matters to your business at this point in time. Once you have these broader questions sorted, you will have the wherewithal to build a business case and refine it according to your budgets, resources, technological readiness, and customer needs.
Designing the route to loyalty
Once you have the rationale and your business case ready, you can get your creative juices flowing. This is where you can involve different perspectives both within and outside your company. Thinking about the ‘customer’s journey and experience’ is the most critical piece here. Put yourself in customer’s shoes or even better, get them involved in the program design through surveys, focus groups, or in-depth interviews. Insights gathered here will tell you a lot about customer motivations, preferences, behavioral traits, shopping tendencies, etc. Also vital is insights gathered from internal stakeholders across the organization – from store staff to Marketing Managers to Customer Service to the C Suite. These will help you discover what your customers want to achieve and how your brand can be a part of those aspirations. For instance, Amazon Prime was conceived around a key insight: customers hated paying shipping fees. Once you crack this for your brand, you will be able to figure out the protocols on which your loyalty program will work – i.e., the exact behaviors you want to influence, how to control them, and the value your customers will derive from participating in the program.
Analyzing your technological readiness
For a long time, loyalty programs remained fairly simplistic and were isolated to a single platform. But as they grew in complexity and functionality, loyalty programs became a centerpiece of the entire customer experience. New-age loyalty programs are extremely cross-functional and require close integrations with multiple systems like CDPs, Marketing Automation, Analytics, POS systems, in-store analytics, CRMs, and ecommerce platforms. The most important thing to ensure before launching your loyalty program is that you have the capability to process and make sense of the mountains of data that it will inevitably generate. Having the technology piece figured out is half the battle won.
Planning the program launch and promotions
Launching your loyalty program is a lot like launching a new product or campaign. You must know what to say, to who, and through which channels. For instance, you might have a segment of existing customers who will be more inclined to join the program and a segment that is likely to contribute the highest revenues. Try to find the overlap between these two segments. Also, at this point, you must have a sense of the marketing/promotional budget along with the expected signups/membership target. Let’s look at these aspects individually.
Knowing what you are aiming to achieve with your loyalty program launch is very important to : keep you, and your team focused, assess your launch’s performance, and tweak your variables midway if required. The key performance indicators could be the awareness generated, conversations triggered, word-of-mouth reach, and enrollment.
Exposing your entire customer base to the program at one go is not a good idea, simply because you would have left no scope for testing different versions of the same. We suggest that you create a small subset of customers with diverse purchase patterns, product preferences, engagement levels, and channel behaviors to test out the program in terms of engagement, customer benefits, and return-on-investment. This will surface your Ideal Customer Profile for the program and also give you and your team enough bandwidth to manage the program since it would be easier to deal with the expectations of a smaller customer base.
Everyone in your company should be thoroughly familiar with your loyalty program and the way it will change your customer engagement dynamics. All your employees must know what your loyalty program is all about, how it works, and how it fits into the broader business goals. These include your in-store associates, your customer support executives, your customer experience specialists as well your marketing and customer communications teams. The last thing you want is for your customers to feel your employees do not know what’s going on.
Your loyalty program launch communication should be easy to spot, simple to understand, and tempting enough to drive your customers to enroll or act upon the same. Tell them what’s in it for them and what they need to do to derive the benefits. It is also essential to use the right channels for promoting your program. Since a major selling point of a loyalty program is the exclusivity and ‘Inner Circle’ aspect of it, it’s important to make your customers feel special while communicating the program specifics. One-to-one communication channels such as Emails, SMSs, messaging apps like WhatsApp are a great way to capture customers’ attention and engage them better. If the program content and benefits is personalized to a customer’s age, location, purchase history, and product preferences, that’s even better!
Continuous program improvement
Once your loyalty program is in motion, it’s important to keep a close eye on how it performs. This, of course, requires having access to data reports and dashboards that give you a detailed and summarized view of program-driven ROI, contribution to the topline, customer engagement trends, location wise and season wise patterns, and more. These insights give you the necessary inputs to modify and optimize your loyalty program, and transform it into a self-sustaining virtuous cycle of rewards and revenue-creating a win-win scenario for both your brand and your customers.
It is here that investing in a holistic loyalty program management platform reaps enormous benefits. You can consolidate all your customer data in one platform, gain omnichannel insights into how customer interactions and shopping behaviors have been influenced by the program, and get real-time insights for the very critical seasonal sales and promotional campaigns.
5 Ways to Increase Brand Loyalty
Now that you are familiar with the hottest trends in loyalty programs and customer retention strategies, here are some of the best practices to increase brand loyalty amongst your customers.
Birds of the same feather flock together! If your customers feel you are ‘like’ them and that your values, priorities, and motives are similar to theirs, then they naturally get attracted to your brand. You can build brand affinity by associating with an influencer who fits in with your ethos and is respected and admired by your customers. You can also build affinity by spearheading a social cause, for instance, leveraging your loyalty program to minimize the negative impact on the environment or some unmet needs of a certain unprivileged section of the society. For instance, Shell* helps its customers minimize the impact of their carbon emissions by offsetting their fuel purchases using the Shell Go+ app.
The brand uses fuel purchase data to calculate the total carbon emission per customer and offsets their carbon emission by supporting groups and communities involved with preventing deforestation in regions like Peru and Indonesia.
*Shell has an active engagement with Capillary
Unique convenience aspects of your program create additional engagement and brand stickiness. Use-cases include access to online shopping channels, discounts within a partner ecosystem, value-addition (access to experts, workshops, exclusive events, etc.), fast shipping, or hassle-free returns. Analyzing the customer experience in its entirety will make it easy for you to understand how the program will benefit the customer at every stage of the purchase journey.
HBR research revealed that the top 10 most empathetic companies increased their financial value more than twice the bottom 100. Empathy and compassion here relate to day-to-day relationship micro-moments with customers rather than a ‘big act.’ Human-to-human interactions – such as between your staff and customers, at any of your stores, online, over email, or phone – are opportunities to make a positive difference. This, however, requires empowering your staff to act in the best interest of the customer.
When Nintendo launched Pokemon Go, 800 million people downloaded the app, raising Nintendo’s share value by 86% in the first week alone. Nostalgia has a strong pull-effect. It strikes a chord with customers across age groups, geographies, and ethnicities. Brands can find ways to resurface old memories and times lived, through advertising, digital campaigns, or merely one-to-one, personalized emails, and intelligently crafted messages based on the person’s profile and interests. This builds an association between memories and the brand. Paperboat, the Hector Beverages owned food and drinks brand leveraged this effectively in their mass campaigns and brand communications. The brand posted a 62% surge in revenue for FY19.
Otherwise known as ‘premium’ or ‘paid’ loyalty, customers pay a fee to earn special loyalty privileges in this type of program. Although subscription loyalty need not wholly replace a freemium version of your loyalty program, it can certainly complement it. The benefit of a paid model is that you can offer instant rewards to customers – right from sign up – without impacting your bottom line. It also nullifies the typical program lag between earning points and redeeming rewards. Members within a subscription loyalty program usually contribute significantly higher sales and revenue due to the loss aversion mindset.
How to Measure the Success of your Rewards Program
Once you have launched your rewards program, you need to monitor its performance continually and observe the trends and changes in your customer behavior, sales, and customer satisfaction metrics.
Certain specific key performance indicators (KPIs) help to measure your loyalty program’s success.
Repeat Purchase Rate (RPR)
The repeat purchase rate is a ratio of your repeat customers versus your total buying customers. It gives you an assessment of the pull factor and brand affinity. To calculate this metric, run a report on your total number of customers, followed by your total number of repeat customers. Divide the number of repeat customers by the number of total customers. Next, multiply that number by 100 to get a percentage (i.e., 0.01 is 10%).
Each industry has a different benchmark for Repeat Purchase Rates (RPR) and each store will have a different RPR depending on the inventory mix and which customer segments you’re targeting. Generally, a 20-40% RPR is considered a good range. A dip in RPR is indicative of an ineffective customer engagement/ marketing strategy and/or loyalty program architecture. Try executing personalized (demographic, purchase lifecycle, product preferences) cross-channel marketing for your target segment, along with Bonus Point promotions, Win Back offers, etc.
Customer Retention Rate (CRR)
You are converting visitors into buyers but are you able to keep them engaged for months or do they switch to a competitor after the first transaction? The answer lies in your Customer Retention Rate.
Also shortened as CRR, the Customer Retention Rate is another way of measuring the extent to which your brand and loyalty strategy is able to retain your customers over a period. You can calculate it as per the below formula:
The customer retention rate reveals the percentage of customers returning to your brand within a specific period. It thus removes new customers added during the period to give you the ratio. Your loyalty program will have a significant influence on the Customer Retention Rate (CRR) and a dip in CRR requires reassessing your program structure like reward catalog, earn/burn rules, tier upgrade rules, and ease of redemption. There are several ways to boost your CRR: optimizing your loyalty program architecture and increasing engagement and brand recall through cross-channel marketing, personalizing promotions to a micro-segmented audience, and utilizing customer feedback and surveys to enhance products and services.
Loyalty Redemption Rate (LRR)
This metric is a good measure of your loyalty program’s engagement value as it reveals how participative your customers have been. Loyalty Redemption Rates (LRR) is critical to the effectiveness of your loyalty program since it has a direct impact on your loyalty-driven topline sales. The redemption rate depends on your loyalty program’s simplicity, attractiveness, and popularity among your customers. It is a ratio of the total points redeemed by customers versus the total points issued by you over a period.
The loyalty redemption rate helps determine the relative success and ease of utilizing different loyalty initiatives, types of loyalty points, and earning and redeeming methods.
A low Redemption Rate indicates that your customers are not actively engaging with the program, either due to complex program structure, steep redemption rules, lower value Per Point (VPP) or a restricted reward catalog.
Customer Lifetime Value (CLV)
CLV, or Customer Lifetime Value, is a master metric that analyzes a customer’s value across the brand relationship cycle. It calculates the value customers have already brought to your brand and also predicts the future value they could add. CLV is the difference between total revenues (earned plus expected) and the total costs of acquiring the customers (incurred plus forecasted).
At a glance, CLTV tells you how much a customer is worth to your brand and gives you insight into their overall value. From there, you’ll have better clarity of how much you should be investing in customer retention going forward. This is a great way to segment your highest-value customers, giving you a chance to target them with personalized campaigns intended to increase engagement and loyalty —and their overall spend. A CDP integrated loyalty platform like Loyalty+ is an excellent tool for calculating CLV, since it aggregates all the key data components in one place.
Increasing Customer Lifetime Value is usually the topmost KPI for brand managers and marketing heads. In a retail scenario, CLV boosts can be achieved by increasing the Average Order Value and Purchase Frequency through personalized, time-bound Dynamic Vouchers, Celebratory Campaigns (Birthdays/Anniversary etc.), Bonus Point Campaigns, cross channel marketing etc.
Loyalty marketing is quickly evolving beyond the confines of being just a retention program and into a critical entity within the Customer Experience flywheel. As a result, loyalty programs have become complex engines with many moving parts that – when managed well – can significantly accelerate the company’s growth and revenues. A well-run loyalty program can dramatically increase the economic value of an organization by means of continuous investment in the right customer acquisition channels and marketing strategies to improve profitability. And most importantly, they are a key factor in crafting those micro-moments of delight throughout the purchase journey; and transforming casual shoppers into staunch brand advocates.
The majority of retailers still view their loyalty programs through a restrictive and narrow ‘purchase-and-get-points’ lens.
We are not discrediting the model; it has been proven effective, and given the challenging economic landscape, discounts and store credits still carry a lot of weightage. Having said that, brands will have to take into account the rapid commoditization in the loyalty marketing space (the average customer is part of 15+ programs) and relook at their loyalty program to give customers a compelling reason to come back beyond cost savings.
Expanding the Scope Of Your Loyalty Program
While discounts and cashbacks are great for attracting new customers and lowering the risk of commitment, there lies a massive opportunity for brands beyond the horizons of transactional loyalty.
A staggering 84% of consumers in a study said they would actually spend more with retailers that offer points for activities other than spending.
*Report by COLLOQUY
To boost customer retention and program ROI, brands will need to expand their loyalty program to incorporate behavioural, experiential and engagement-based rewards like QR code scans, store check-ins, app download, newsletter subscriptions, product trials, event access, social shares, and reviews in addition to transaction-based rewards.
Trailblazer Brands in the Non-Transactional Loyalty Space
China has been at the forefront of O2O, omnichannel, and loyalty marketing innovations and the underlying tech powering most of these transformations is WeChat – the largest messaging app in China with a whopping 1.2 billion monthly active users from a wide range of age groups.
Brands like Dyson*, Kipling* and Lee* have managed to crack the omnichannel customer journey code by incorporating omnichannel loyalty, non-transactional rewards, and of course WeChat.
1.The consumer sees the brand’s ad in the offline world, scans the QR code and starts following the brand’s WeChat account. He/shereceives Welcome Bonus points for following the brand’s WeChat account. Based on the user’s demographic & location, the brand sends a personalized in-store promotion to the customer
2. The customer earns points for checking-in at the store and for completing a transaction. The brand also generates a real-time, limited period discount coupon for a different product.
3. Once the customer purchases the cross-sell product, he/she receives a feedback survey. The customer completes the feedback survey and earns more points in their account.
4. A few weeks later, the customer receives a notification for an online sale and is prompted to redeem their points to get higher discounts.
With this journey, the consumer has been incentivised to explore all of the brand’s touchpoints (WeChat, physical stores and online channels), thereby giving the branda complete Omnichannel View of the customer.
Another great implementation of non-transactional rewards and gamification in loyalty is by Health Promotion Board (HPB)* – a statutory board under the Ministry of Health (MOH) of Singapore that was established to enhance and drive national health promotion and disease prevention programmes
HPB’s flagship program – Health Insights Singapore (hiSG) – seeks to understand the health behaviours and lifestyles of Singaporeans. Participants are offered a free Fitbit Ionic smartwatch that collects lifestyle and behavioural data across various health topics such as physical activity, nutrition and mental wellbeing.
With the Healthy 365 mobile app, participants in the programme earn HPB Healthpoints for diverse use-cases like: wearing the smartwatch, completing step count challenges, syncing fitness records, answering questionnaires, scanning QR codes and recording meal logs.
HPB uses Healthpoints to drive real-world changes in consumer behavior by rewarding users for healthier purchases (through barcode scans from food, drink or grocery consumption) and redeeming them for shopping and dining vouchers, as well for EZ-link top-ups.
[*Capillary has an active engagement with these brands]
Leveraging AI to Measure the Impact of Non-Transactional Rewards
Retailers have traditionally focussed on the transactional aspect of loyalty programs and for a good reason – it’s easier to quantify and track the ROI. However, advances in AI and Machine Learning have made it a lot easier for retailers to understand which non-transactional rewards and strategies drive sales. According to a Capgemini report, 70% of consumers with high emotional engagement spend 2X higher with the brand.
AI can help marketers understand the impact of different experiential rewards and engagement strategies in influencing a customer’s decision to make a purchase, move the item to a wish list or abandon the purchase cycle. The algorithm essentially compares multiple combinations of successful and unsuccessful reward, promotion, engagement strategies. The ones with positive influences can be further enhanced and the negative ones removed to optimize the process.
The data reveals that a certain segment of customers is likely to purchase a product after a free trial. In this case, offering rewards for sampling and trials to that select group could increase the probability of a purchase.
Your customer feedback suggests that product returns are spiking due to customers not realizing product value due to inconsistent usage. Offering rewards for continued product use can reduce returns and reinforce product value. This is a great use case for fitness trackers and electronics.
Millennials are sidestepping your brand due to limited product reviews. Rewarding customers for publishing trustworthy online reviews could attract new customers. This is a quick hack for brands with limited digital mindshare.
Benefits of Non-Transactional Rewards
Nurture Emotional Loyalty
Non-transactional rewards are a great way to strengthen the emotional loyalty of a brand-customer relationship. Emotional loyalty is a combination of three components (Affinity, Attachment & Trust) and together they underscore the reason why customers prefer a brand over the others, beyond the monetary aspects.
A study by Wunderman Loyalty states that 79% of customers will only consider shopping with brands that show they understand and care about them. By rewarding all kinds of engagement, not just transactions, you demonstrate that you care about your customers beyond their wallet share. The simplest and easiest way to get started on this path is to offer personalized rewards on special occasions (birthdays, anniversaries etc.)
Boost Engagement Rates
The biggest benefit of non-transactional rewards is by far the ability to sustain continued customer engagement outside of the purchase cycle. Unfortunately, most brands have a disconnect between their customer engagement strategy and their loyalty program. When layered together, they create almost endless opportunities like rewarding user-generated content, recycling initiatives, charity and donation drives, writing product reviews, product-related quizzes, or referring a friend. The rise of Smart Tags and IoT expands these use cases even further: for instance, brands can reward workout progress, going for a run in their new shoes, or minimizing carbon footprint.
Acquire Deeper Customer Insights
Non-transactional data allows marketers to glean a wealth of additional information about customers and their life outside brand interactions. Analyzing these data reveals what is important to program members, and allows marketers to craft more personalized and meaningful experiences that can further improve the engagement rates, thereby creating a positive feedback loop.
Tips to Incorporate Non-Transactional Rewards
Create a Lifestyle App
The best way to adopt a non-transactional reward strategy is to see your loyalty program as a dualistic entity: one with marketing and Customer Experience components. The points, redemption and transactional part of your program flow into the marketing bucket while the engagement and emotional aspects are part of the Customer Experience universe. The important thing to remember here is that the experience has greater longevity in your customer’s mind compared to discounts.
A great mobile app experience can serve as the linchpin that connects these two aspects of your loyalty program. Several brands like Walgreens, Starbucks and Amazon have cracked this coded fairly well. For instance, in addition to earning, tracking and redeeming points, the Starbucks app allows customers to place orders, pay for an order and even stream music on the go. Likewise, the Walgreens app offers extended functionalities like upload/refill prescriptions and pay for purchases in addition to its loyalty program.
Incorporate Gamification Elements
Gamification is essentially the application of game design elements in a non-game environment. From a loyalty program perspective, this involves status and tiers, levelling-up and unlocks, missions and challenges, goal setting, progress feedback etc. The idea is to boost engagement as well as the stickiness factor of the loyalty program. In a Bond report, over half (53%) of members said they were interested in using game mechanics and 81% of members engage with game mechanics when they are present.
Bakmi GM*, a legendary restaurant in the Indonesian culinary scene leverages gamification-based loyalty initiatives like Spin and Win, Pick and Win to improve customer engagement and loyalty.
Virgin Red is another classic example of a gamification-driven loyalty Program; it incorporates several game mechanics like virtual treasure hunts, leaderboards, secret vaults that can be unlocked for prizes, and daily quizzes to earn extra points.
[*Capillary has an active engagement with the brand]
Invest in the Latest Loyalty Tech
Non-transactional rewards that are not contextual or value-driven will fail to spark customer interest. That’s why data should be at the core of a great loyalty program experience. Retailers should be able to integrate data from multiple sources like in-store, social media, website, app and customer helpdesk, not just purchases. A slew of technologies like CDPs, DMPs, CRM and advanced AI should work in tandem with your loyalty program to blend customer’s digital avatar with brick and mortar store behaviour to create the famed Segment of One. Once you have access to behavioural and transactional patterns of a customer, it becomes a whole lot easier to drive hyperpersonalized and contextual rewards at scale across online and offline channels.
The lines between the Brand, the Program and the Customer Experience are increasingly blurring but the Program remains a critical part of a customer’s relationship with the brand. As the Brand and the Program have become more intertwined, a new paradigm has emerged – one where the Program is an extension of the Brand and serves to enhance the Brand experience.
Except for supermarkets and convenience stores, most retailers see a customer an average of 5-6 times a year. The ongoing digital explosion will likely reduce the frequency to 2-3 in the coming days.
Unfortunately, traditional loyalty paradigms are built around the number of transactions and repeat purchases. To make it worse, even as customers’ behaviour and purchase journeys have become increasingly complex and non-linear, retailers are still stuck with a one-dimensional view of customer loyalty.
Rethinking Loyalty Program Paradigms
In the last few decades, customer loyalty got heavily tied to discounts, points and promotional offers – basically a purely transactional or functional form of loyalty. The biggest reason for this is sheer convenience – it’s easier to nail down the rational aspects like repeat sales, basket size, and customer lifetime value (CLV). However, this only provides a one-sided view of loyalty – for instance, a customer might detest a brand but continue purchasing their products due to lack of choice (Comcast?).
There are critical downsides to measuring customer loyalty from a purely transactional standpoint. And these downsides are becoming increasingly accentuated in the digital world.
Today’s ever-connected customers have hundreds if not thousands of choices at any given point. And as humans typically do when presented with a lot of choices – they rely on several factors like brand experience, emotional connect, convenience, price and reviews from friends and families to guide their choice. With so many variables on the table, how do brands begin to predict customer behaviour?
The answer lies in seeing customer loyalty with a dualistic mindset: one with an emotional as well as a transactional nature. And with each passing day, it’s becoming imperative for brands to view customer loyalty from this new vantage point.
What is Emotional Loyalty
Rather than give you a long-winded and boring definition, we’ll try to explain it with an example. Imagine a tourist exploring a new city. After a long day of sightseeing, he feels drained and craves a coffee and sights:
Phew, I badly need a coffee, is there a Starbucks nearby?
That sums up emotional loyalty – it’s a fast and almost instantaneous positive preference for a brand with zero rational or logical deliberations. Unsurprisingly, Starbucks also has one of the best loyalty programs in the F&B space.
Components of Emotional Loyalty
A customer feels an affinity for a brand when they deliver great goods and the branding matches their lifestyle. It’s important not to confuse ‘Affinity’ with ‘Loyalty’ . A customer might feel an affinity for a brand but it doesn’t mean he/she will be loyal to it. In a sense, ‘Affinity’ lies closer to ‘Preference’ or ‘Liking’. For instance, customers who only have an affinity for a brand will easily switch to a competitor with a better product or lower price.
As the name implies, ‘Attachment’ implies a connection to a brand. A large part of attachment is tied to how a company engages with customers. Make the effort to build meaningful connections through highly personalized communications that are relevant and useful to the customer to strengthen this aspect of emotional loyalty. Another great way to improve the brand attachment quotient is by rewarding engagement, in addition to transactions, and recognizing premium customers with exclusive benefits and acknowledging their status in every communication.
Trust is the most important element in the emotional loyalty construct. It’s essentially the framework on which Affinity and Attachment are built upon. Brand communication and customer engagement are critical in establishing trust. To create a sense of trust, offer authenticity, great support, timely communications, respect for customer privacy and ability to provide feedback.
How to Measure Emotional Loyalty
Marketers typically track behavioural loyalty metrics like conversion rates, customer value, basket size to gauge the effectiveness of a loyalty program. However, it’s equally important to analyze emotional loyalty metrics that gauge intent, sentiment, perceptions, and customer experience :
Net Promoter Score (NPS) :
Envisioned by Fred Reichheld of Bain & Company and Satmetrix Systems, NPS measures customer responses to the famed single question: “How likely is it that you would recommend our company/product/service to a friend or colleague?”. It is a highly popular framework due to its simplistic nature and how the score calculations are clearly defined. However, that simplicity can often hide the root of the problem. For instance, brands with very dissimilar distribution of Detractors, Passives & Promoters could arrive at the same NPS score. Therefore, NPS scores should always be used in conjunction with other Customer Experience metrics and business results.
Customer Satisfaction Levels :
Tracking customer satisfaction levels through simple surveys can offer brands a sense of how customers perceive the brand. These informal surveys allow marketers greater freedom in tackling specific issues and reporting them. Granted that they might not offer the clear metrics and apples-to-apples comparison NPS offers but they can reveal abstract and often hidden insights. For instance, when Expedia aligned Customer Satisfaction with other loyalty metrics, it discovered a key insight: customers are frustrated when offered two one-way flights at a lower price than a roundtrip due to the hassles with changing flights. This helped Expedia to streamline the booking process thereby elevating customer satisfaction.
Sentiment Scores :
Sentiment Scores are a good way to unearth the overall brand perception and customer intent. The common way to do this is through text analysis of internal and external customer feedback (blog comments, surveys, call center transcripts and social media data). Sentiment analysis generates a word cloud that uncovers what’s working well and what are the most painful aspects of the customer journey. A word of caution: Sentiment Scores are perceptions and might not directly translate to action so it’s important to overlay them behavioural metrics like repeat sales, churn rate etc.
How to Nurture Emotional Loyalty
Building emotional loyalty requires an integrated and dynamic mix of activities and interactions between your brand and customers that will drive personalized engagement at every touchpoint. Here’s how successful loyalty programs build affinity, attachment, and trust among customers:
Create unique, personalized experiences
From premium rankings to exclusive event passes, customers expect unique, personalized rewards and experiences that make them feel special and appreciated. Ensure your loyalty program offers these one-of-a-kind rewards by leveraging loyalty data to understand customer preferences and interests. Alternatively, offer early access to sales or limited-edition rewards to make customers feel good and build a greater emotional attachment to the brand.
Anticipate your customer’s needs
Just as customers expect a more personalized experience, they also expect brands will leverage customer data to predict their next likely action with a brand. Brands can add value for customers by demonstrating they understand their needs and are committed to creating a better brand experience for them. Enterprise loyalty program platform like Loyalty+ offers predictive modelling capabilities which capture customers’ contextual and behavioural data and leverages it to predict next-best-action in the customer’s journey.
Prioritize data security
Make data security a top priority— invest in loyalty management best practices that protect customers against fraud and spam. Doing so ensures great customer experiences while driving greater trust with brand advocates who know their data and privacy are respected.
Encourage two-way communication
A strong emotional relationship requires honest communication. The same holds true for emotional loyalty. Allow customers to connect with you to provide their feedback and opinions. This creates a sense of being valued, appreciated, and respected; creating attachment and trust. Conduct VOC polls and surveys to validate your product concepts or messaging while generating data that can be used to create more relevant, targeted experiences that will resonate with your target audience.
The UAE and the Middle East as a whole poses several challenges for marketers and brands. This is because individual markets within the geography display similarities in culture, language and habits but at the same time have varying differences. For instance, the UAE and Saudi Arabia are geographical neighbours and both are part of the GCC council, however, the spoken dialect of Arabic differs considerably from each other.
To serve this complex, multi-cultural and multilingual cultural landscape there are a plethora of media, which makes it challenging for brands to reach out to their audiences. For instance, there are over 300+ TV channels in the region and over 3,000 officially registered print titles. In addition to this, there is a large number of blogs and digital publishers which further makes the digital media landscape even more fragmented.
The Convergence & Contradiction
Despite the regional and cultural differences, one area where there is convergence and similarity amongst the GCC countries is trends around media consumption and advertising spends.
For a long time, even as early as 2015, TV and newspapers accounted for the majority of advertising revenue in the Middle East. But this has been changing recently and the region’s digital marketing spends have been steadily increasing.
Internet advertising spend in the MENA region is expected to reach more than $5 billion, according to eMarketer and digital ads are expected to make up about 40% of that. Continuing its growth, regional spend on digital ads is expected to reach 28 percent of total ad dollars spent by 2022, with Google search ad spend accounting for the lion’s share.
The contradiction here is that despite declining ad spend, television consumption in the region shows no sign of slowing down. Even though the greater portion of time spent with media is through the internet in UAE – an average daily time a user spent is over 7 hours – there is still a significant TV viewing time of 2 hours 30 minutes. And MENA as a region has a substantial 5 hours average daily tv viewing time.
The surge in free to air channels, the rising penetration of video on demand and streaming networks, and COVID-induced quarantines are all expected to further contribute to a spike in TV consumption patterns at least for the near future.
The key takeaway here is that marketers and brands in the UAE are presented with a unique opportunity in terms of a large population (9.6 million), that consumes media across diverse traditional and digital channels (Television, Newspaper, Facebook, Instagram, Google Ad Networks, Snapchat, Tik Tok etc.) and are extremely tech-savvy (99% social media penetration) and connected(99% internet penetration).
The Omnichannel Marketing Imperative
Omnichannel marketing is simply unifying multiple marketing channels in a way that creates a logical progression for your target audience to progress from one stage to the next. The various channels (SMS, Email, Ad Networks, Facebook, YouTube, Instagram etc.) need to work together and provide context for the messages your customer receives as they move from one channel to another. The biggest advantage of omnichannel marketing is that it creates a win-win situation for both the consumer as well as the brand. From a brand’s perspective, it improves engagement/conversion rates at a higher ROI; for customers, it provides a connected brand experience regardless of the channel they chose to interact with the brand.
An omnichannel marketing strategy essentially stands at the crossroad that connects in-store retail, ecommerce, customer engagement & marketing.
There are several reasons as to why retailers and brands in the UAE are perfectly poised to leverage the benefits of omnichannel marketing to improve brand loyalty.
Let’s dive in.
Investments in AI & Big Data
Omnichannel marketing leverages AI and Big Data to improve personalization and improve ROI by automating the channel mix for every customer based on his/her response and conversion rates. And the UAE government has been focussed in investing heavily into AI and digital initiatives. His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai recently approved the UAE’s action plan on artificial intelligence and digital economy. In 2019, Sheikh Mohammed had appointed a full-time minister to increase the contribution of the digital economy from 4.3 percent of GDP to 8% in the next 5 years.
Omar bin Sultan Al Olama, Minister of State for Artificial Intelligence, Digital Economy and Remote Work Applications, recently released a comprehensive plan that focuses on providing tools and infrastructure to support the UAE’s leadership in digital transformation initiatives. The larger business community in the region shares a similar view in terms of technological adoption; a PwC report states that digital transformation is the key priority for 88% of Middle East retail CEOs.
Faster Retail Recovery from the COVID Crisis
The United Arab Emirates is predicted to be 6th best performing market in 2020 (of the 49 economies compared by GlobalData) with spend growth remaining in the positive territory, mostly due to the short lockdown period of just two weeks for non-essential stores.
With lockdown restrictions for non-essential items being lifted in the UAE, retailers have started reopening stores with safety and hygiene measures that are likely to be used as a benchmark for other brands that are considering how they can operate safely.
While the recovery in retail and consumer consumption is optimistic, brands are likely to be cautious about launching large scale campaigns. Omnichannel marketing presents a unique opportunity for brands to launch highly targeted and personalized campaigns and loyalty program initiatives even with a constrained budget.
The Launch of 5G
As adoption of 3G and 4G services gathers pace, the next stage of the region’s mobile revolution will be driven by the launch of 5G networks.
This technology, the GSMA estimates, will cover about 30 percent of the region’s population by 2025, with Ericsson predicting 17 million 5G subscriptions by 2023. To put it into perspective, that’s almost the same number as the total number of mobile connections in the region two decades previously.
The UAE is also the third most-connected country globally, after US and Switzerland and the Telecommunications Regulatory Authority of UAE has established three committees, including all stakeholders (operators, manufacturers, academia and users), to synergize the 5G rollout in the region. This initiative by the TRA works with several strategic partners to make UAE a leading country in deploying 5G.
Accelerated Ecommerce Growth
Even before the pandemic, the UAE was the first growing ecommerce market in the region and was projected to grow at 23 percent annually between 2018 and 2022.
A recent survey conducted by Ernst & Young found that 92 per cent of the consumers in the UAE have changed their shopping habits – including shifting to online purchases. Around 68 per cent of UAE consumers said that Covid-19 led to their first online grocery purchase, while 70 per cent have made their first online purchase from pharmacies.
According to PwC, 53% of Middle East respondents had increased their use of smartphones for shopping in response to the pandemic. The results also suggest in particular that shopping via smartphones will continue to rise after lockdown ends, with 92% of those consumers who increased their shopping via smartphone reporting that they were “very likely” (63%) or “likely” (29%) to continue with this purchase method once social-distancing measures are removed. In essence, the impact of COVID-19 has forced change: consumers who were previously resistant to using mobile payment channels discovered that purchasing goods and services on their smartphone was not only easy but convenient too.
Recently, ZON, hailed as the “the region’s first fully decentralized mobile-only ecommerce network,” raised $8m in seed funding, ahead of its launch later this year. Meanwhile, Mumzworld, an online baby shop, reported an 800% increase in activity across channels. There have also been instances of traditional retailers partnering with online retailers – for instance, Emaar Malls partnered with Noon.com to launch a Dubai Mall virtual store to support retailers and the community during the lockdowns.
Significant Millennial Population
Millennials account for 30% of the population in the UAE and they are characterized by extreme digital-savviness and high spending potential. Being digital natives, they also account for the heaviest consumption of digital content, clocking at least 6 hours of Internet usage every day across multiple channels. Video content networks, especially YouTube is an extremely popular channel within the millennial demographic with more than 50% acknowledging that their shopping was influenced by YouTube videos/ads.
Surge in Social Media Usage
With 9.73 million social media users, UAE has a whopping 98% social media usage rate. YouTube leads the pack with 8.65 million users, followed by Facebook (7.77 million), and Instagram (6.68 million). Amongst the messaging apps, WhatsApp has the highest adoption rates with 7.77 million active users. Millennials account for 45% of social media users. Marketers can leverage omnichannel marketing to create highly engaging, rich media content across multiple platforms to progressively nudge users to the next step in the purchase cycle.
While omnichannel marketing is universally relevant and seeing rapid adoption across the globe, the United Arab Emirates is fortuitously placed in unleashing the full potential of the technology.
According to the 2019 survey by McKinsey, brand loyalty among the Middle Eastern consumers has eroded. 18% of the Middle East consumers confessed trading down (purchasing lower-priced consumer goods) in 2019 as compared to only 8% in 2015. Not surprisingly, the trend has only grown stronger with the 2020 pandemic.
These consistent and visible changes in consumer behaviour are a result of various concurrent factors – economic slowdown, the volatility of oil prices, government reforms, tax policies, and, more recently, COVID-19.
Overall, the Middle East consumers are less optimistic about their financial prospects and prefer to save more. Interestingly, retail analysts have observed that shoppers are shifting to lower-priced brands and intend to ‘stick’ with their new choices, even if their financial prospects improve. It indicates that the perceived (and real) quality of lower-priced brands has increased, with more consumers trying them.
Apart from price-sensitivity, we also see a shift towards more ‘conscious shopping.’ Preference has increased across all age groups, including the younger generation, for environmentally sustainable goods, all-natural ingredients in food and beverages, and locally sourced products.
Distrust for the conglomerates and larger brands, tripled with a sense of belonging towards the nation and a responsibility to revive the economy, is also visible in the purchase behaviour of millennials. They are ditching years of brand loyalty in favour of lesser-known local brands.
COVID has also accelerated the shift towards online shopping by leaps and bounds. So much so, that over 90 percent of consumers in the UAE and Saudi Arabia have shifted their purchases online. For example, Carrefour has experienced an 800 percent spike in online grocery orders in Saudi Arabia. Similarly, Majid Al-Futtaim Retail has welcomed a 300 percent growth in online sales from March to May 2020 as against the same period in 2019.
Loyalty Program Trends in the Middle East
With such drastic changes in shopping behaviour, retailers need to adapt and change the way they engage the Middle East consumers with their brand, ethos, and products. Quick fixes like deep discounts and price cuts would not be a sustainable approach and might lead to long term damage to the brand’s bottom line. Hence, engagement through emotional loyalty aligned with the evolved needs of the millennials becomes extremely important for the Middle East retailers to adopt.
On that note, here are our top loyalty trends that are likely to prevail in the Middle East.
Digital-first, omnichannel loyalty programs
Smartphones have eroded the differences between online and offline shopping experiences.
70% of loyalty program members currently access their rewards using an app. Like for everything else, consumers want to be in greater control of things. And loyalty is no exception. Businesses adopting omnichannel strategies using the latest loyalty software are seeing 91% higher customer retention rates than those that fail to adopt these techniques.
Retailers should thus focus on investing in channel-agnostic loyalty marketing technologies that provide a convenient, win-win platform for brands and consumers to interact and engage as well as exchange and track value across channels in a highly transparent manner.
Sustainability and social-consciousness in reward programs
As the younger generation becomes a truly glocal one, ‘responsible consumerism’ is fast catching up.
48% of MENA’s millennials only buy from socially responsible brands. And 45% prefer buying from local brands as an expression of solidarity with the local economy.
For brands that want to retain their customers in this heat of economic upheaval and rising competition, it becomes essential to offer a reason more substantial than a “points-based loyalty system.” Retailers should thus look at helping their consumers support a cause they care about when shopping for the category (say environmentally safe packaging in food or indigenous community-led fashion production).
Data-driven, engagement-based loyalty program
According to research by Forrester, emotion is the #1 driver of loyalty.
A study by Capgemini further reveals that ‘Consumers with high emotional engagement’ buy the brand 82% of the time whereas ‘Consumers with low emotional engagement’ buy it only 38% of the time.
The emotional engagement of consumers has today become extremely easy to notice, measure, and reciprocate. Positive interactions on brand’s owned channels (Instagram, Facebook Live), reviews and references, and participation in online activations (contests, etc.) – are all signs of emotional bonding. As price sensitivity increases in the Middle East, brands should appreciate and reward such non-spending but emotion-driven behaviour.
Coalition reward programs
A consumer’s shopping list is a long one.
And your brand is just one of the line items. Thus, when formulating loyalty programs, it is vital to consider the consumer’s entire lifestyle and allow scope for deriving loyalty benefits across the board.
Shared loyalty programs do just that. They allow redemption of loyalty rewards in multiple ways, at various places, and in numerous categories. Led by the participating brands themselves or independently branded by loyalty rewards program providers (such as Plenti in the US and Nectar in the UK), these offer freedom and flexibility to consumers. They also attract new customers from related categories if you strategically choose a partner with a shared demographic of customers.
Personalized, contextual rewards
The person before purchases.
What millennials expect from brands is to be understood, followed, and remembered as human beings. It is all about making them feel special. According to statistics, 91% of consumers are more likely to shop with brands that provide offers specific and relevant to them, and 31% of shoppers wish their shopping experiences were more personalized than they currently are.
It means something like offering a complimentary fashionable face mask to a consumer who may have ‘liked’ and ‘shared’ it from your Facebook page but didn’t end up buying. Today, there’s technology like Capillary’s engagement-based loyalty program to make it happen at scale!
Gamification and geolocation in loyalty programs
A good loyalty program has neuroscience behind it and is experiential in nature. Brands that incorporate gamification into their customer engagement strategies see a 47% rise in engagement and a 22%rise in brand loyalty. Loyalty gamification starts with a clear idea of what consumer behaviour to inspire, a simple-to-follow set of rules, and an easy way to know where the participant stands in the process. Starbucks, for example, uses push notifications to alert customers of their rewards status. And Florida’s Good Vibes Juice Barmakes loyalty shareable by inviting customers to post pictures of their glass bottles online.
The 2020 COVID pandemic has made it very clear to retailers that shopping behaviour can change overnight. Consumers who had never shopped online before or never cared to try little-known local brands are doing so out of financial uncertainty and a sense of responsibility towards their country. Softer aspects of personalization and corporate social responsibility (CSR) are adding their weight alongside technology and gamification. Embracing these shifts will require a considerable realignment in the way retailers engage with new-age shoppers and earn their loyalty.
It is the dawn of a new age of consumerism – one where consumption is a way of self-expression.
Even before the COVID pandemic, consumers and businesses in the Middle East were reeling from the socio-economic impact of tumbling oil prices, digitization and geopolitical instability.
Consumer sentiments around job and financial security in the region have been steadily declining in the last 2-3 years. A 2018 report by Mckinsey that surveyed Saudi Arabia and Egypt and UAE found that more than half of the consumers (55%) now look to spend less and save money. This trend will be further amplified by the ongoing COVID crisis, but supplemented with higher adoption of digital channels.
The Winds of Change
The pre-existing purchase power fluctuations and the recent apprehensions around health/hygiene have heavily impacted the shopping behaviour of consumers in the Middle East. And more importantly, it has fundamentally shaken long-standing customer-brand relationships and led to a large number of customers migrating to cheaper, better-value alternatives.
The McKinsey report also reveals that more than half (54%) of those who have chosen lower-priced alternatives were satisfied with their decision; which is an indication that the trend is likely to be sustained in the future.
These shifts in consumer behaviour are especially interesting in the Middle East context – it’s often perceived as a bastion for luxury shopping and where the large majority of the populace prefer to purchase from a narrow and select set of brands. The rise of ecommerce in the Middle East led to consumers searching out lower prices and offers on their preferred brands. The current zeitgeist seems to be a cost-conscious hunt for cheaper alternatives.
What’s Eroding Customer Loyalty in the Middle East
Consumer behaviour shifts usually don’t hinge on a single entity and are typically driven by a collective system of change factors. Here are the major ones impacting customer loyalty in the Middle East.
Rapid Rise of Ecommerce
While ecommerce had a slow start in the region, it has steadily picked up pace in the last 2 years. Saudi Arabia’s ecommerce market is expected to hit 9 billion USD by 2025, rendering it one of the fastest-growing ecommerce landscapes in the world. The COVID crisis further accelerated ecommerce adoption in the region, especially for the grocery and personal care segment.
The ecommerce shift will surface new-age brands and expose consumers to high-value, cost-effective alternatives to their preferred brands. For instance, the rise of ecommerce in India has led to traditional companies in the personal care, FMCG and electronics space losing wallet share to digital-first consumer brands like BoAt, WoW Skin Sciences and MamaEarth. Consumer affinity towards these brands is highlighted by the fact that most of them have crossed INR 100 crore in revenue within 24-36 months of launch, a feat which used to take 5+ years earlier.
The Middle East also enjoys a high smartphone, internet and social media penetration which has connected the digitally-savvy population with global brands and digital-first labels. The integration of native commerce by social networks like Facebook, Instagram and Pinterest is further likely to entice consumers towards newer brands that are more cost-effective and promise higher value.
The COVID Pandemic
The pandemic contributed to declining customer loyalty in two ways: by accelerating ecommerce adoption and shrinking the consumer wallet share. The closure of shopping malls and stores as part of lockdowns imposed to curb the spread of the virus has compelled a large segment of consumers to shop online.
This shift in consumer behaviour is particularly visible in GCC, according to research by Ernst & Young (EY). The firm conducted a survey in the first week of May that revealed that 92% of consumers in the UAE and Saudi Arabia had changed their shopping habits, with 52% terming the change “significant.” While Carrefour’s online grocery platform in Saudi Arabia saw an 800% spike during the COVID pandemic, Majid Al-Futtaim Retail witnessed a 400% YoY growth in orders and a 300% YoY growth in online sales between March-May 2020.
The COVID-induced job losses and salary cuts have also led consumers to tighten their purse strings and look for ways to save money. According to a report by Inmobi, 19% of users in Saudi Arabia said they had seen salary cuts or a loss in business, while 15% said they were laid off or had to shut down their business. The impact has been more severe in the UAE where 28% of people polled in the survey said that they have already dealt with salary cuts or a loss in business. According to a Mckinsey report, 92% of consumers in the UAE have tried a new shopping behaviour in the post-COVID world (in terms of new store, brand, product or channel)
The Large Millennial Population
The Middle East is home to around 108 million millennials and they account for about 60% of the population. Globally, millennials are notorious for their fickle brand loyalty and only 7% of millennials identify themselves as brand loyalists. However, millennials in the Middle East are an outlier here – a Google Consumer Barometer study found that millennials in the region demonstrate more brand loyalty than their peers in the US, the UK, Japan or Australia.
A significant number of millennials in Saudi Arabia and the UAE considered just one brand before a purchase But there is a flip side to this narrative. However, higher millennial loyalty has a price tag attached to it in the form of higher expectations.
The Google report also mentions that Arab millennials have a shorter supply of patience and are less forgiving when it comes to encountering bad user experience, especially on mobile devices. It mentions that 43% of millennials in Saudi Arabia will switch to a mobile-optimized site if they experience any problems.
While this trend will not directly lead to a decline in brand loyalty, the lack of focus on customer experience and user experience – especially by newer entrants who rushed their ecommerce launch- will cause a significant number of consumers to switch loyalties.
How Brands Can Adapt to the New Loyalty Narrative
Adapting to these rapid changes and fluctuations in customer behaviour and brand loyalty can be tricky. But it’s not impossible. Based on our experience with 400+ global retailers and insights from millions of customer interactions, here’s what works :
With a large segment of consumers migrating to ecommerce, retailers should ensure that their loyalty programs seamlessly adapt to digital channels like websites, mobile sites and apps. More importantly, they should maintain a unified platform for storing user data, purchase history and other membership details to enable a great omnichannel experience, regardless of whether the customer shops online or in-store.
Offer Adaptive & Personalized Rewards
With consumer behaviour in constant flux, it’s vital for brands to offer a highly personalized loyalty scheme that adapts quickly to these behavioural changes. Personalized loyalty programs powered by advanced analytics lets you predict the probability of a customer to redeem an offer, target specific segments at the right moment in the purchase cycle or dynamically change offers/promotions/points based on recent purchase behaviour of a specific customer.
Drive Deeper Engagement through Emotional Loyalty
In a crisis situation where the purchase intent tends to be low and there is higher friction towards spending, it’s important for brands to shift away from the traditional earn/burn loyalty program models. Emotional loyalty programs that are built around communication and engagement rather than transaction has been proven to be especially effective in these circumstances. For instance, retailers can leverage the higher social media and digital usage to reward customers for writing reviews, liking/sharing brand posts or taking part in contests.
Double Down on Customer Experience
Perhaps the single biggest factor that influences customer loyalty is Customer Experience. Ecommerce brands in the Middle East and everywhere in the globe should prepare for higher traffic, orders, returns/cancellations etc in a strategic way. The first thing to consider is your ideal customer segment and their immediate shopping list (eg:- grocery, personal care, safety/hygiene products etc). Next up, fix disrupted supply chains, and have clear communications with manufacturers about production capacities. And finally, make sure you communicate supply chain issues, delay in delivery or fast selling products on your product pages. This honest and open communication allows you to manage customer expectations and prevent negative experiences later.
The COVID crisis and the digitization policies by GCC governments will make the fight for customer wallet a whole lot fiercer in the coming days. Brands and businesses in the Middle East seeking to gain a competitive edge should leverage smarter analytics, engagement-based loyalty programs and new-age customer experience platforms to ensure they stay ahead of the competition.