The Impact of Loyalty Programs: Pros and Cons
Loyalty programs are designed to reward your most valuable customers. Businesses choose to implement a rewards program to retain current customers and convert new buyers into loyal customers. Traditionally, many businesses use rewards programs such as rebate programs, cashback, earning points, and others to incentivize customers to make purchases.
What is a Loyalty Program?
The most basic definition of a loyalty program is that converting customers into brand loyalists necessitates a repeatable process that incentivizes them to continue purchasing from you. Loyalty membership is essentially the process of rewarding customers for their frequent or ongoing engagement with your brand through structured marketing strategies.
They receive more rewards as they spend more. Customers will feel good about purchasing from you if you put customer preferences at the heart of your marketing efforts and execute a program well, giving your business a competitive edge over your competitors.
Why Are Loyalty Programs Necessary?
Loyalty programs were created when businesses realized that the competitive advantage, they once had due to product differentiation was no longer valid due to the proliferation of similar looking and “me too” products. Having loyal customers became more important and difficult in such an environment.
Advantages of Loyalty Programs
Loyalty programs became popular because they offered businesses a way to maximize their customers’ lifetime value, along with the following advantages:
1. Retention of Customers
A loyalty program’s primary goal is to retain customers by rewarding them for repeat purchase behavior. According to Khan and Khan, “loyalty exists when a person regularly patronizes a specific (store or non-store) that he or she knows, likes, and trusts.” In short, a customer loyalty program is a tool for retaining customers by providing them with a compelling reason to return to the company and establishing habits.
Many studies have been conducted to explain the relationship between loyalty programs and retention rates. According to one European study, customers’ relationship perception of a loyalty program offered by a Dutch financial services company explained about 10% of the total variation in customer retention and customer share.
Customer retention strategies have a well-established direct impact on the bottom line of a business. A company with a 60% customer retention rate loses three to four times as many customers as a company with an 80% retention rate.
2. Customer Information and Consumer Trends
When a customer registers for a loyalty program, their information is saved in the company’s database. Companies can use this data to segment their omnichannel, offline, and e-commerce customers, profile their best customers and tailor their offerings to specific groups of consumers.
Because loyalty program data provide a comprehensive picture of customer behavior, purchasing habits, and preferences, the company can use it to improve inventory management, pricing, and promotional planning. This information also allows marketers to assess the effectiveness of special promotions based on additional purchases, the use of additional channels, or a shorter time between purchases.
3. Increased Cart Value
Data collected by a company can be used to cross-sell and up-sell. It can provide extended warranties after a purchase, recommend accessories that complement the purchased item, and provide discounts on related purchases. Furthermore, the loyalty program can provide relief by increasing demand during slow seasons.
The best example is an airline mileage program that is only available on certain flights. Because there are less wastage, such targeted promotions are more likely to produce satisfactory results.
4. Getting Rid of Unprofitable Customers
One of the less frequently mentioned benefits of loyalty cards and programs is that they allow businesses to shed excess weight. A well-designed loyalty program enables businesses to segment their customers and identify profitable and unprofitable customers. It assists them in dropping customers who only buy discounted lines and avoid the premium range regularly. These customer profiles may end up costing more than they generate.
5. Improved Customer Communication
A loyalty program provides a direct line of communication with customers, making interactions much easier. Aside from promoting sales and announcing new products/services, a useful item on this list of the benefits and drawbacks of loyalty programs is that they facilitate recalls when necessary. This is possible due to the recalled items’ purchase date and barcode. Because it is based on the consumer’s actual purchase of the affected good, the recall notice gains weight and significance. In comparison to a store sign or newspaper notice, this email-borne recall notice has a high chance of being read by the public.
Disadvantages of Loyalty Programs
Loyalty programs have not always worked the way businesses aimed them to. Here are a few disadvantages you should hedge against while using a loyalty program.
1. Loyalty Behavior Is Difficult to Assess
It is extremely difficult for the loyalty framework to break free from the transactional spirit. A frequent buyer appears to be a loyal customer often. However, this may not be the case, as he may be purchasing from the company simply because it is convenient for him. Or he may be purchased solely for the benefits provided by the loyalty program in the form of rewards. As a result, loyalty, which is essentially an emotion, may not be measured by the loyalty program.
2. Keeping the Bottom Line in Check
The financial aspect of loyalty programs is the most stressful of all the benefits and drawbacks. Discounts, in any form, are detrimental to a company’s bottom line. A typical $50 sale transaction has a cost of $40 and a profit of $10. A 5% loyalty discount—$5 off a $50 sale—reduces profits by 50%. The costs remain constant, but instead of earning $10 on each sale, the profit is reduced to $5. What appears to be a minor discount (in this case, 5%) can have a significant impact on profits.
The key to overcoming this financial setback is to ensure that your loyalty program is reasonably priced and effective. If the program is truly increasing repeat purchases and average order value, you should have no trouble recouping your losses if your discounts are balanced.
3. Saturation of the Market
Loyalty programs, like products, are ubiquitous and may appear identical. They are all similar in terms of membership requirements, purchase requirements, and benefits. However, in today’s ultra-competitive world, businesses are unable to back out of their loyalty program commitments due to the fear of lost sales.
With the average household participating in over nine reward programs, businesses must develop programs that are distinct and distinguishable. However, creating a loyalty program based on a sustainable competitive advantage that cannot be replicated is extremely difficult. However, advocate loyalty programs are a good way to stand out because you can reward customers for doing things that are unique to your audience.
4. Profitability Variability
Based on past customer behavior, loyalty programs hope to increase repurchases. However, their incomes, needs, and lifestyles change over time. Naturally, their purchasing habits shift. People prefer to avoid the traditional loyalty program. According to a Maritz poll, four out of every ten loyalty program participants left at least one program. That is why some experts are understandably skeptical of loyalty measures such as RFM (Recency, Frequency, and Monetary Value). RFM is a useful tool for measuring customer loyalty, but it is far from perfect.
5. Loyalty Data Limitations
Because loyalty data excludes purchases from other brands and stores, it provides a skewed picture of consumers’ overall purchasing behavior. Data from customer panels may also be more representative than data from loyalty card members. Furthermore, customers may be offended if they are uncomfortable sharing sensitive information to receive the program’s incentives.
However, this point on the list of the benefits and drawbacks of loyalty programs can be addressed by incentivizing customers to share their other purchase data by rewarding them for submitting third-party receipts to you. You can gather this information to reward them for their purchases of your goods while also processing the receipts for additional information, whether they do so by scanning physical receipts or forwarding e-receipts.
Conclusion
Nobody can deny the value of loyal customers. The point of contention is the loyalty program’s ability to generate more loyal customers. This is because not all loyalty programs are successful. Some have failed due to their undifferentiated appeal, while others have failed due to poor implementation. Some have also failed because of incorrect value propositions.
Understanding the benefits and drawbacks of loyalty programs will aid in avoiding such errors.
Role of Rewards in Driving “Value Sharing”
“I do not love rewards!”, said nobody. Rewards are always exciting and free vouchers always boost the motivation of the customers. Also, customer loyalty programs are the best way to drive value sharing in the business either by helping in buying decisions or keeping employees motivated to achieve a certain goal. The end goal of every business has to be to achieve the buyer trust and a brand name of its own which only can happen with the help of high sales and motivated employees. Both the driving forces can be kept happy with free goodies that come as a reward to them. Value Sharing is an extensive subject that includes not only building on buying decisions but also include other intangible good a customer can do to a brand in terms of helping in word of mouth or act as a repeat customer. In short, a reward will make a customer happy and a happy customer will help in adding to the value share for the business.
Here are certain points to help you understand the role of rewards in driving Value Sharing.
Satisfied Customer Base
Buying and purchasing is a daily activity a customer does but when the target audience shops he adds on to the credibility of the brand as a whole. On top of the quality products you promise, if the customer also gets a good discount or a buy one get one free option it will help in saving more and bring a purchase satisfaction to your customers. This will help you in retaining more customers.
Win Customer Trust
Winning a customer is one thing and retaining the existing customers is another. Most of the times major brands also indulge in a plan to do a lucky draw and only one winner wins which in fact makes a lot of people disappointed and sad who do not win the draw resulting in a reduction in sales and unhappy buyers. Winning customer trust is important.
Add More Customers
loyalty reward management programs in terms of discounts and sales often add on more footfall in your store or website and help in adding more customers to your database. Discounts and other rewards act as a driving force for the customers to invest more money in you than your competitor.
All in all, rewards are a win-win for both the buyers and the sellers where they gain in terms of a customer or retaining customer and the customer gets brands at reasonable prices. For more end to end reward program solutions, one can visit rewardport.in. Through research and collective expertise, we guide our clients with choices to help them motivate their people. Be its sales force, channel partners or employees. We motivate to enable people to do things differently, by developing their strengths, knowledge, and confidence. They care and focus to build a relationship with people… Forever.
A Guide to the Ultimate Loyalty Program
What is a customer loyalty program? It is a full-fledged marketing plan to retain a brand’s loyal customer base. A company which uses customer loyalty programs benefits more at any point of time than a company which doesn’t use it. Moreover, it is likely to cost a brand more to acquire a new customer than it does to retain an existing one.
Did you know? Your existing customers spend about 70% more than the new customers.
It is time you incorporate success-driven customer loyalty programs in your brand’s marketing plan.
Today we have an impressive list of technologies to get customer attention and direct them in buying a product or service. Nowadays, customer loyalty programs have become increasingly important and gain a bigger potential to retain existing customers. Chances are some of them become active members.
Customer loyalty programs should be included in all companies that value its buyer base. Buyers who stay true and loyal to the brand help spread the word and encourage their families, friends and others to know more about the brand. This, in turn, increases free referrals.
If you are running a company and looking to maximize your customer base, the following inputs will make the process smoother.
How to make a customer stay with your brand?
- Analyze your target audience with their expectations and tastes. Then, work on a strategy that helps you achieve your customer acquisition goal
- It is important to maintain consistency in your product quality while you try different ways to promote the same
- Whenever and wherever it is required, attend to your customer feedback and reviews
- Always keep a tab on your sales performance and listen to what your buyer says
- Your loyalty program should be designed in a way that gives the maximum value to your customers
A detailed and customized loyalty program will make your buyers feel valued and important for the business that you do. This excites them to be a part of your brand today and in the future. Appreciate your customers by including fun and surprise elements whenever they make a purchase.
By learning what they like and see in your product//service, you will be in a better position to evaluate your plan and make necessary adjustments which will then increase their brand loyalty. They would love coming back to you. Use the present opportunity to learn about your customer touch points. How often do you meet your customers to interact with them? Learn more ways to improve your customer loyalty both online and offline. Research about the key metrics that help determine your customer value. Chart out plans for reward points and recognition. Find out different methods to motivate them. These will guide you to design the ultimate customer loyalty program for your brand’s success.
Avoid these 5 common mistakes in 2019 if you want to run a successful loyalty program
2019 has just arrived and every brand or organization is already prepped up to create and build loyalty programs that are not just interesting but engaging and utilitarian in nature. Times have changed and are likely to keep changing at a fast pace and all you need to do as a brand is to get with it! Old-school ways have ought to go and newer ways and strategies must be embraced to cater to the evolved set of customers you have.
Here are the top 5 common mistakes that you must avoid if you wish to run a very successful loyalty program:
1. Cut the complications
2019 should be all about being apt and adept. The basic rule to this is to do away with any kind of complicated rules. The simpler, the better. It is one thing to create exciting offers and incentive programs and it’s another to complicate it through multiple tiers and rules. The point is to be straightforward and prominent. The reason you need to keep the complicated rules to the bare minimum is that you want to gain your customer’s attention by offering them valuable loyalty programs and not have them occupied in figuring out or calculating their gains.
For instance, if your loyalty program need points to be converted into monetary value then make the who process simpler by denoting each point to a certain value of money. Eg: 10 points = 10 Rupees
2. Being generous with the validity
This is a must-have condition for any loyalty program at this point in time. If you are looking for customers to reflect their emotions and trust towards your brand for a long time, then it is necessary that you stick to your words; in this case, the rules you assign to the program. People will bestow you with their loyalty if your program offers them a large window of redemption of the loyalty program they have. Even better would be to stake out any form of validity period at all! Shorter periods for the redemption of these incentives or rewards might project your brand as a petty or cheap brand.
3. Don’t bore it
One of the main reasons why a loyalty program is offered in the first place is because you want to create loyal customers out of your target audience. If your loyalty programs offer you the straight-out-of-the-mill type of incentives then you’re clearly not doing great! Boring needs and has to go out. A BOGO offer is acceptable only if your company has five other offers that are sure to knock your customers out of the park. Creating new, interactive and creative ways to get your customer’s attention or loyalty is of utmost importance.
4. Few Amends Only
Take a loyalty program live to the public only if you have complete faith and confidence in it. Should you feel that there are bugs or smaller errors to be amended before going live, it is imperative that you make sure to get it changed prior to making it available to your audience. Frequent changes in your loyalty or incentive program can directly affect the faith of your customers on your products and services. It also tends to distract them easily.
5. One-tier rewards are a No-no
As it is earlier mentioned, it is important to create reward programs that make your customers want to stick with your brand for longer. To initiate such long-term behavior, it is important that you develop loyalty programs that are manifold and offer more in each segment and not be static in any way. Multi-tiered reward systems engage your customers and encourage them subtly to get back to you in the hopes of getting onto the next tier of the program.
With such simple yet significant changes, you are sure to make the most of 2019 with your loyalty programs. Remember to gauge your audience at all times and work around their expectations to reduce discouraged behaviour from your customers. If you can let go of these 5 major mistakes while structuring your loyalty programs, then your program is set to be a hit!
How to Prepare for a Successful Loyalty Program This Festive Season?
Once the festive season arrives, every company tries to amp up their game especially the commercial consumer brands. Each brand aims for higher engagement with their audience and customers in any form and medium.
They plan events and programs that help in promoting their brand or products to their target group which in turn increase sales of their product. Festivities also mark a stark rise in the social media pages or websites of different companies which are often carried out with the end goal of reaching out to more favourable customers.
Most of the companies focus on collaborating with other brands in order to offer a combination of rewards and festive gifts that may be further booked in bulk by major corporates for festive gifting as well as in the form of loyalty programs that can be redeemed as per the receiver’s whim.
Many corporate companies tie up with F&B companies to avail sweetmeats and decorative gifting options. Although corporate gifting is a major trend amongst big companies, it is also very common for them to offer their employees with attractive vouchers, gift cards and loyalty program offers that provide them with an opportunity to redeem them according to their preferred time and avail items that meet their requirements.
Below mentioned are a few ways in which companies can create a successful loyalty program for the festive season:
1. Cashback is in
It’s a natural psychology of people to get attracted to offers that allow them to get a percentage of their money back in the form of hard cash or even virtual money; that’s precisely how one can cash onto a large section of the working class people.
It allows them to shop for a certain amount and receive a fraction of their expenditure in the form of cashback. Tieing up with clothing brands or restaurants that offer a cashback on purchase from them can prove to be a healthy collaboration for both the employer and the employee.
2. Discount Vouchers & Coupons
Everyone is in a festive mood when any of the big festivals arrive and shopping for their desired clothes, accessories and appliances become a must for many, which is particularly when a company must collaborate with electronic companies, clothing brands, etc as it is highly likely to pull crowd once they see a discount on their favourite item of choice!
Coupons also work in a similar way as they help people get a discounted price when they apply a specific coupon applicable to their purchase. Rewarding employees with vouchers and coupons that enable customers to avail a certain discount based on the net purchase amount usually works great and even greater during the festive season!
3. Freebies & combos
Having a loyalty program that allows you to choose from a variety of products and then getting a free product along with it makes people extremely happy and allows the retailers to sell more items at a fairly good rate. Freebies also encourage people to share good reviews about their shopping experience and also helps in getting free PR from their customers! This can work particularly well if teamed up with restaurants as people are highly likely to eat out during that time and free meals or happy hours, etc. work great during this period.
4. E-commerce
The world is now run online and thus, it is imperative to be conscious and strategic in placing yourself with the right type of E-commerce website as it is likely to fetch great returns if done the right way.
Companies can collaborate and offer their employees codes or referral links to avail a certain product or reward on their partner E-commerce website, which allows the employees to shop straight at their homes or desks without the hassle of travelling to brick and mortar shops to purchase festive articles.
This technique projects the company associating with them in a good light along with their own brand which was chosen as their partners. It’s a win-win situation, most of the times!
Loyalty programs can be a great way to encourage people to buy from a particular brand or channel and it also helps in trust building factor or employees towards their company itself. This occurs due to the choice of loyalty program made and the offers made are generally very attractive. The festive season, in general, is a great time to pair up loyalty programs as they make everyone feel like they are getting something extra and are rewarded for the same!
How to make your Loyalty program addictive
Today Loyalty programs form a major component of engagement with all the stakeholders in business. Their significance is of prime in retaining existing customers and thus reducing higher cost inputs. Similarly, improving the B2B partner relations or motivating employees is crucial and is made easy with Loyalty programs.
Giving Rewards while empowering the customers
For any business, empowering customers helps developing confidence in them about the business. Customer should be given a platform to review the products/services. This should be achieved actively by offering loyalty points to the customer for a single review that they provide for the product or service received.
This eases feedback taking and incentivizes the customers to review.
Special occasion rewards
The loyalty programs can be offered at special occasions for the existing group of customers with higher discounts or amplified rewards than on the regular days. For instance, a gift card and 10% cash-back or an online shopping coupon & 100$ cash-back on minimum purchases.
Reminders go a long way in keeping the customers hooked especially on the special events in their life such as birthdays or anniversaries
Bundled offerings
Businesses can bundle their products into a packaged offerings to the customers such as Amazon Prime. It offers unlimited free delivery of products coupled with free music & movie streaming on Prime Music and Prime Video respectively and numerous flash deals.
B2B
Successful businesses today rely on cordial relations with the existing trade partners/ clients. It takes a great amount of effort in building the relation and trust and even greater to maintain it. The partner loyalty program ensures that the partners are engaged in work with the businesses for long run.
The best strategy to develop client relations through loyalty programs is to start organising business conferences, meet-ups or other similar events and offering VIP passes.
Once the ground of trust is laid along the way, businesses can offer their partner hotel bookings & trips to various destinations for profits realized together, as part of the Loyalty program.
Employees
Digital endorsement
This programme will make an employee feel a pat on his back by way of being endorsed online. For every achievement the employee can be given digital pat on the back. This means the employee is rewarded by the addition of credit points into his account which can be redeemed later on and any product worth those points can be obtained.
Ultimately, all stakeholders desire to get tangible rewards by getting a free service/product or a cash-back. Whether rewards are given digitally or by manual methods, the loyalty programs dispense interface has to be simple and comprehensible such as the one created by Sephora beauty brand for their customers.
And lastly the terms and conditions should be part of the loyalty program which could be in the form of FAQs to make it self-explanatory for the customers.
5 Trends to Influence Next-Gen Loyalty Programs
Loyalty programs have become the part and parcel of almost every company or brand. Engaging customers has become all the more difficult at this point in time and introducing innovative and exciting strategies to engage and bring more consumers to purchase products from partnered brands has become crucial.
The tried and tested methods of gaining attention of target audiences has now shifted to a different tangent hence, learning about the new trends that are influencing loyalty programs is highly recommended.
On looking deeper into this subject, these 5 trends mentioned below seem to be the most influential strategies in the realm of loyalty programs.
User-Friendly Features
There are several kinds of philosophies in terms of redemption of rewards. Some reward loyalty programs by different hospitality companies are extremely straightforward, as they say on their schemes are clearly slated on website like“Accumulate 14 nights, get 1 night’s stay free.”
This is to ensure that customers are redeeming their rewards instead of expiring rewards, blackout dates and continuous degradation of the value of the reward points assigned by the loyalty programs, that may discourage the customers.
Premium Program
Nowadays, we get to see a plethora of premium reward loyalty programs. The main reason why premium loyalty programs are becoming extensively popular is because the members want the advantages and benefits that a premium program offers and are willing to pay for it as well.
In a recent consumer study from the former year, 62% of the subjects admitted that they would consider joining a reward loyalty programthat was fee-based if the provider or retailer was of their choice.
Next-Gen Rewards
Introducing rewards that have the ability or capacity to evolve into another offer or reward or could be combined with other offers, would make reward loyalty programs much more appealing and attractive to existing and new customers.
Allowing a guest to trade their offer with something that suits their requirements and preference can definitely boost a loyalty program. The concept of combining of unused rewards into a bigger and more appealing reward can be a great hit amongst loyalty program consumers.
Chatbot and AI
Though chatbots or artificial intelligence cannot technically replace an actual human interaction, chatbots seem to be the most effective medium when a customer is trying to resolve common trivial issues. Chatbots reduce the need for customers to visit the website or store, etc making it faster and more efficient due to the increased chances of reduced human errors.
Predictive Personalization
The ever-growing consumer industry has been growing and changing their strategies for years. It has tried to break through from a tier-based system to a more personalized loyalty program that caters to specific sections of the target audience.
In this new archetype, you would receive a reward based on your previous purchases or will be tailored to your specific needs. One loyalty program member might wish for an exclusive event entry and another might require the best suite with the fastest wifi and giving a reward based on their personal requirements would gain their attention more than generic mass-planned loyalty programs.
Trends are often a fast-moving phenomenon and is driven by various factors and the aforementioned are the biggest trends that are likely to reign in the world of reward loyalty program. They are an estimated vision of how the trends would influence the Next-Gen loyalty programs.
Importance of Green Loyalty Card Schemes for a Better Living
We all agree to the fact that sustainable living leads to a better environment. Our global future entirely revolves around how we use our natural resources. Usage of solar power, eating locally grown foods, consuming less fuel are some of the few things that can lead to a sustainable future.
To encourage this, loyalty card companies also have come up with various schemes that reward their customers to shop for more goods and services that are considered environment-friendly.
There is nothing better than an incentive plan that rewards its customers for a better future. Green card loyalty card schemes are basically an ethical way of rewarding people for a sustainable living.
These schemes encourage people to purchase and use services that are more eco-friendly that include travelling by sustainable moods of transportation, consumption of locally grown fruits and vegetables, usage of solar panels and lightning etc.
A loyalty program company implements the same concept of loyalty schemes into green card loyalty programme by purchasing which customers can collect reward points, and spend them with the partnering companies to purchase environment-friendly goods and services.
There are various educational programmes and campaigns on sustainable living but the question is what’s in there for the customers to follow it. The answer is awareness and it acts as a motivational factor for consumers to adapt sustainable living.
After the implementation of these programmes, consumers are slowly inclining towards ethical consumption of goods and services, the growth is slow but constant.
The loyalty programme companies choose their partners who are basically manufacturers of sustainable goods and services who also have attractive ways to present them in front of their customers.
The schemes have become popular in retail, travel industry and consumers have started using more organic products and services than artificial counterparts. For example, more and more people are purchasing solar panels, solar heaters, solar cookers, solar chargers etc. to use more of sunlight generated electricity.
This initiative taken by the Loyalty programme companies also has a huge contributing factor in achieving a nation’s financial goals since sustainable living helps saving up natural resources. And thus it helps build a stronger economy for the nation. There is a collective benefit in making greener living choices. The change Is slow but it’s progressive leads to a better future for sure.
How IoT Will Influence Customer Loyalty Programs in Future!
One of the important sources of competitive advantages nowadays from a service provider point of view is customer loyalty. Many companies are investing in rewards and incentive programs to encourage customer loyalty. But given the ever-increasing competition, keeping customers loyal to your brand is no easy task. So how do brands build trust, drive engagement and create value for their most prized customers in today’s fast-paced world?
The Internet of Things (IoT) can help!
Today there are a multitude of objects and devices connected to the Internet of Things (IoT). The number of connected devices is expected to exceed 40 billion by 2024. Considering the proven value of Internet and such promising growth trends, it only makes sense to ride the wave of opportunities that the IoT will provide.
Let’s see how it works!
Innovate using IoT insights
Creating innovative experiences that remain true to the brand is one way to engage customers. We talk about virtual reality changing the landscape of customer engagement. Let’s see how it works. Virtual reality enables customers to ‘try before they buy’ products online. Now if brands tie this into their loyalty program, what will happen? Their loyal customers will have a richer experience when shopping with the brand, which will certainly move the graph upwards.
Create a new level of personalization
Internet technology can dramatically increase the ability of firms to serve and develop intimate relationships with their customers. Using analytics, brands can create an entirely customized rewards program based on individual customer preferences, history, location and more. Automated emails related to customer actions are a great way to do that.
Gain the necessary competitive advantage
In a rapidly changing competitive environment, skillful use of technology can really help you establish a niche for yourself. Let’s use the seemingly simple mobile as an example. Your customers are connected to their phones, so if you really want to differentiate yourself, use your loyalty program to go where they go most often. An example of this is Sephora’s targeting of those who use their beauty insider app. Their beauty insider app allows for a seamless omni-channel experience where one can browse online, check store selection and pick up in store, all while collecting points.
A word of caution!
The IoT experience is the most exciting technology of this decade. The use of IoT has given businesses the NEW opportunities to interact and engage with customers, as well as introduce never before realized revenue streams. Be mindful, however, of customer privacy. Remember, with IoT we are also dealing with huge amounts of personally identifiable information. IoT is all about data and insight. We must, therefore, ensure that effective consumer privacy protections are in place to protect individuals.
Above said and done, we believe that IoT has the power to change the face of loyalty programs. Given the growing use and acceptance, the loyalty program of the future will offer more relevant, personal and rewarding brand experiences.
Will AI Replace Traditional Loyalty Programs?
The face of customer loyalty is changing constantly with the increasing cut-throat competition between companies. There are a hell lot of retail options available to customers. So what makes a person choose one over another? And there comes the most basic customer retention techniques- rewards for their loyalty.
They have made themselves as Loyalty Rewards Company – a give-away reward to retain their customers. But is it the future? Do customers really want to be engaged in this way only?
The future is Artificial Intelligence. AI will help in gaining a foothold in this very competitive environment. AI consists of speech recognition, natural language understanding for creating better intelligent assistants. They will help customers with accessing information and completing tasks. AI will result in better business processes and customer orientation.
The urge is there from customer side to make it more personalized and nothing can do it better with Machine Learning, which is a part of AI. Companies like Nectar are leveraging upon the technology giving their customers more personalized offers and they are very successful.
As more customers use their Loyalty Rewards Programs and other digital channels, the better the machine learns about what is relevant for them. Customers are more likely to shop with retailers that deliver more personalized experiences.
Machine learning will totally eliminate the guessing work, it uses the data & analytics to provide the most likely predictions. Loyalty Reward Management programs basically will be utilizing the customer’s prior behavior on certain set of rules.
For example, AI facilitates virtual assistants that can monitor the customers on the basis of their engagement in good behavior and then they could be rewarded for it. This reward would lead to more loyal behavior, and all of this will be done without any human interference. Further, this will significantly reduce the marketing cost since they would be targeting only the most relevant customers.
In the very future only, machine learning and AI would be touching every industry and customer loyalty is no different. A Loyalty program company which will use AI and Machine learning will no longer have different teams working on different campaigns for designing and managing offers schemes and discounts for their customers.
So, with the help of Machine learning, they would not have to push 200 offers to everyone, but to push 20 offers for 20 type of audience which would have a higher conversion rate with low cost.
Also, the ability to deliver real-time personalized offers based on the ever-learning algorithms will completely replace the traditional loyalty programs. AI will disrupt business functions in nearly every industry. Different loyalty rewards companies are heading towards adopting this technology for better retention of their customers.
Blockchain – Redefining the Future of Customer Loyalty Programs
Loyalty programs have slowly made their presence felt across travel, retail, financial services, and other business sectors. And since technology is progressive in nature, they are seeking for some kind of disruptive innovation that would turn them more consumer-friendly.
Currently, companies are trying to implement new technologies that would suit their ever-growing needs. Blockchain is the next level innovation in this aspect and according to experts, it will bring the same change to banking what internet bought to media. Blockchain has become the first native digital currency for peer-to-peer value exchange.
It acts like a redemption for consumers since it provides them a single platform to access multiple loyalty programs. For example, imagine keeping only one wallet for all loyalty points and you don’t have to hunt for different options, limitations and redemption rules.
Apart from that, there are a host of benefits for which Blockchain will redefine the future of all financial transactions in near future. Let’s explore.
1. It’s fast
The decentralized approach of blockchain diminishes the complications between buyer and merchant. Many stakeholders make e-commerce transactions unnecessarily complicated by involving parties that makes the process complicated by adding additional function and bureaucratic steps. Blockchain eliminates the need of a centralized authority, so the money can travel instantly in real-time.
2. It’s cheap
Blockchain reduces a lot of costs. All kinds of loyalty and financial transactions run through a lot of complex network of vendors, banks and payment processors.
Blockchain removes all unnecessary third parties by allowing cheap and timeless peer-to-peer transactions. For any online transaction, a consumer ends up paying somewhere around 7% extra which can be minimized by switching to alternative mood of payments.
3. It’s Transparent
Transparency is one of the most salient features of Blockchain. Since it follows a distributed public ledger system, it’s possible to track every bit of information of a transaction.
In e-commerce, marketplaces and brands usually keeps all information by themselves and charges the trader to pass them. Blockchain solves this issue by making all data visible and allows all involved parties to access data for free.
4. It’s secured
Blockchain uses certain security system which is decentralized and immutable in nature. In case of any kind of data loss, it can be traced back easily.
5. It’s easily accessible
Blockchain is digital in nature and by implementing it, a lot of additional costs can be minimized. By nature it’s less costly and has lots of potential to divert people’s minds to purchase and participate in global economy. And since it’s decentralized, the same loyalty points can be used for various purposes.
Blockchain is almost similar to the existing loyalty and transaction programs, except that it is cheaper and faster. In a country like India, it’s still early to declare it as the ultimate redemption for the existing loyalty programs since Indian government has not completely legalized it yet.
But its transparent nature is a major step towards democratizing economy and bringing the power of economy back to people.
How loyalty is acting as a game changer in the e-commerce industry
The e-commerce industry has revolutionised the way consumers think and purchase items. People love to shop online for all the convenience and benefits e-shopping brings with it. Consumers can shop anytime and anywhere for everyday or luxe products, save fuel cost, avoid traffic jams, and bypass crowded payment queues.
The list is just endless. On top of that, a good customer loyalty program — that is simple to access — keeps the customers motivated and hooked for a substantial period of time.
The old patterns of consumer behaviour do not hold true in today’s digital age. So a customer loyalty program, that is constantly evolving according to millenials’ demands and industry trends, is definitely the way to go. A successful loyalty program depends on how effectively the consumer data is studied.
With the right approach and proper discipline, a set of new benefits excites customers to shop at a reasonable cost. The old benefits, that are no longer serving any purpose, are eliminated from the program.
A game-changing loyalty program not only leads to an increase in sales but also results in new customer acquisition and better reputation for the business. A better brand image is definitely a good sign for overall business operations.
According to studies, it is the idea of a reward that makes most customers happy. The idea of saving money only comes after that. Since any great loyalty brings with it new customers and ups the sales, it helps the brand to reduce marketing costs to a great extent.
On top of that, existing customers are far more likely to buy from the same brand again and again. Therefore, to keep them loyal is far more handy than to target new customers.
Also, since these customers are already familiar with the company’s products and services, they are more cost-effective to serve! Reduction in cost to company and honest feedback are the two things that a business can rely on their loyal consumer base for.
Although many e-retailers understand the concept of customer loyalty fully and how important it is, many of them are lacking in effort for a sustained loyalty program. So there seems to be a disconnection. Still others don’t keep an accurate tab on how these programs are performing, even after they have been set into motion.
The idea is to recognise the prime market and construct a plan that makes new customers loyal and keeps the loyal ones excited and looking forward to the brand’s new products. This has also proven to be helpful in beating competitors — that serve the same products and services — thereby gaining an edge over them!