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Earning loyalty for loyalty programmes
Middle Eastern consumers are flocking digital platforms, says Dion Martiz, general manager at International Customer Loyalty Programmes Ltd (ICLP)
May 26, 2014 5:59 by kippreport
As consumers, everyone enjoys when a company notices brand loyalty and makes it a point to offer something in return. But as a business, what is the best way to reward your consumers?
Kippreport discussed the issue with Dion Martiz, the general manager at International Customer Loyalty Programmes Ltd (ICLP), and discovered that an upcoming way to communicate with clients in the Middle East is through various digital platforms.
You have many international clients, including premium retailers. What are the leading trends in consumer loyalty programmes internationally? Will the Middle East region adopt them soon?
Brands need look at what customers want and deliver to customer expectations to drive loyalty. We recently conducted a global research to evaluate how customers view brand loyalty and engagement.
The views towards brand loyalty are influenced by cultural, demographic and market factors. Some of the common elements are:
With the global economy in flux, price remains a primary consumer motivator
Consumers across the world want instant rewards and flexible discounts and savings in return for their loyalty
Consumers are demanding more personalised engagement with brands. Brands have mastered the basics of discounting, but often stumble in the eyes of the consumer when it comes to personalisation and digital engagement
Emerging markets herald the changing face of loyalty – consumers in India, China and Brazil show more enthusiasm for emerging channels such as social media and mobile platforms. Brand engagement through social media, SMS and mobile application outpaces similar engagement from consumers in the US and the UK.
However, in the Middle East region, traditional methods still dominate brand engagement, although, increasingly, consumers still want to access and engage with loyalty programmes using mobile phones.
There must be some loss involved when companies offer discounts and cash-back options. Can you quantify this?
That would depend on how well a company has designed its loyalty programme and, equally, how well it uses the benefit of customer insights available in the data collected on clients in a programme.
Retail programmes that offer discount or cash-back vouchers as a reward actually see incremental revenue benefit, rather than margin erosion. Typical practice would see a discount or cash-back voucher of a specific value being issued when a customer reaches a predetermined threshold of spend.
The voucher is in effect a deferred discount, as it can only be used on a future visit and transaction. This encourages a return visit to use the voucher and the common trend observed is that customers will spend much more than the value of the voucher on their next transaction.
However, research by ICLP, which is a global company and has serviced 760 clients in the past 27 years, shows that deferred discounts or points-based loyalty programmes are losing appeal in the Middle East region for certain industry verticals. Customers that are loyal to a brand will find value in instant rewards in programme design and this won’t amount to wholesale margin dilution for organisations.
Have these programmes proven successful in retaining loyalty?
Well-designed and well-executed loyalty programmes have proven successful in retaining transactional loyalty. Traditional loyalty programmes usually define most valuable customers as those who have the highest commercial value or are the most profitable for a business. Typically, these customers will represent as little as 25 per cent of an organisation’s customer base, but will contribute as much as 70 per cent of the total revenue earned by a business.
Which loyalty programmes are the most popular and why? Which sector is leading?
Frequent flyer programmes (FFPs) and frequent guest programmes (FGPs) are most popular in the world. Travel rewards such as flight discounts, room discounts and upgrades are highly desirable for consumers.
A consumer would need to earn some miles or points in an FFP or FGP to be able to redeem for a travel reward than they would need to earn in other programmes. The cost of rewards, an empty airline seat or an unused room, is much lower, making it possible to set a far more generous redemption proposition.
What advice can you give to business owners on how to attract and keep customers?
Business owners that have introduced a loyalty initiative should do the following:
Identify potential value. Analyse your customer database to determine which new customers have the potential to become valuable and fast track them with targeted campaign. Organise your customers into segments based on their needs, predicted behaviours and overall value, so you can prioritise your efforts based on their current and potential future values.
Redefine the meaning of valuable customers. Look again at your definition of ‘valuable’ customers to determine and invest in the most appropriate strategy for nurturing them, both now and in the future. With the increasing influence of social media, it is vital to cultivate the business opportunity presented by the digital segment.
Use data intelligently. Understand who your top customers really are and motivate them. Think about the content they are interested in, the type of events they will actually want to attend, people they want to talk to, opinions or ideas they want to hear, more convenient ways to transact and propositions or offers that will really appeal. Delivering this kind of personal relevance rapidly builds loyalty and deepens customer relationships.
Use trust to breed advocacy. Consumers place enormous value on the purchase experience, expecting not only good service and a quality product, but also personalisation and understanding. Shoppers want to be recognised and made to feel valued every time they interact with a brand. These are the types of consumers that can ultimately become effective brand advocates.
Facilitate dialogue – listen and respond. It’s not just talking – make customers feel part of a conversation, rather than as recipients of one-way marketing messages. The growing influence of social media networks has highlighted the need to change the marketing approach.