The Loyalty Programs in a post-pandemic Landscape . . . . .
Are they ticking close enough to the customer?
The Covid-19 pandemic has shown that brands need to rethink consumer trust and loyalty
to adapt to the new normal and truly deliver the personalized experiences that today’s
customers expect. The stakes are higher than ever..— Salesforce are Loyalty Programs Important in this challenging Covid 19 times?
The performance of every business is impacted heavily due to Corona Virus globally, so we can’t simply ignore the importance of customer loyalty. It’s akin to keeping a close vigil of those remaining streams of water intact when the lake is drying up. So measuring and improving the loyalty of your customers is key for every When you offer services to your
customers, during a crisis, they are less likely to leave your brand.
business, especially during the COVID-19 pandemic when spending is at an all-time low
across the globe.
Loyalty sometimes is hard to come by in a cash strapped backdrop shaped by post
pandemic landscape where people cut to the chase looking for downright value leaving out
frills and brand loyalty for a moment, unless companies leverage its IT, OT & CT in
confluence in the digitization efforts to derive significant customer value and simplify process
bottle-necks to bring about ultra-convenience where it matters. Consumers are becoming
more demanding, and if organisations fail to engage with customers exactly when and where
it matters, then they will not wait and quickly move to a competitor. The focus, therefore
should have more weight to customer retention and loyalty rather than customer acquisition.
Consumer research had established that retaining an existing customer is cheaper than
acquiring a new one, getting a first-time customer is 5 X times more expensive than retaining
a loyal one. Repeat customers usually spend more than first-time customers, they have a
higher average order value that increases with the duration of affiliation with a brand. On top
of that loyal customers produce higher conversion rates. The average conversion rate of a
loyal customer is 60% to 70% while that of a new one is 5% to 20%. Research also suggests
that business profits go up by 25% to 95% when customer retention rates are increased by
only 5%.
Given the findings of consumer research, A robust Loyalty program stands a powerful
instrument in sustaining a company’s business intact or least disturbed leveraging its
existing customer base to good use. Running a Loyalty program is all about listening and
responding to the pulse of the customer in a timely manner. Gaining and maintaining Loyalty
becomes a smart yet serious affair in a turbulent environment as customer could easily be
wandered away with cheaper options at the expense of Loyalty.
When you care and offer services to your customers, during a crisis, they are less likely to
leave your brand, Therefore the role of a Loyalty program in the given context could well be
summarized upon rigorous Rs. of the game.
Recognizing the customer with Relevant Rewards
Regain and Reassure trust
Reinvent and Rebuild the program to suit Resurgence of the business in the new
normal.
Change with the Change
As the name suggests “Loyalty” programs should start reciprocating true loyalty and feel the
pulse of its customer to package timely and relevant value to win long term trust in a post-pandemic landscape.
Salesforce’ Trends in Consumer Trust study found that 95 percent of customers are more
likely to be loyal to a company they trust, while 92 percent are more likely to purchase
additional products and services from them. So loyalty begets loyalty, the customer and the
brand are at play. This could take re-shaping, re-scoping, re-packaging and reinventing the
program to make it right for the times.
For instance throwing up a super “one- size- fits- all” multiple points accruing campaign,
simply to buy a customer‘s decision to engage with a brand may not seem that convincing.
Loyalty program should come forward to portray a more personalized and honest concern
for safety and relevance first and cater to the needs of the customer in a meaningful way
especially during a crisis situation.
It’s speculative if the standard loyalty program behavior on rewards and discounts tied to
member tier and earned points/miles could sustain for long given the ever growing
marketspace of the demanding and intelligent global consumer preferring more
personalized and relevant experiences by way of cohesive and proactive engagement
across all possible communication channels.
Brands might no longer have the freedom to dictate how should the customer connects with
them instead, customers need to be served at their channel of choice, may it be via email,
text, Facebook, Instagram, YouTube, twitter etc. Customers will expect proactive
engagement and responses to their needs in real time, before it becomes a pain , the game
could become even tougher with the swarming-in tech savvy and Millennials and Gen Z of
the future market base who generally need everything fast.
Responding Fast; Quick Wins
Evolution has given people a strong desire for immediate rewards more than those in the
distant future. In times of adversity, this human nature can be further intensified, generally
speaking, we want things now rather than later. The same theory can well be employed in
strategic sense where Loyalty marketing is concerned.
Short term investments by way of quick wins to the distressed customer creating memorable
experiences could well lead to long term loyalty sealing trust and pledge towards a brand.
Extending mileage or points expiry and tier status: This could augur well in the immediate aftermath showing empathy and renewed loyalty and ease the tension of its
top tiered members. Some Airlines have even extended elite status for its Loyalty members already until January 31, 2022.
Innovate to engage the customer in different ways: American Express Credit Card’s MR (Membership Rewards) points program in partnership with JetBlue, has launched a new pilot program, “Pennies for Points” that gives targeted cardholders the opportunity to round up
purchases to the nearest dollar and turn the spare change into True Blue points with high accrual rate,
Offering Bonus Points/Miles: Some of popular hospitality, banking and travel rewards cards that usually offer primarily hotel and airline perks have updated their programs to include limited-time bonus rewards. HSBC Sri Lanka with its newly introduced rewards card is offering
5X Rewards for enhanced earnings and expanded its redemption network at over 100 redemption partners.
Loyalty-integrated food / gas/ delivery services: Providing food / gas purchases and
delivery are akin to supplementing lifestyle needs of the pandemic-stricken consumer
thus keeping the program engagement all time high and need-centric. American Express
card recently revamped its rewards strategy, which has typically been travel-centric, to
accelerate points earned for food delivery, streaming services, and groceries.
Expand Scope and Value Stream : In the Loyalty space there are multiple loyalty
programs and cards in differing industry segments offering distinct benefits, Its
worthwhile exploring interoperability between programs so that the customer sees real
benefit of the program. For instance during a period of travel restrictions, where they
cannot earn and redeem airline miles, they see immediate value if they can earn or burn
such miles in a different program like consumer retail.
Interestingly in this backdrop, a local loyalty company CH17 is planning to introduce a
single card concept to the market, incorporating as many segments as food, clothing,
footwear, leisure, dining, wellness, telecommunications services, hospitals, inbound/out-bound travel, household goods, electronics and electrical goods, hardware
items, groceries etc. to address this need.
Increased Options to Donate: In a pandemic situation where you can’t put your miles
to good use, it is a welcome gesture to give some of your loyal customers added flexibility
to donate their points or miles for a worthy cause if they so wish. A good case in point is
“star points” that had come up with such initiatives during past. In the global scene
“Hilton Honors” had enabled donation in increments of 10,000 points. Each
10,000 Hilton Honors Point donation equals a US$25 donation. One hundred percent of
that donation will go directly to the Make-A-Wish Foundation.
Increased Accrual Rate and decrease Redemption Requirements: Since the dip in
leisure and business travel is expected to continue for an extended period taking months
or even years to return to normalcy, it will negatively impact the earning, redemption,
and expiration activity of members, hence will change their engagement with loyalty
programs, it is helpful to inject the program with some complementary member points /
miles by way of bonus miles, fast-track accruals by tying up with more transaction
partners and increasing the rate of accrual and lower the redemption requirements to
give that necessary boosting to keep the program up and running and to spur activity
just as injecting capital to keep the economy running.
Travel and Tourism is Hard Hit
The International Air Transport Association (IATA)* estimates passenger revenue
miles will decrease by 40% in 2020. Additionally, they anticipate that the recovery
time after COVID-19 will be greater than the time required for previous recoveries,
as most people, especially the leisure sector aren’t ready for traveling both physically and
mentally for a foreseeable future.
So from a loyalty perspective, the benefits of a travel credit is thus irrelevant for that the
premium attributes like lounge access, baggage concessions, fast track channels, insurance
benefits, complimentary tickets aren’t very useful. Hence holding on to a travel credit card
has no value, especially when it has a high annual fee unless the card company comes up
with a renewed value proposition right for the times to win trust and heart share of the
customer at a critical juncture.
Going Digital and Data Driven to stay competitive
During an online loyalty summit, in a session on Travel’s Loyalty Renaissance, Jon Glick —
partner, customer experience and loyalty at PwC — and Corbitt Burns — director of Rapid
Rewards at Southwest Airlines — agreed that engagement, fueled by personalized digital
interactions, is one of the most important metrics for successful loyalty programs right now,
and that strong, relevant customer data is what it will take to create those personalized
moments of truth. Google analytics is a great tool to analyze traffic of a brand’s website.
Taking a deep dive of customer data to understand past behavior, demographics, locations
etc. to generate customer insights could help develop more personalized offerings to
strengthen loyalty.
Taking Personalization to the Next Level
To grow trust, the brand’s communication efforts needs to be timely, relevant, and tailored
to the specific individual. Generic emails stating a brand’s health and safety guidelines are
no longer enough. For example, if a traveler belongs to high-risk age group, and had booked
to travel to a Covid infected area, an airline or hotel could send a personalized message
acknowledging that they know about the customer and offer him to cancel and rebook trip
without any penalty. The brand may lose the short-term revenue, but build long-term loyalty
from the customer, which is more valuable in the end.
Research suggests that 51% of consumers expect companies to anticipate their needs and
provide relevant suggestions before making contact. When you extend personalized offers,
customers are more likely to revisit and stay loyal to your brand.
Being data driven enables the loyalty program to track customer behavior and purchase
history in order to personalize their experience. It will help send personalized emails and
create campaigns that customers will appreciate. This will ensure that they get the right
content at the right time to engage in.
Netflix, Amazon, booking.com and YouTube are excellent examples of brands that take
personalization to the next level. YouTube recently launched recommendation filters in the
form of topic bubbles that are situated at the top of your feed. These topics are related to
the video or the channel you are watching or based on your browsing behavior.
Personalize by Using Segmentation
Customers have varying tastes, preferences and interests. So the loyalty team need to focus
on creating different customer segments based on their demographics and interests. They
can then use these segments to send more relevant and tailored offers and
recommendations to their customers and prospects. Grouping customers by their purchase
histories, locations, genders, ages or even job titles, can go deeper with these segments
and be intimate with more relevant messages.
For example, from the customers list, we can create a segment of the people who had
surpassed a certain threshold spend during last month and reach out to them with striking
card offers to thank them for their loyalty.
Personalize by Using Dynamic Content
Dynamic content is any personalized part of a message that changes based on user
behavior or data about customers. When companies use dynamic email content, they can
provide their customers with a more personalized experience.
Using dynamic content saves hours of effort customizing messages to make it relevant to
your customers or prospects. Essentially, you need to draft only a single email, but you can
customize portions of it based on the customer segment you’re sending it to. The customer
feels special because they’re getting relevant information and offers delivered straight to
their inbox.
I remember sometime back when I visited a particular hotel I asked for a certain newspaper,
thereafter each time when I visited that Hotel, they never forget to offer me the same
newspaper every morning without my asking.
This is a great strategy to not just show that you understand what they want, but to get some
additional sales as well.
Personalized by using “Location – base” Technology
Now with latest mobile friendly travel Apps, for ex: “Locomole”, now one can go to the extent
of white-labeling and personalizing based on real-time location of the customer, push all
nearby promotional offers, places of interest, things to do and video streaming of nearby
attractions into the smart phone to delight the customer to help explore and best utilize his
vacation to the full.
Monitoring the Health of Loyalty program in a pandemic landscape
According to IATA Air Passenger Market Analysis, survey published on April 2, 2020
to get an understanding of the behavior of the loyalty program during and after
pandemic, we can employ following measures.
1. Determining when loyalty members’ activity began to be affected (i.e., January in Asia Pacific, February/March for Europe and the Americas)
2. Obtaining the most accurate measures of breakage: That is analyzing data related to member activity as of the latest dates where data was not yet impacted. Breakage is the percentage of live points/miles in the program that did not get redeemed or expired to total points/miles issued by the program. Thus Low breakage signifies that the customers are actively engaged in the loyalty program.
These estimates will serve as a baseline before COVID-19 impacted data. The behavior of members during the time when COVID-19 halted traveling activity should not representative of normal member activity when traveling returns back to normal levels. So any type of modeling should not overreact to the severe disruption on member behavior due to COVID19.
3. Monitoring changes in breakage and member activity. This will vary across programs as there is no “one-size-fits-all” solution. Any breakage model needs to be adjusted to reflect the effects of COVID-19. The most flexible and robust approach to model the future impact of COVID-19 is through scenario analysis. It will be dependent upon the length of time the travel disruption continues, the decrease in member activity during that period and how each program reacts to maintaining member engagement. However It is way too early to forecast any financial impact that COVID-19 will have on loyalty programs. The coronavirus pandemic is redefining the fundamentals of customer loyalty.
Building loyalty is simply building trust through a consistent and deeply personal customer
experience. To stay competitive and successful, companies need to demonstrate they
understand their customers better than the competition does; customers won’t hesitate to
switch brands if their expectations aren’t met.
The loyalty program of tomorrow will be a cohesive experience that’s tightly connected into
its customer relationship management system, allowing all staff and stakeholders from
loyalty to sales to procurement to IT to product development to marketing to create the best
and most relevant experience for its end customer.
Pradeep Attanayake
B Sc. (Moratuwa), MBA (PIM), MCTS, MCPM, PMP
Former Loyalty and Partnerships Manager @ Sri Lankan Airlines Ltd
Former Chief Marketing Officer EChannelling PLC &
General Manager SL of Riverview Mobility Solutions (Pvt.) Ltd, Singapore,
A Digital loyalty solutions Company for smart businesses
E mail: pradeepattanayake1@gmail.com
Attached (Picture): Loyalty division staff of Sri Lankan Airlines at a brainstorming session