Future of Loyalty Programs: A shift from point-centric model

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  • April 29, 2016

Loyal customers are the backbone of every business. Developing long-term loyal customers is critical for brands and companies. It is not only easier to sell more products and services to your existing loyal customers, but one single, satisfied customer can bring you hundreds of customers through positive word of mouth. When you factor in the expense of trying to reach new customers and the high lifetime value of each individual customer, loyalty should be considered a top priority for every business.

Traditionally, loyalty programs have focused on “redeemable points or percentage discounts” which gave customers a sense of “importance” in the eyes of the organization. Loyalty program participants continued to shop more with the brand with the assumption that the more they shop with the brand, the more rewards they will receive. This model of loyalty program has worked exceptionally well over the past decade but its effectiveness has started to fade over the past couple of years. Millennials are smart and tech savvy and with limitless options in the market, it’s not possible to lock in their business with a system of plastic and points anymore.

So, what are the major challenges with the traditional approach to loyalty programs?

Firstly, it creates loyalty with your program/ offer and not your brand.

  • Consumers will buy from you as long as the loyalty program is alluring to them. Once they find a better program with more discounts and points, they will switch your brand and hence, their loyalty.

Secondly, it only serves the consumers who spend more on the brand.

  • Consumers are considered as important as their last purchase.

What is the future and scope of Loyalty Programs?

Loyalty is shifting from point-centric model to a new process wherein the brand uses all consumer data, insights, touch points and customer responses to increase the efficacy and relevancy of their loyalty programs. Consumers’ desire for seamless, compelling and personalized brand experiences is driving the next generation of customer loyalty programs.

Here are a few ways to revamp your Loyalty Programs:

1. Focus on personalization, not generalization:

You need to know and understand your members. Consumers want to receive exclusive, VIP access to the products and experiences they covet in exchange for their loyalty. By studying the consumer habits of each member, loyalty programs can create exclusive earning and rewarding schemes tailored for each individual, which means that consumers are unlikely to ever get an offer that has no relevance to them.

2. Build engagement with your consumers:

Most consumers consider loyalty a one-dimensional experience- “I spend money and I get points or I buy a certain number of things and I get something for that.” This consumer belief needs to be changed. Consumers have to be nurtured and engaged at every step of their purchase cycle. The level of involvement consumers have across multiple channels has to be constantly monitored and enriched along the way.

3. Create a bridge to the customer with ancillary products and services:

Value-added bonus services are an effective strategy to boost customer loyalty. Consumers are looking for a convenient and hassle free experience, a loyalty program which offers them multiple benefits under one umbrella. Building a loyalty program with diverse benefits and features will not only boost customer loyalty but also lead to increased member enrollment.

Loyalty programs are fundamentally about value exchange. In this digital era, it is very easy to get access to consumer behavior insights but the real question is- What do you do with these insights? The answer starts with the way you convert that knowledge into customized experiences that will surprise and delight customers. Remember, loyalty programs are no more about selling more products and services, they are about serving your customers better.

Looking to build or upgrade your loyalty program?

At Custom Travel Clubs, we are experts in creating loyalty programs with travel benefits and optional booking technology. We offer bespoke solutions that includes a beautifully designed portal for your members, a host of member benefits and 24×7 customer service to answer your member’s queries. These portals are responsive, attractive and easy to implement in your existing platform or can be stand-alone member sites.

Author & Co-Author: Mike Putman & Swati Jha
Contact Details:
Mike Putman
+1 864 325 2379
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