When one thinks of loyalty programs, the first thing that comes to mind is an attractive card that can be faunted in the wallet. But look at the history of loyalty programs and you will realise that they go beyond just giving the customer a cool card for some discounts and cashbacks.
The science and glamour accompanying loyalty programs today lead one to believe that the phenomenon was started by a bigshot retailer a few decades ago. In reality, customer loyalty programs date back to the 19th century. Originally the product of the imagination of a few retailers in America, the initiative comprised of American retailers giving customers copper tokens with purchases that could be redeemed later for products on future purchases. Yes, you read it right. Loyalty programs initially set their base in copper!
The journey of loyalty programs from copper to paper followed by the sophisticated plastic cards and now just mobile numbers has undergone a massive transformation. The purpose of the initiative too has seen a revolution – from simply offering discounts to helping a brand build an emotional connect with its customers.
Loyalty Programs & the Indian Retailer
Indian retailers – whether they are the national retail chains or local mom and pop stores, all of them seem to have mastered the art of winning over their patrons. Where the big names have at their disposal the logistics and bandwidth to offer a full fl edged loyalty programs, one cannot overlook the local retail / kirana stores who ensure that they connect with their customers in their own unique way. Take for e.g. a local apparel store in Mumbai by the name Carron. Way back in the 1990s, Carron gave loyalty cards to customers who shopped for a certain amount. The card carrier was eligible for discounts on their next purchase along with a host of other benefi ts including a special preview before their EOSS as well as timely updates of their new collection.
A PAGE FROM THE HISTORY OF LOYALTY PROGRAMS
Overall, loyalty programs in the past were more about enticing the shopper with discounts so they would visit the store again and make a repeat purchase. National retail chains soon started picking up on the idea and in the recent past, the idea has snowballed turning into an essential sub-segment of the retail industry.
Shoppers Stop set the ball rolling with a pan-India loyalty program. First Citizen, their loyalty program has three levels and based on the card a shopper has, the privileges and rewards differ.
Food tech retailers have gone a step ahead and are offering instant gratification allowing their patrons to collect points. For example, Swiggy’s Super program makes a patron eligible for instant discounts and free delivery. With an upfront fee charged (which again is offered on a discount mostly), the benefits begin rolling in. Similarly, meat delivery app Meatigo offers instant cash back post the delivery of the order (which is within 90 minutes maximum from the time ordered) and then the icing on the cake comes when on crossing a certain bill amount, the customer is eligible for buying certain items for as low as `1!
Local stores like Sarvodaya in Dadar, Mumbai, pamper patrons with assured gifts on certain bill amounts – no points or cards required to claim gifts and rewards. Similarly, Osia Hyper Retail – which has branches in many states – has alluring offers for their patrons. All of their hypermarkets ensure that their loyal customers are made to feel like a part of one big large family. Sharing how customers are rewarded for their loyalty, Dhirendra Gautam Chopra, Chief Managing Director – Osia Hyper Retail says, “Our concept is based on offering lowest price deals 365 days of the year and apart from that we reward our customers with a month’s of shopping free if they shop at our hypermarket for 12 consecutive months. We also off er cash back vouchers where we off er discount to the customer on his next purchase.”
Loyalty Programs by National Brands With a 36 million customer base, Landmark’s loyalty program – Landmark Rewards – is another prominent program where members can earn and spend points within all the Landmark Group brands in India, which includes Lifestyle, Home Centre, Max Fashion, Spar Hypermarkets, Melange, Krispy Kreme and Fun City.
Vasanth Kumar – Managing Director, Lifestyle International Pvt. Ltd. says, “The Landmark Rewards is a rewards and benefits program aimed at providing loyalty benefits to all customers shopping at various formats of Landmark Group in India. The host of benefits both in-store and online include features such as – free enrolment, earn and spend points at all the Landmark Group stores in India and online, personalised offers, exclusive store promotions, end of season sale preview, birthday bonus points and out of store off ers.”
Since its inception, Metro Shoes has been the undisputed leader in the footwear category with a record number of COCO stores across India. Metro initiated its loyalty program – which resonates the value of the brand – a few years ago.
Talking about the loyalty program, Alisha Malik, VP Marketing & E-Commerce, Metro Shoes, says, “Metro believes that loyalty can be built with only the fi nest quality of products, unmatched customer services and being generous in the way you reward customers. With these values, Metro Brands Ltd. has built a simple, yet generous points-based rewarding program for its key brands – Metro Shoes and Mochi. The loyalty program in Metro is called ‘Club Metro’ and Mochi is called ‘My Mochi’.”
Citing the key features of the program, she says, “Our program benefits include 4 percent reward points equivalent to Rs.4 for every Rs 100 spent, birthday rewards and surprises, invite to exclusive previews, store launch, and new collections, special offers/ rewards for premium customers and a dedicated loyalty customer support team.”
It is interesting to note that over 8 years, they have built a base of over 6 million loyalty members across all their brands.
To accentuate the success of their program, she adds, “Our repeat ratio is more that 50 percent, which speaks of the success of our loyalty program.”
The business of beauty has come out of the closet too and forms an integral part of the retail industry. Malls across the country are home to several salons and stores selling beauty products. This makes it imperative to bring forth the work being undertaken by salons and beauty brands in building their loyalty programs. For e.g. Lakmé Salon’s loyalty program has a whopping 7 lakh members. Called the Runway Rewards, the program allows its patrons to enjoy a gamut of offers, bonus reward points, happy hours and much more.
Pushkaraj Shenai, CEO, Lakmé Lever states, “The Runway Rewards Membership Program has something for every woman. To highlight a few – The Lakmé Salon app is perfect as it lets one book an appointment with the experts at just a click. Additional discounts and reward points are just the icing on the cake! The app is available on Google Play and App store. Making birthdays extraspecial is the Birthday Treat benefit that gives our customers a 15 percent discount on their bill in the birthday month. We have also initiated the Happy Hours where the consumer can enjoy Happy Hours benef ts from Monday to Thursday until 3 pm where every service is discounted up to 20 percent depending on the membership tier. As time goes by, earning reward points gets easier, as we give our customers many ways accumulate the points. Customers who reach the topmost “Showstopper” tier (the highest tier in the runway reward program) enjoy multiple privileges and also stands a chance to get invited to the Lakmé Fashion Week.”
Moving over to understanding the dynamics of loyalty program of cosmetic brand SUGAR, it is enlightening to learn their journey from offering a basic loyalty program to moving ahead and redesigning the program making it engaging for patrons.
Encapsulating the journey of SUGAR Rewards Loyalty Program, Kaushik Mukherjee, Co-founder & COO – SUGAR Cosmetics shares, “The SUGAR Rewards Loyalty Program was introduced in 2016. The initial phase of our loyalty program involved the elementary system of giving our enrolled customers ‘redeemable points on ordering’. Being a start for the brand, we first experimented the traditional way of giving SUGAR points on signing up and on the total value of each order placed. These points were redeemable to unlock a discount code of a measured value which could be applied to the customer’s subsequent purchase. Gaining more understanding about the program we realised that it was not just about giving discounts to customers but enhancing their engagement on the platform. Hence we decided to add valued yet simple ways for customers to gain more rewards. This was done through asking the customers to connect and engage with the brand on other social media platforms which also gave them timely updates about new launches, offers by the brand. There was also an option to add in your birth dates to be entitled to gifts and surprises from the brand and further referring SUGAR Rewards to other friends to share the gained value with them. We further used our re-marketing tools to communicate special exclusive offers, makeup trends and tips periodically solely for members of SUGAR Rewards.”
Currently SUGAR Rewards engages almost 1 million active users, and this has helped the brand generate a value of almost Rs 12.4 million. What makes SUGAR’s loyalty program special is the fact that they truly pamper their customers building a surprise factor on each step of their association with the brand. Mukherjee reveals, “The rewards which don’t just include discounts but also provide higher privilege and exclusivity like limited edition gifts, welcome gifts on entering a new tier, private sales and earning more points for the same purchase on higher levels. Lastly, the feature of gamification added to the program that unlocks access to additional points by liking, following and referring friends to SUGAR’s social media platforms. This has increased consumer engagement on the program.”
Where malls earlier were seen only as a one stop shop for people to shop, today they have become a destination in themselves where people actively visit malls not just to shop but also to unwind and spend their leisure time. Little wonder, each mall today has its own loyalty program place.
Mumbai’s Viviana Mall’s V Club loyalty program has been in existence for little over a year but in this time frame it has managed to garner over 80,000 active customers. Rima Kirtikar, Sr. Vice President Marketing, Sheth Developers & Realtors (India) Ltd. says, “Customer engagement numbers have improved with Viviana Mall witnessing 3x growth in terms of customer engagement / has been a beneficial one in terms of brand’s revenue and sales, attracting new customer and giving us a direct way to communicate to customers.”
The Essentials of a Strong Loyalty Program
‘What’s in a name?’ it is often said, but when it comes to naming a loyalty program, it means everything. A brand needs to establish an emotional connect of consumers with their loyalty program and hence the name must be well thought of.
For example, Ayesha Accessories, a brand that has created a niche for itself in India for the range of accessories that it has, calls its loyalty program ‘Ayesha Tribe’. A typical customer of the brand is someone who is looking at making a statement for herself with the accessories she wears, and the name simply fits in perfectly to make the consumer stand out from the crowd and a part of a special tribe that simply loves its accessories.
SUGAR Cosmetics’ loyalty program too has an extremely well thought of name. “Experience also taught us to always keep updating and improving the perks for our loyal customers. In mid-2018 we introduced the ‘tier based’ loyalty program. The names of our tiers being inspired by the SUGAR customers journey with the brand, where first time users come in to ‘Like’ the product, slowly fall in ‘Love’ as they keep purchasing more, and then are in complete ‘Lust’ with the brand. Gamifying for us was a phenomenal way to engage the customers more with our rewards program and making it exclusive– adding prestige value to be a part of the highest tier. Tiered reward programs offer different rewards depending on which tier a customer is in. In order to progress to the next level, customers must pass a predetermined milestone of their spending on the brand.”
On the criterion to judge the success or failure of the loyalty program, Malik says, “If a retailer is able to ‘wow’ a customer and impress them with relevant engagements and can increase the stickiness to the brand with their loyalty program, then it is a successful loyalty program. If loyalty is equal to just collecting database and broadcasting messages, it is not very effective.”
Points Vs Instant Gratification: What Works Better?
Where having an instant discount on an item purchased would no doubt add in excitement to the shopping experience of a customer, going by the trend, the customer today also wants prolonged pampering from the brand. If the customer has a brand’s loyalty card in her wallet, she may well want to ensure that the card serves some purpose in form of making her feel a part of the program at any given day – that could be perhaps by reminding her of add on points during her special days like birthday and anniversary etc. or allowing her to fl ash the card to beat the billing queue. Keeping this in mind, one cannot help but wonder on the best strategy to adopt.
Malik says, “There is no standard strategy of loyalty. One should define the brand objective to start a loyalty program. A points program which almost works like a cashback that can be utilized in the next purchase helps get repeat sales and increases walk-ins, while instant gratification helps push immediate sales.”
“While we have adopted the points-based program for our brands Metro Shoes and Mochi Shoes, the Crocs loyalty program available in stores run by Metro brands Ltd, is a more ‘Gamified Rewards Program’. Instant gratificationis a good strategy to piggyback on converting instant sales and should be amalgamated with your existing program benefits as a short-term move, not as a permanent program structure,” she further explains.
According to Kumar, “Loyalty programs should have a good mix of both. When objectives like driving annual spends, increasing annual visits and such have to be achieved, benefits accumulated over a period of time can help drive these objectives. Instant gratifi cation benefits can help driving short term goals such as improving basket size, ticket size and categories purchased. However, in both the cases, the award of the rewards must be sooner than later, thereby ensuring a great customer experience.”
Mukherjee shares his views saying, “We have always seen the customer’s likeliness to unlock their exclusive gifts only after reaching a certain level of their loyalty program status. Customers are also more likely to add into their purchases, or repeat purchases in order to level up their loyalty program status and enjoy better perks. This trend has been noticed from the inception of our loyalty program and we agree that points accumulation, complemented with exciting gifts that await the consumers is something that works for the Indian audience. This also helps the brand create high consumer engagement to their platform.
The Road Ahead
Ritu Chhadha, an avid shopper with one of the leading apparel brands shares her experience which is more of a disappointment stating, “As much as I simply adore the brand, I really think that the loyalty program they run needs to be shut down immediately. The moment I go to the billing counter, they ask for my number to add on to the points. On enquiring whether I am eligible for a discount or if I can redeem the points accumulated most often than not what I hear is either that the points have expired or that I haven’t crossed the minimum slab where I can redeem the points. Well, even if it is `10, why should they have a problem if I wish to redeem the same? I find absolutely no value in the loyalty program they run.”
Like Chhadha there are umpteen Indian customers who seem to have literally given up on the loyalty programs run by their favourite brands. Where brands are now working their way to ‘engage’ the customer through the loyalty program, the fact remains that the average Indian customer is more interested in seeing how much money they can save by being loyal to a particular brand and the kind of pampering in form of gifts and special discounts they are eligible for.
Kirtikar reiterates the point saying, “The key motive behind a loyalty program is to retain customers by rewarding them for their regular purchase behavior. Such loyalty programs are a tool to retain customers by giving them a solid motive to buy again from the particular brand and establishing habits. Keeping in mind the new age consumer they look for instant gratification be it points/rewards on credit cards, airlines, online shopping platforms, retail chain programs, there are many rewards programs that brands offer.”
Mukherjee agrees, aptly concluding the discussion saying, “A loyalty program usually gives customers access to free merchandise, rewards, coupons, and even exclusive previews of released products but all of these elements may not suffice for a business to retain ‘loyal’ consumers after a certain point of time. As businesses are now under constant pressure to meet customer expectations with exceptional experiences, they are required to look beyond the complex rewards systems and continue evolving their loyalty programs, strategies and technologies to off er tangible value which is something truly unique to customers.”