Retail loyalty program

In the United States, self service retailing boom started in the mid twentieth century. This enabled the customers to pick and choose all the goods they require off the shelf. The evolution of modern retailing started here. Since then, the concept of SKUs, pairing of goods such as coffee and sugar close together, display of items to please customers picked up.  These concepts can easily be copied across different retail chain. Hence, the customer experience among different retail chain was narrower. Therefore, the incentive for the customer to stay with a particular retailer was less and the switching cost for the customer was close to zero.

With such low switching cost, the retailer had to compete predominantly on price. When the concept of loyalty program, in which the customer can collect points on each purchase and then can spend the points for free purchases on the store itself, was introduced, the concept of customer retention came into picture. When a customer enrolls in a loyalty program and starts to collect points, the cost of switching becomes a little higher. This helped the retailer to understand the needs of the customer to serve them better than the competitors and at the same time compete on price as well.

The traditional loyalty program should be enhanced further to understand the needs of the customer better, provide unique customer experience both on and off the store and increase the switching cost of the customer by engaging with them closely. With the help of Information technology, the retailer can achieve enormous business benefit. The key points for this transformation are discussed below.

Household loyalty program: The purchases made off the loyalty card do not always reflect the actual need, wish and desire of the customer. Especially in a multi member family in which purchases are made by different members of the family at different points of time, the retailer loses information about the needs of the family. Either one card is shared by the family members or some purchases of the family go unnoticed due to unavailability of the loyalty card with them at the time of purchase. Either ways, the retailer fail to gather key information about the needs of the family as a whole.

I propose a household loyalty scheme in which all members of the family register for a club card and form a household group. All the points collected from the purchases goes to the group, which can then be redeemed by either head of the group or any members of the group based on the preferences set by the head of the group.

This allows the retailer to gather complete information about the needs of the family and also the needs of the individual members of the family. This, in turn, helps to target a family and selected members of the family for promotion and marketing. For a retailer, who already has a loyalty program up and running, the changes needed for implementing the household program is minimal. This is because the household program simply links two or more individual loyalty accounts and forms a group. However, the benefits the family gains are enormous.

Loyalty tier level: For any retailer, not all customers are the same. Some customers bring more business to the retailer than many others. A single loyalty program for all the customers may not work. Customers must be rewarded both for longevity and purchases they make. The retailer must define loyalty levels in a way that a new customer would join the program at the lowest level and earn promotion based on their purchases and longevity.

Customers at the higher tier level may get more points for the same purchases. This serves as an incentive for the customer to earn a promotion to higher levels. Also, the retailer may create rules for customers to stay at a tier level. For example, if a customer reaches the next tier level, a target should be set to maintain the same tier level for the next year and a target to earn promotion to the next level. For the retailer, this increases the cost of switching immensely. Tier level promotion along with household accounts helps the retailer to engage a family closely, understand their individual and collective needs and serve them better.

Mobile application: Mobile application is one of the fastest growing fields. People use apps for almost everything. Retail chain can use this facility to engage the customers in the following areas

Loyalty – View tier level and points purchased, Teaser on which of the favorite items of the customers their points can buy, Teaser on how many more points needed to complete their wish list.

Point of Sale – Mobile phone apps are currently used as POS terminals. Instead of issuing a loyalty card, a bar code on the app can be used for detecting and updating the points for a loyalty member real time.

Savings – The app may also show how much they have saved in every shopping based on the number of promotional purchases and purchases made on customized marketing.

Preferential treatment: Loyalty customers bring sustained business. Therefore, these customers deserve preferential treatment when compared to others. Some ideas such as a separate lane for highly loyal customers, similar to business class check-in desk in airlines industry. Using the mobile application, the customers could register for a new product, such as XBOX game, that comes to the market. If a loyal customer booked the product, preference may be given in allocating the product.

Loyalty program is slowly dying in many markets due to relentless focus on the costs. Loyalty program, which used intelligently, can create a better customer engagement, understand the needs of the customer as a whole.

Enhancements to the existing loyalty program is the key to engage customers and hike their cost of switching.

Can airlines use social media to grow?

Social media allows like minded people to come together to achieve a common goal. Similarly, the social media gives organisations tremendous potential to connect with its customers. For the airline industry, the potential for engaging with the customer is enormous.

From the airline’s perspective, the social media gives them the platform to showcase their brand image. Superior brand perception helps to win customers over the rivals. Advertisements sent through social media connect with the customer very easily and the cost of delivery is virtually zero. Hence, the airline can create as many adverts and deliver to millions of customers free of cost.

On top of this, the airline can push cheap fares, advertise flights that are low on load, give pictorial information about holiday destinations and so on. There are more than 500 million users in Facebook and more than 150 million users in Twitter. The continuous engagement with the customers will ensure that the brand remains in the mind of the people all the time.

However, if social media is not handled properly, it could create a huge problem for the airline. Some years back when Qantas tweeted that passengers in delayed flight can get unlimited alcohol in its lounges, it created a strong criticism from most of its users. A bad message can spread fast as all users can communicate with each other more easily through the social media.

Also, unimpressed customers can cause a stir. Brand perception can go down badly. When Indigo flight attendant refused to handle a wheel chair patient, the social media ripped its image. The airline has to be very careful when responding to tough times via the social media.

Airline tickets are not an impulse purchase. If a beverage is advertised all over the social media and on other forms of media frequently, a customer can make an impulse purchase on the shops to try it out. However, a customer may not be tempted to buy an airline ticket that impulsively. Still, majority of the customers world over look for cheap deals rather than sticking to a particular brand.

Social media, if used intelligently, can create hundreds of thousands of fans for an airline. But, fans turning into regular customers is not a guarantee.