Loyalty Programs and Customer Experience (CX)

Last week I was a participant in the Seamless Middle East; an in-person event held in Dubai between 31st May-1st June 2022. The two-day event brought attendees, exhibitors and speakers from Banking, Fintech, Retail, E-Com, Payments and many other industries. I could attend a few key note speeches and panel discussions but the one which was quite exciting was on the topic of “Future of Loyalty Programs”. While listening to the key note I was thinking how these programs have evolved over time and how could they enhance the modern-day Customer Experience (CX). Let's dig into these questions below:

The History

The one of the first loyalty programs was developed by the American Airlines way back in 1981 in the form of the “Frequent Flyer Program” under the name AAdvantage.

It offered rewards (in the form of points, miles etc.) which can be used by the customers to upgrade, change schedule (date/time), receive discounts on retail products, receive cash backs, hotels, rental cars and many other such incentives.

The Objectives

The original objectives with which these programs started were

• To attract and retain customers
• To avoid customers going to the competition
• To Boost Sales
• To increase brand affinity

Over a period of times the card based loyalty programs have evolved into a simple mobile app and many new objectives have been added to the above list:

• To avoid exponential expenses in acquiring new customer
• To drive significant value and is business growth
• Use critical customer data to make personalized offerings and recommendations
• To maximize lifetime value of a customer

It helped in creating a tribe of loyal, repeat customers who not only become a long-term customer but also advocate you to others. It stands to reason then that customer loyalty programs can be incredibly valuable to any organization with repeat customers.

There are alternatives to loyalty programs in the form of “Membership Programs” which Amazon, Netflix etc. run successfully. Although the objective is almost the same as in Loyalty Programs but the difference lies in the fact that these programs require you to pay upfront to become members whereas the loyalty programs are free to sign-in.

The Millennials and Gen-Z Customers

In a large survey conducted in 2021, 81% of millennials said these programs prompt them to spend more with a brand/retailer, 78% adding they’d switch to another if their offering was better. Further, 86% of those loyal to a brand said they’d recommend it to friends and family. It shows that more and more new generation customers are opting for these programs to gain as much as they can. At the same time, there are other customers (boomers, Gen-X etc.) who would not become members in these programs as they fear that their personal information could be compromised. Overall, the number of customers who actively participate in these programs stands around 50% only, suggesting that there is huge potential to take it much higher.

Customer Experience (CX)

It's been confirmed that successful loyalty programs have helped generate additional revenue to the retailers/brands and also made customers happy with rewards. All this adds up to a better customer experience, which certainly results in much more and better returns. However; with more and more organizations having their own loyalty programs is not a good news because customers might sign everywhere but they use only a few. So what are those factors which made customers to choose one over another? I believe someone who delivers amazing CX must be the winner here.

So how can one enhance the CX so that customers stick to them and use their loyalty program over others? Lets understand a few ways to do so:

• Personalization to the core

Using the information shared by the customers and recording their purchasing history, is the easiest way to know what the customers' behavior. All of this captured data need to be translated into tangible benefits, one of which is PERSONALIZATION. Different retailers/brands use different ways to enhance the customer experience through personalization. My personal favorite is Tesla who does it in the most advanced way by capturing all the information about their drivers' preferences and setting them in advance so they don't need to re-set them every time they enter in the car.

This is one of the best way to enhance the CX and goes a long way in making the loyalty program successful.

• Friction less shopping

Loyalty programs captures majority of customer information through their touch points at different shopping channels and the purchasing history including the payment methods chosen. With the customers' permission their online payment methods are stored (Credit Card Info, COD, Debit Card, UPI, Bank Transfer etc.). This allows the customers not to search and enter the payment details every time they make purchases. Almost all of the loyalty programs now a days have this feature.

Some of the programs such as Starbucks etc. allows you to order your coffee using the app even before you reach to the store/pick-up location. This allows the customers to not loose time in coffee preparation, payments etc. all this is possible because all the info is already stored in the program app and fetched every time you order something using it.

All of these are frictions for a seamless shopping hence by removing those frictions, you are enhancing your CX in a big way.

• Happy Customer advocates

Then only way a brand/retailer or any other business grow is by ensuring that they provide such CX which their customers speak about to other customers (advocacy) and thus increase the footfall in your shopping channels. For this to happen, the customers have to feel happy dealing with you. Loyalty programs are one such thing which can do this for businesses without getting directly involved.

Amazon Prime is one such example which is an all-encompassing program which not only gives access to the exclusive members only TV programs, movies and music etc but also keeps track of all your orders, purchasing history, returns, addresses, payment methods etc. Gives recommendations based on what others are buying, what is the best seller and on top of that the program also gives you access to Free Shipping thus making the customers happy.

To conclude, Loyalty Programs are a great way to create dedicated, loyal and long term customers but these programs will have a long life only if the Customer Experience (CX) is kept in mind while adding or removing any of the features of the program. Using the right CX tactics in developing and building the loyalty program can have a long lasting impact on business growth.