{"id":18697,"date":"2023-01-23T19:25:56","date_gmt":"2023-01-23T13:55:56","guid":{"rendered":"https:\/\/www.cigniti.com\/blog\/?p=18697"},"modified":"2023-01-24T11:43:43","modified_gmt":"2023-01-24T06:13:43","slug":"modernizing-customer-loyalty-landscape","status":"publish","type":"post","link":"https:\/\/www.cigniti.com\/blog\/modernizing-customer-loyalty-landscape\/","title":{"rendered":"Modernizing the Customer Loyalty Landscape"},"content":{"rendered":"

These days, we can’t complete a transaction in a retail store without “giving away” our contact number. This is true especially if the store is part of a retail chain that is spread across the region or country, and there are many stores present within the city a few kilometers away from each other. If you ever wonder what they are doing with your contact number, just be aware that they have a file on you! This is a simple form of a membership club where each of our contact numbers becomes our unique membership identity, or at least part of the membership profile! With this number, they may be tracking all the items each of us is buying and how much money we spend every time. Next time when we go to the checkout counter and say our number again, we may be told by the checkout staff that we have earned 15 % discount on our purchase this time. Guess that will be as exciting as it was unexpected, and that is for no reason!<\/p>\n

Welcome to the world of loyalty programs!<\/p>\n

When we make repeat purchases and the shopkeeper gives us a discount or a free product as a token of their gratitude for our loyalty to their shop, that is the simplest form of a loyalty program. And that is how historically loyalty programs started; in fact, it is said that in ancient Egypt, people including workers were rewarded status tiers and tokens made of wood which they could redeem on a wide variety of things. Later in the 18th century a merchant in New Hampshire gave away copper tokens to customers during each purchase transaction, which, once accumulated, could be used for future purchases. So, the history of loyalty programs goes back centuries!<\/p>\n

Fast forward to the 20th century, when more businesses in multiple industries started introducing loyalty programs to attract and retain customers. It is exciting to learn that Betty Crocker coupons, one of the oldest but still running coupons program, was started a century ago in 1921. American Airlines is credited with introducing one of the world\u2019s first frequent flyer programs in the 1980\u2019s that rewarded “miles” in return for every flight booking, which travelers could later redeem to buy future flights.<\/p>\n

So, we talked about discounts, coupons, and miles. These are some of the ways for rewarding a customer for his or her loyalty, which we generally call “loyalty currency,” and there are different categories of rewards. But first things first, let us define what is a loyalty program?<\/p>\n

\"How<\/em><\/p>\n

Exhibit: How loyalty programs work<\/em><\/p>\n

In simple words, a loyalty program is a membership-exclusive program used by enterprises or businesses to retain and engage with customers by rewarding them for repeat business. We can stretch and improvise on this definition to suit the domains we want to apply it to, but the overall objective of such programs is to increase the Customer Lifetime Value or CLV, for the enterprise. And rewards are the mechanisms by which retailers give it back to the customers and around which they build relationships. Such rewards may fall into one or more of the following categories:<\/p>\n

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  1. Points-based (or Miles-based, as we see in the case of airlines). Such a reward system allocates pre-determined points to each currency unit we are paying, whether in dollars, pounds, euros, or rupees.<\/li>\n
  2. Discounts or cashback, offered simply on the purchase value, or by virtue of a coupon or a voucher<\/li>\n
  3. Information on topics of interest to us that is otherwise not easily accessible E.g., upcoming events, talk shows, or an exclusive cooking session on the company\u2019s website<\/li>\n
  4. Privileges such as access to airport lounges, special events such as golf courses or horse racing, and favorite channels<\/li>\n<\/ol>\n

    Almost every industry, from automobile companies to grocery chains, has come out with its own loyalty programs, which may vary in how they engage and reward. The way luxury car companies like Mercedes run loyalty rewards and programs could be very different from how grocery shops like Sainsbury’s- where customers make frequent repeat purchases – design & implement.<\/p>\n

    1. Designing a Customer Loyalty Program<\/strong><\/p>\n

    The best loyalty program is one that provides the most perceived value for every member for each point or instance of interaction with the brand, be it a purchase or sharing a piece of information. In simple words, if you are a sports enthusiast, this would mean that not only will you receive a notification about your favorite sporting event in your city well in advance, but you will also get to buy a ticket using your membership. And for a company running a loyalty program, this means much more: from knowing each customer’s tastes and preferences beyond just their purchasing behaviors to forging partnerships and collaborations with multiple parties and organizations that equally benefit from a loyalty ecosystem, and then using data and technology to design, evaluate, and launch campaigns and programs that will help generate additional revenue opportunities while creating a positive customer experience and reinforcing their brand loyalty.<\/p>\n

    1.1 Setting the priorities<\/strong><\/p>\n

    A Harvard Business School report published in 2019 rates customer service, digital access, and ease of use well above traditional monetary rewards when it comes to loyalty strategies in the 21st century. The study also reveals that<\/p>\n