Is there a future for loyalty points?
Updated: Jun 15, 2021
Is there a future for loyalty points programmes in a post-pandemic world?
Even before the world turned upside down early last year, putting many businesses on or over the edge, costly loyalty points programmes appeared to have passed their peak. The pandemic has surfaced some important cornerstones for loyalty thinking in the “new normal”.
Major brands like M&S and Waitrose already by-passed the points based offers that historically powered Tesco and Sainsburys in favour of a new model with a different kind of customer engagement. And as a Mando Connect / YouGov¹ study showed in 2019 membership of loyalty programmes stagnated, with a membership gap opening up among millennials and Gen Z.
As this study points out, Rewards are still top of the charts in terms of what customers want from a loyalty programme, but the pandemic has shone a different light on the wider expectations of customers who expect extra TLC when the going gets tough. Some brands rose to this challenge but many did not.
What strategies are viable for retailers who are carrying the cost of expensive points based programmes?
Globally some brands have moved to monetise their points liability to liberate cash in difficult times: JetBlue Airways in the US pocketed US$150m at the start of 2020 through a sale of points to a financial institution, following similar moves by Hilton and Marriot (totalling US$1.92bn).² Airlines like British Airways have been swift to use points as a stimulus to attract new bookings, releasing cash flow for future travel. Points have provided a financial lifeline to struggling businesses.
Ongoing operating costs remain a challenge when margins are squeezed and “points currency” offers little flexibility for trimming beyond an unpopular re-valuation, which risks turning customers away.
Could the current squeeze herald the end of some programmes? Points foster primarily transactional loyalty, while emotional engagement is hailed as the sustained behaviour changer. Critically, is there a difference for customers between “being rewarded” and “feeling rewarded”?
The idea of “reward” in its literal sense nods to a deal or a discount, getting something for giving something, but the feeling of reward can be something entirely different, and has already been applied through charitable donations on behalf of customers, free coffee in store, newspapers, exclusives - all de-linked from the value of the purchase transaction, but fostering a feeling of reward.
While points programmes will need to balance the company finances with cash pressured consumers looking for more from their loyalty membership (and their data), a gap is opening up to provide a feeling of reward in a different sense that appeals emotionally to customers and balances the books.
Drawing on lessons learned from the Covid crisis here are some pointers for loyalty innovation:
Values - many organisations’ true values were revealed under pressure and some brands won many fans, while others found quite the opposite. Many customers were delighted to receive a proactive credit against their car insurance for example.
Extra care in difficult times - being ready to take extra care of your regular/valuable customers in challenging operating conditions emerged as an expectation in the crisis. Some brands, like Ocado, took a while to find a way to offer their existing (pre-Covid) customers access to their besieged grocery delivery service.
Rituals and small pleasures - “There has been this trend where consumers create emotional ties to physical things they enjoy everyday,” ³ highlights an Annex Cloud report on emotional loyalty, and this has shown to be particularly true during a time of upheaval where our rituals and habits have been forced into re-consideration and change. Many of us have found pleasure and comfort in small new habits.
In many ways, strong loyalty strategies will be more vital to businesses than ever before, but the need to innovate, manage costs and truly tap into the customer’s new normal, will be essential for success.
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Deb Corless - Board Advisor, Joyall Ltd
What the British Want from Loyalty Programmes 2.0 Mando Connect https://www.mando-connect.co.uk/what-brits-want-from-loyalty/
From Loyalty Magazine UK LM 26 June 2020 https://www.loyaltymagazine.com/
Dr. James Intriligator, Emotional Loyalty in 2019, Annex Cloud https://www.annexcloud.com/emotional-loyalty-2019
Joyall Ltd is a first-of-its-kind loyalty platform provider that offers brand-immersive casual games with real-world rewards. Based in the UK, Joyall operates at the intersection of game publishing, brand engagement and customer loyalty. By creating branded casual games, Joyall provides a cost-effective media platform that drives deep customer engagement and rewards positive loyal behaviours. For more Information please visit www.joyall.co.uk
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