The Hindu Business Line : How loyal can you be?

Loyalty programmes are crawling out of the woodwork with a variety of companies from carmakers to real estate offering them. Catalyst looks at the efficacy of running such programmes.

REMEMBER the first time you got a loyalty card from a large format retail store in your city? You must have been on top of the world to be treated as a preferred customer. And you would have looked for opportunities to shop only in that particular store to redeem the points you would have accumulated and avail yourself of the attractive discounts that were on offer. But, loyalty prgorammes for buying apparel and other goodies are passé. No longer are they restricted to large format retail stores, credit card companies or airlines. Car manufacturers, real estate companies, coffee cafes, malls and even road toll companies are doling out the cards to lock in customers.

With customer relationship management (CRM) becoming the buzzword of Indian industry, loyalty programmes are considered an effective tool to build relationships with customers across categories.

"Most corporations today recognise the need for a new attitude towards the customer. What you are seeing is a result of that. Better service can be offered only if we know what the customer wants. To know what he wants we need to talk to him — have a relationship. To do that we need to know who he is. This leads to the development of a structured programme," says Supriya Padmanabhan, Associate Vice-President (Strategic Planning), Thompson Connect.

"All programmes of this sort help companies develop a more accurate and up-to-date database of their customers. The simple process of registering into the programme is the first step in collation of data. One is also able to then begin tracking trends and determining with whom and how marketing money can be spent so as to allow for less wastage. And, if the programme is managed well it can nurture a relationship," she adds.

The unconventional ones

Talking of unconventional programmes, the most recent one is probably that of Ford India, called the Ford Car Gainz. The programme rewards service and maintenance of cars and purchase of Ford gears from the company's authorised dealers and service centres. Apart from this, the car owner also gets additional bonus points when he/she follows the Ford prescribed periodic maintenance. In addition, loyalty points are earned for continued ownership as also for making use of the periodic maintenance service. The loyalty points, however, can only be redeemed at the time of exchange for a new Ford vehicle.

How does the company benefit out of this programme? Says Vinay Piparsania, Vice-President (Sales & Marketing), Ford India: "We realised that in the automobile industry loyalty for a brand comes with frequent usage. By encouraging customers to avail themselves of our authorised services, we hope to encourage them to buy a Ford car when they plan to change their car. The customers earn points when their car turns a year older and can even redeem their loyalty bonus points and get discounts when they decide to exchange their existing car."

"Our strategy is to make our customers loyal to the Ford brand. We are shortly going to launch Ford Fusion and through the loyalty programme we would like to see our existing Ikon owners considering to buy the new model," he adds.

Yet another offbeat loyalty programme is the Purva Privileges Programme offered by the Purvankara Group, the Bangalore-based real estate developers. From helping customers do up their brand new flat to paying their electricity and telephone bills and even organising domestic help for them, Purva Privileges promises a host of value adds. The programme enables customers to get discounts on a variety of things starting from geysers, fans, light fittings, paints, upholstery, furniture and so on.

Girish Purvankara, Director, Purvankara Group, says, "As developers we help our customer with the usual services such as documentation and registration, but apart from that we wanted to add further value by helping him/her settle down in his flat."

The loyalty programme also has a referral reward scheme. "The members are entitled to earn credits for every successful referral made to the Purva Privileges help-line. These credits may either be exchanged for any of the concierge services offered by the help-line, or for specific goods and services with high-perceived value such as travel packages, white goods or even cash," says Purvankara.

While loyalty programmes are popular among retail stores, the trend which is catching up is mall loyalty programmes. Ansal Plaza is among the first few Indian malls to offer a loyalty programme. Called the Ansal Plaza Privileges Program, it has more than 18 outlets as programme partners. The programme enables the members to earn and spend privilege points at any of these outlets.

Says Munish K. Baldev, CEO, Ansal Plaza Mall Management Co., "A coalition programme offers multiple benefits to the member, the programme partners as well as the mall management company. While the member can earn and redeem points at all the participating outlets, it is a cost-efficient and cost-effective way for the programme partners to retain customers. A standalone loyalty programme would need huge investments. For the mall management company, it would be a brand-building exercise. It would not only help in increasing footfalls but also ensure loyalty towards the mall rather than loyalty for the tenants."

Baldev says that the programme has a loyal customer base of more than 7,500 members, who spend a sizeable amount of money at the participating outlets.

"Members spend more money at the participating outlets than non-members. We have seen that special promos and offers for members have resulted in better turnovers. It would be tough to say that the programme has resulted in increasing footfalls. But it has resulted in increasing the frequency of visits by the members and getting a higher share of wallet," he adds.

The other unusual loyalty programme is that of Delhi-Noida-Delhi Tollway. The programme enables regular users of the tollway to accumulate points and redeem them at various participating outlets in Delhi and Noida.

Trade-related programmes

A loyalty programme is not necessarily company-customer oriented. A number of large FMCG companies are running a lot of trade-oriented programmes, says, Saroja Kannan, Business Director, Ogilvy One Worldwide. "We had done one such trade-related programme for HLL's A-1 Tea brand, which was called Maharathiyon ka Manch. The distributors could participate in this programme only if they achieved a certain target. We also involved the families of the distributors in this programme and organised events such as a rangoli contest. This exercise created a feeling of involvement among the distributors and both the distributors as well as the company benefited out of it."

Similarly, Padmanabhan of Thompson Connect refers to the Good Life Club programme which HLL has been doing for hot teashop owners to promote the Brooke Bond brand.

She also says trade-related programmes are quite common and have been around for ages. "They might never have branded it or called it a loyalty programme. It normally consisted of achievement-based recognition like rewards on highest sales, targets achieved and so on."

Cross-promotions

Soft-drink companies doing promotional activities with a fast food chain, or a toy company associating itself with a fast food chain to give out goodies along with kids meals have become quite common off-late. It has become a popular platform for like-minded brands to feed off each other's success and customers.

"Cross-promotional programmes allow us access to each others' databases. A company can do targeted communication to a specific group of people using the opportunity to sell more. The host company of a cross-promo uses the offer from the partnering company as part of a loyalty programme. This also enables to share costs or increase the scale of a programme, allowing for greater impact," says Padmanabhan of Thompson Connect.

Kannan observes that FMCG brands are increasingly resorting to the strategy of giving out freebies along with their products. "Kissan, for instance, has been giving out Pokemon collectives along with its products. These kind of offers generate behavioural preference for the brand which is rather unconscious and are going great guns."

Are loyalty programmes always successful?

Praphul Misra, CEO, NetCarrots Loyalty Services, says, "If developed and deployed judiciously, loyalty programmes can provide a lift in sales and corresponding revenues."

At the same time he also says that a programme could backfire if the team launches an unfocussed programme without doing a sanity check on relevance for the category or brand. There could also be implementation and flexibility issues, where the organisation would be unable to make tactical changes based on the feedback from the consumer, trade or sales/service staff.

Says Padmanabhan: "According to statistics most loyalty programmes never run the full course. The marketing team moves on and the next guy wants to launch his own baby. The financial team can't keep showing a balance sheet that keeps aside money for points that might be redeemed. Or very simply, people expect to see all the results immediately whereas putting in place a good, working relationship programme does not happen overnight.

"It is not only a question of some simple software and mailers announcing a programme, but a strategy that remains a part of the company. Training down the line, intelligent analysis of data, continuous, constant improvement and insightful strategies that are the result of this. All preceded by very clear objectives and methods of measurement/evaluation along the way."

When it comes to getting transactional volumes, Kannan of Ogilvy says, it is only the airlines which have benefited out of loyalty programmes. She says that to have a successful loyalty programme, the company should constantly innovate by trying to figure out what the consumer would genuinely be interested in. "Putting a loyalty programme by tying up with a few brands without adequate research will not work."

Loyalty-based management, says A.V. Vedpuriswar, Dean, ICFAI, Hyderabad, must be guided by a set of principles and values and not short-term expediencies. He says that loyalty-based management must aim at creating so much surplus for customers that there is enough left for investors and people.

"Loyalty-based management is about people. It is about motivation, behaviour, humanistic values and principles. There should be meaning in the work. People are always more motivated when they are working towards a service goal that benefits society rather than trying to make a quick buck," he says.

Future of loyalty programmes

Misra of NetCarrots says, "When products are at parity, it's the relationships that'll differentiate."

Loyalty or relationship programmes are here to stay, says Thompson's Padmanabhan. "In this world of new product launches everyday, it is difficult to get a truly `loyal' customer. However, if we have invested in a relationship, then several things happen. Our customers are less angry when we occasionally slip up, they are less inclined to move away from us, they recommend us favourably, we are able to react more efficiently to their needs, and we are able to recognise whom we should concentrate our efforts on."

She says that the Indian corporate is going all out to achieve a win-win relationship with its customers. "To develop that relationship several corporations are actually setting up systems... and if need be changing certain business processes to stay in-tune with the customers needs."

She says that developing loyalty is a strategy that can keep a company flying high in good and bad times. "When advertising budgets are cut, loyal customers will bring in the profits. It's just common sense to develop those relationships or at the very least maintain them."

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