The power of loyalty in retailing is well-recognized. That’s why, nowadays consumers around the world face thousands of loyalty programs. At the same time, many are still questioning the real value offered by loyalty programs. However, the emerging technologies are going to change it all. The Loyalty Industry will undergo dramatic changes, which will be driven by the factors arising from the consumer perspective, corporate perspective and from the perspective of other stakeholders.
A typical wallet of an active consumer is loaded with a dozen of loyalty cards. However, that is going to change when the card-based loyalty programs gradually transform into mobile loyalty applications. Yet, it will be naïve to assume that such mechanistic transformation can solve the problem, as fewer cards do not necessarily translate to fewer problems for consumers.
The main problem will stay unresolved, as the consumers will still have to use multiple loyalty applications that are scattered amongst many different brands. Ultimately, such scattered nature of the loyalty sector results in the limited value creation for the consumers. Therefore, the solution will be not only to stockpile all the loyalty applications into a consumer’s mobile handset, but to have a multi-brand (i.e. coalition based) loyalty application that will unite many brands under one umbrella. Such consolidation in the loyalty Industry would mean additional benefits for consumers, as:
- Increased value creation. The involvement of many brands in a coalition program will increase the speed of accumulation, hence the consumers will receive more value from a loyalty program.
- More choices. Customers will have a bigger choice in terms of accumulating, as well as redeeming the bonus points.
- Convenience: It will be much easier for a consumer to keep up with just one application while shopping at various merchants or making purchases through different channels.
All the above benefits would result in increased customer engagement leading to a long-term loyalty towards the participating brands. However, still there are a number of other reasons that will drive the corporations to reinvent their loyalty programs, as described in the following paragraph.
From a corporate perspective, an obvious trend will be to make more personalized loyalty offers to customers using the CRM tools. In addition to utilizing more traditional demographical data or behavioral statistics, a mobile application has a functionality to tailor an offer with even higher degree of personalization, using the information regarding the location, timing, weather conditions or the other data provided by a specific consumer.
However, even greater innovation will occur in the PCG (or FMCG, as it is often called) Sector. For a long time, consumer goods manufacturers have been looking for a tool to connect directly to the end users of their products. Now, at last, the mobile devices in the hands of the end users can be used as such tools. Therefore, a strong driver of the upcoming transformation of the loyalty sector will be the need of PCG/FMCG Manufacturers to make a direct marketing communication to end users.
Even with the developments described above, still a big challenge will be to motivate the end users with valuable loyalty offers. One approach would be for PCG Manufacturers to launch standalone loyalty schemes but such approach will disintegrate the already scattered loyalty sector even further. It then follows that in order to increase the value creation for consumers, some sort of coalition with the traditional loyalty programs will be necessary. This, in turn, will drive further the need for consolidation in the Loyalty Industry. The benefits for the corporations from such coalition are obvious, as described below:
- Multi-channel Data. A coalition based loyalty program offers a cross-selling opportunity to make a direct marketing communication to the consumers shopping at the channels of other members of the coalition.
- Ease of Integration. The development of mobile technologies, such as mPOS terminals, allows an easy integration of standalone loyalty programs into a unified loyalty application.
- Cost Efficiency. Being a member of a loyalty coalition, means sharing the costs with other members of the coalition in delivering a value to consumers, resulting in cost savings (including the savings in marketing costs) for the individual members of the coalition.
In the era of digital transformation, at the very center of all loyalty programs is information and data analytics. The volume of data behind a coalition-based loyalty program could reach a truly significant size. It will allow for Big Data Companies to be employed for their expertise, technologies, machine learning tools and AI capabilities in order to make targeted offers and to personalize the loyalty rewards for the customers. IoT will be an additional source of personalized information to be integrated into a wider ecosystem of loyalty programs. Large customer base, accounts for bonus point accumulation, redeeming rewards trough eCommerce platforms, Big Data for consumer credit scoring– all these factors will incite the interest from the Banking/Payments Industry. These could lead to the integration of loyalty programs into the crowdfunding, mobile payments and other platforms.
So, it only remains to watch how the digital transformation occurring in the loyalty industry differentiates some innovative companies from others.
Beso was previously involved in a number of projects that initiated: the adoption of Visa PayWave contactless payment solution into CEMEA Region, the development of the solutions for NFC Payments, the introduction of co-branded bank cards and the development of the first coalition loyalty program in the Republic of Georgia.
He also works as the CEO of Wings & Freeman Capital LLC, a financial advisory company providing financing solutions to the corporations in One Belt One Road Region Countries working with OPIC, DEG and other IFIs.
Beso holds a Master's degree in Engineering from Georgian Technical University, a Ph.D. degree in Engineering from London South Bank University and an MBA degree from the University of Warwick.