How customer loyalty helps businesses sustain any weather
By Rijish Raghavan
The twin events of demonetisation and the Covid-19 pandemic have accelerated the adoption of digitalisation and digital payments in India. The cashless economy, earlier seen as an emerging alternative, suddenly became a mainstream phenomenon. However, the pandemic also brought with it the rude reality of a volatile and uncertain economic environment for all, and businesses in particular, compelling them to shift strategy and focus more on customer retention than customer acquisition.
The change in approach has put back the focus on customer loyalty as the real long-term strategy for business models to sustain any weather. Loyalty works on the principle that sustainability is built by acquiring customers at a viable cost, and by retaining the customers through continuous engagement, superior experience and meaningful rewards. Adoption of data-driven marketing with hyper-personalisation shall remain the key to maintaining consumers’ affinity to the brand. Loyalty programs are thus designed to serve as an influence over customer retention.
A loyalty program at the PoS-level will involve integration of transaction data via PoS or QR code, and customer specifics from the loyalty program database. This is because while merchants can view transaction data when accepting digital payments, the customer identity is hidden. It is the loyalty integration that can give the customer identity details and, hence, enable merchants to offer a better experience to customers.
As we move towards being a more digital-savvy society, customers don’t just expect to be acknowledged by their favourite brands; they also expect to be seamlessly engaged and rewarded. According to a study by Bain & Co, growth in customer retention by just 5% leads to at least a 25% increase in profit; and returning customers spend an average of 33% more per order than new customers.
It is recommended that payment transactions (either online or PoS machine/QR code) are complemented with a loyalty program. It will prove to be a win-win for all, as merchants ensure higher customer stickiness and customers earn reward points that can be redeemed on future transactions for additional discounts, vouchers or be used to pick a product of choice.
The right rewards
For customers, the strongest connect with any business or brand is personalisation. According to a consumer survey in 2018 by Epsilon, nearly three-fourth of consumers across sectors are more likely to make a purchase when brands offer personalised experiences. Along with payment facilitation, diversifying into financial service, such as extending credit to customers or offering payment flexibility, is gaining traction towards creating an evolved ecosystem to ring-fence loyal customers and simultaneously drive new customer acquisition.
Using mobile or digital loyalty programs comes with practical advantages. Digital loyalty works on building a data analytics dashboard with built-in marketing campaigns based on a customer’s transactional data. It can be integrated with artificial intelligence (AI) and machine learning (ML) to forecast customer behaviour or segmentation. So, every time customers make a payment on a PoS machine or via a digital payment facilitator, they automatically get their loyalty points, and the transactional data is linked with the customers.
This way, merchants can start identifying customer purchasing habits — like how many times they visit a store, or if they haven’t visited in a while — and send them a free reward to win them back.
A successful loyalty program will ensure new customer acquisition and keep them for a longer period, and, simultaneously, find new ways to engage and reward existing customers. This will encourage customers to remain on board and attract further recommendations for the brand through social media and word-of-mouth, which will finally enhance brand recall and value. Loyalty is always a good cost for sustainable growth.
The author is CEO, PAYBACK India