Loyalty Programs – 3
A 1995 HBR article had this to say about loyalty programs and rewards: “A rewards program can accelerate the loyalty life cycle, encouraging first-or second-year customers to behave like a company’s most profitable tenth-year customers—but only if it is planned and implemented as part of a larger loyalty-management strategy. A company must find ways to share value with customers in proportion to the value the customers’ loyalty creates for the company. The goal must be to develop a system through which customers are continually educated about the rewards of loyalty and motivated to earn them. Achieving sustainable loyalty, measured in years, requires a strategic sustainable approach.”
From a recent HBR article: “Customer loyalty programs are ubiquitous, accounting for more than 3.3 billion memberships in the United States alone. And they can confer tremendous advantage: Members are more likely than others to buy from a retailer whose program they belong to, they visit the website or store more frequently, and they are more likely to download the retailer’s app, follow or otherwise engage with the retailer on social media, and recommend it to family and friends.”
Payback India’s then CEO Gautam Kaushik spoke about multi-brand loyalty programs in early 2020 in a Business Standard interview: “Multi-brand loyalty is a very successful concept as it works for the customers and the partners beautifully. Let’s talk about the customers first. They can join the programme with any one partner and use their membership across all participating brands (more than 100 in the case of Payback) to earn or redeem loyalty points and to avail of all other privileges. It offers them a lot more value for a very small effort and that keeps their engagement high. For the participating brands in the network, it is great as they have access to a diverse set of customers, the cost burden of point issuance is lower vis-à-vis standalone programmes as they get a ready set of customers who hold points, which are earned from multiple brands within the loyalty network.”
During the pandemic, airlines were saved by their loyalty programs! From HBR: “When the bottom fell out of air travel, loyalty programs stood out for their resilience. Although people had stopped flying, they continued to spend with program partners, specifically the co-branded credit cards. Accrual from non-air sources (activities other than flying) now account for more than half of all miles earned in major programs. This type of spending has proven to provide a natural hedge during downturns… At $24 billion and $22 billion, respectively, the disclosed pro-forma valuations of AAdvantage and MileagePlus exceeded the airlines’ own market capitalizations at the time ($6.5 billion and $10 billion as of July 1, 2020).”
Who would have thought that the loyalty programs of the airlines would be worth more than the airlines themselves! And yet, for many of us who were members of JetPrivilege (now Intermiles), that should have come as no surprise. It had 10 million members as of 2019.
