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The Economic Times: Customer loyalty in the midst of a makeover; brands using social media, mobile phone to retain customers

by Rahul Sachitanand

For decades, they have been the privileged lot, strutting into reserved airline lounges, getting discounts on purchases at retail stores and a surprise room upgrade for being a loyal and frequent guest at a luxury hotel.

The ownership of this piece of plastic has sorted the wheat from the chaff, allowing companies to focus on high-value customers and pamper them with special deals.

Now, customer loyalty is in the midst of a makeover; firms are using the mobile phone and social media to convert this passive field into a two-way street, and hoping that it keeps flighty customers tethered to their brands.

Companies realise that the profile of their loyal customers is changing with time. Once a preserve of older and well-heeled patrons, exclusive loyalty clubs are breaking down many of these barriers.

Members are becoming younger, networked and more demanding. It is no longer about funneling seemingly special offers to a loyal customer; these diehards also want to be heard and want programs that are tailored to their needs.

“There exists a fantastic opportunity if social media is tied to loyalty points,” says Girish Khare, chief marketing officer for RewardPort, an incentives and loyalty management services provider.

For most companies, the challenge is to turn thousands of likes on Facebook and retweets on Twitter into actual business. India represents a fertile opportunity for these marketers.

For example, the country has some 50 million Facebook users many who spend up to 16 hours a day on the social network, often on pages of brands they prefer, liking new products or looking for offers tailor-made for them.

Along the way, some familiar elements — such as the ubiquitous card — may drop out of sight. Instead, companies such as therapeutic solutions firm VLCC and branded apparel maker Indus League have already junked the piece of plastic and shifted to a mobile phone number as a customer’s loyalty identification badge.

According to the Asian Digital Marketing Association (ADMA) report 2011, India has over 100 million internet users, more than half of whom read product reviews online and make a purchase based on feedback. The upshot: There’s plenty of opportunity to grow loyalty programs in India.

Around 96% of the population of the United Kingdom has a membership of at least one loyalty program, and over 64% belong to three or more of them.Retail giant Tesco alone is reported to have paid $900 million-$ 1 billion in vouchers to members of its loyalty program. In China,Wumart, a local retail major in Shanghai, has 10 million members.

According to data from Colloquy, a publication of LoyaltyOne, which is a provider of loyalty marketing and strategy, only 42% of people surveyed in India belong to a loyalty program compared to 74% in the United States. The 26-34 demographic — characterised as the well-heeled frequent shopper—was more demanding of a loyalty program too.

According to this survey, 40% of people in this age bracket expected special services, 29% were willing to pay a premium to be part of a program and 28% were early adopters. This kind of data means that this young, upwardly mobile, and constantly-connected bunch is a key target in the changing customer loyalty market.

Loyalty programs are trying to keep up with these changes. One of the most recognised loyalty programs in the country today is retailer Shoppers’ Stop’s First Citizen initiative, with 25.67 lakh members at the end of May this year. The retailer has 2.6 million fans on Facebook, the eighth largest fan base among brands on the social networking site.

“We have an exclusive section on our Facebook page for First Citizen members,” says Vinay Bhatia, marketing chief for Shoppers’ Stop. “They can view points, update their profile and access an exclusive First Update magazine, which has been created exclusively for them.”

The retailer has also launched a mobile application that not only acts as a virtual loyalty card but allows them to check their points and new promotions. These programs are evolving to allow companies to manage their customers in different ways.

“We can reach out to our customers in new ways … both mediums help us stay connected with loyal customers on a real-time basis,” says Sandeep Ahuja, managing director,VLCC Health Care India and CEO of VLCC International.

Loyal customers who are FB fans get a special gift voucher on enrolment, they are issued bonus reward points for filling up a know-yourcustomer form on the social networking site and they have tailored programs and offers for them to boot.

“We have an opportunity to have a more meaningful dialogue with our customers,” adds Ahuja. VLCC’s program, called Way of Life, has over 150,000 members,who account for 45% of the beauty chain’s business.

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