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Loyalty programs must use data carefully to keep consumer trust

by Alexandra Cain | 14 May 2019

Loyalty programs are an increasingly important tool for financial services businesses to engage and reward customers. But they are not all created equal. The best ones are powered by technology and aim to genuinely reward consumers.

Asian businesses are leading the charge. For instance, India’s PayTM’s PayBack Rewards program provides instant cashback across in-store and online. Additionally, 

Amazon’s new Amazon Pay payment system will create deeper integration with Amazon  Prime and support loyalty programs, although this is not yet in Australia. China’s social media platform WeCHat has also allowed retail stores to create and integrate their membership cards on the WeChat Payment app.

Mark Pullen, general manager of point of sale and loyalty program experts Tranxactor has 20 years’ experience designing and operating loyalty programs. He says a good loyalty program must have a clear and straightforward device to generate benefits. 

“Programs no longer just revolve around a mechanism for accumulating some type of rewards, they must provide real and tangible benefits for members. Good loyalty programs surprise their members with even more than they expect, and ensure members are treated as special.”

A well-executed loyalty program gathers a complete view of a customer’s transactions. It allows firms to collect accurate data across relevant touchpoints instore, online and via the brand’s marketing channels. 

“Increasingly sophisticated AI and modelling tools give businesses the opportunity to ‘join the dots’ to understand how their customers engage with their brand,” Pullen says.

Alistair Leathwood, chief commercial officer, Asia Pacific of analytics business IRI, says loyalty programs must have one key ingredient.  

“The program must engage and reward customers with meaningful benefits for continuing to spend money with the business. The more immediate and meaningful the rewards, the more successful the program will be.”  

He says it’s important for financial services businesses to balance trade-offs inherent in loyalty programs. These include cost to the merchant versus value to the customer, using data to target offers and sophistication and useability.

The other area of concern is data security and ethical data management. Says Leathwood: “This involves helping businesses to develop strategies and capabilities to capture data and then manage it safely and appropriately to enhance the customer experience while simultaneously growing the business.”

There are other common mistakes loyalty programs make. Being overly complex is one. 

“Many of the new and successful ventures are disrupting the established players by removing friction and making every interaction as simple as possible. Loyalty programs must follow suit and push the technical boundaries to ensure that customers have no barriers to using the program and earning and redeeming their rewards across all touchpoints,” he adds. 

Programs must be designed to be easily used all business units, not just a single product. This is especially important with bank and financial services.

“Programs can also suffer from a lack of integration and ownership across the whole of business. Often when designed, loyalty programs set out to capture the brand’s most valuable customers and provide them with the best experience. This is often lost in the maelstrom of day to day ‘business as usual’ activities, resulting in a program that is treated as simply an ‘add-on’. Businesses must engage all their business units with relevant elements of their loyalty program.”

Leathwood warns companies to be judicious when it comes to using data collected through loyalty programs.

"I am a big proponent of innovation and outside the box thinking when it comes to data usage – for instance, mining the data to recognise that you often buy fruit when you buy yoghurt, but not always, is interesting and useful. In that situation, a discount offer on fruit and yoghurt together is good for both shopper and retailer.

"But I think we all feel a little uncomfortable about being tracked across multiple stores, online and offline. Any loyalty scheme that seeks to do this needs to be very careful or risk being creepy.”

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