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March 26, 2015

Have customer loyalty programmes been left behind by digital?

Capgemini study suggests vendors are being too slow to adapt.

By Alexander Sword

A new report from Capgemini Consulting suggests that customer loyalty programmes are not evolving with the digital age.

The report showed that 89 percent of responses on social media were unfavourable to loyalty programmes. Programmes of telecoms companies were viewed most negatively, with 96 percent of opinions on social media being unfavourable, followed by consumer electronics at 94 percent and retail at 93 percent.

The research suggested the reasons for this lay in slow adaption to the digital age. Only 11 percent of loyalty programmes offered personalised rewards based on a customer’s purchase history or location data. Most systems were found to use a traditional tier-based system where "classes" are assigned to members based on purchase volumes.

It was also found that only nine percent of programmes offer point redemption across all channels. While 79 percent of programmes used the mobile channel, only 24 percent offer redemption through it. This compared to 83 percent online and 62 percent in-store.

97 percent of loyalty programmes were based primarily on purchases made by consumers, with only 16 percent rewarding customers for activities such as taking online surveys, reviewing establishments or referring friends. Additionally, only 14 percent employ gamification mechanisms, meaning taking the psychology behind games and using it to persuade people to participate more.

Social media was identified as another area where vendors were missing out. Capgemini cited the example of multi-partner loyalty program BalticMiles, which launched a successful crowdsourcing initiative on Facebook called "BalticMiles Brainstorm", for how brands could better use the channel.

Capgemini made recommendations for vendors based on the findings, suggesting that they integrate loyalty programmes with the overall customer experience and deliver more personalised service. They also prescribed "Social Listening" to better understand customer needs, as well as rewarding members for their social media engagement and advocacy.

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Mark Taylor, Global Lead for Customer Experience Transformation at Capgemini Consulting said "Brands need to revisit their approach to loyalty. For us, the key is to integrate the loyalty programme into the overarching customer experience and to reward engagement as well as the simple transaction.

"Additionally, since relevance is the highest form of customer intimacy, offering advanced levels of customisation and tailored experiences will enrich loyalty programmes and further encourage customer engagement."

Capgemini investigated loyalty programmes of 160 global companies across 7 sectors including Retail, Banking, Consumer Products, Telecom, Airlines, Hotel Chains and Consumer Electronics. The firm also conducted a scan of 40,000 consumer conversations on social media to gauge sentiment towards loyalty programmes.

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