Figure 4: Industry-wise Adoption of Engagement-based Reward Mechanisms % of companies that reward customers for at least one form of engagement Hotel Chains Consumer Products Consumer Electronics Retail Telecom Banking 57% N=160 Source: Capgemini Consulting Analysis Note: Our research focused on 5 ways in which loyalty programs reward a customer for engagement – activities (ex: writing reviews, taking surveys), participation in gamified campaigns, mobile app downloads, social media engagement, and in-store checkins. An industry-wise comparison shows that some industries are ahead of the curve. 57% of airlines and 41% of hotel chains reward consumers for a range of behaviors that reflect engagement, other than transactions (see Figure 4). Personalization needs to become much more nuanced, going beyond the broad tier-based approach. Seamless Cross-Channel Customer Experience Has Gone AWOL Companies deliver their loyalty programs across offline and online channels, but do customers get an integrated experience? To answer that question, we focused on a specific aspect of this question – redemption of loyalty rewards. We found significant room for improvement (see Figure 5). Although a significant 79% of loyalty programs use the mobile channel, only 24% allow redemption through it. Most importantly, only 9% of loyalty programs offer points redemption across all channels. Clearly, cross- channel redemption is far from being complete. The Global Head of Consumer Insights at a leading F&B major told us that organizations need to strengthen redemption mechanisms. “Consumers are becoming more and more demanding,” he said. “The entire redemption and reward mechanism, and everything associated with it, needs to become much sharper.” - Leading Consumer Products Company
channels is cleaned and formatted before it is ready for use. This a critical first step to designing loyalty programs that deliver relevant, engaging experiences. Upgrade Traditional Reward Structures to Recognize Engagement and Incentivize Advocacy. Traditional reward structures must be upgraded. They need to ensure that customers are recognized and rewarded not only for completing transactions but also for engaging and interacting with the brand in other meaningful ways. Reward mechanisms should recognize customers for brand advocacy on social media, for sharing feedback and writing reviews, and for participating in game-based campaigns. Luxury cosmetics brand Lancôme’s Elite Rewards loyalty program, for instance, strongly incentivizes brand advocacy. While members receive 10 points for every dollar that they spend on Lancôme merchandise, they receive up to 25 points for sharing Lancôme’s product posts on their Facebook, Instagram, and Twitter pages20. Incentivizing brand advocacy in this manner serves two significant purposes. First, it conveys the message that the brand values the support of its customers. Second, it carries the brand’s messaging to a more receptive target audience, since consumers tend to trust word-of-mouth recommendations from people they know, more than they trust traditional advertising21. Loyalty programs should clearly communicate the types of data they collect and how the data is used. In looking beyond transactions and providing more avenues for consumers to earn rewards, loyalty programs will also be addressing a key consumer pain point – the long lead times for the accumulation of points. The Head of Loyalty and Rewards at a leading bank highlighted the need to revamp traditional reward structures: “What we are finding is that when you reward customers for non-transactional behavior like following your brand on Facebook or Twitter, they start feeling emotionally invested in your brand. They start feeling like you understand who they are, how they see the world, and how they express themselves. This emotional investment is key to driving loyalty in the long term.” In order to have a meaningful dialogue with their most valuable customers, organizations need to understand the context of their needs and behaviors. Figure 7: Customer Needs and their Impact on Loyalty Program Design
Authors Mark Taylor Global Lead, Customer Experience Transformation Rishi Raj Singh Senior Consultant, Digital Transformation Research Institute Jerome Buvat Head of Digital Transformation Research Institute Amrita Radhakrishnan Senior Consultant, Digital Transformation Research Institute Roopa Nambiar Manager, Digital Transformation Research Institute Digital Transformation Research Institute The authors would also like to thank Arnaud Bouchard from Capgemini Consulting France, Marisa Michaud from Capgemini Consulting US, Kees Jacobs from Capgemini Netherlands, Uma Kannappan from Capgemini US, Maggie Buggie from Capgemini Digital Customer Experience, Gagandeep Gadri and Priyank Nandan from Capgemini Consulting UK and Pravin Iyer from Capgemini Consulting India. For more information contact Global Mark Taylor China Julien Bourdinière France Arnaud Bouchard India Neha Joshi Sweden Hakan Erander Norway Martin Landberg Germany, Austria and Switzerland Steffen Elsaesser Netherlands Jan Brouwer UK Sherif Choudhry United States Tony Fross Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group. The information contained in this document is proprietary. © 2015 Capgemini. All rights reserved.