Guest Speak

Customer Loyalty Programme: 

An Effective Value Proposition for Businesses

Buy gold and get a diamond free! Yes, you read that right! Who would not want a deal like that? We all get fascinated by the banners displaying optical discounts. But do we ask how much gold do we need to purchase to get how many carats of diamond? Such a question might hit us, but not at the first glance at the promotional material. The idea is to let the customer know that ‘if you become our customer, we can do more for you instead of just selling the product.’ This is what the concept of ‘Customer Loyalty Programme’ is all about.

According to a research study by Bain & Company, repeat customers spend 67 per cent more than regular customers. On the other hand, a company needs to spend 5 to 25 per cent extra to attract new customers through advertising and promotion. Thus, it is essential to keep the relationship with the customer through multiple promotional programmes.

Customer Loyalty Programme is associated with external public relations, which in turn comes under the broader umbrella of Integrated Marketing Communication (IMC). A few months ago, my students and I went for a field study in Bengaluru to do a comparative analysis between a rural marketplace and an urban marketplace. While discussing with the shopkeeper of a retail vegetable shop in the rural market, we understood that he has a set of loyal customers with a monthly credit system. To retain favourable relationship with the customer, he sometimes gives a few additional vegetable items.

On the other side, a large departmental store in the urban marketplace showed a different picture. Since the target customer base is mostly the middle class with a comparatively higher income level, the attendant of the shop firstly handed over a leaflet to all of us, which covered the discounts over and above the Maximum Retail Price (MRP). Surprisingly, discount tags were displayed everywhere from shampoo to doormats, and from utensils to stationary items. Does it mean that the business is running at a loss? The answer is definitely no! They are selling a large volume with a lower profit margin.

When it comes to bigger businesses, the easiest example would be a few of the Over-the-Top (OTT) platforms or the premium accounts of a few social media platforms when the first month is free of cost.

A study conducted by a few of my students in Ahmedabad found out that customers of an international car manufacturing company continue to be loyal with the brand only because of the commitment level of the service centres. Thus, irrespective of the fuel-efficiency of a certain vehicle model, customers prefer to choose the next model with a higher budget when it is time to change their vehicles. 

Now, let us discuss some existing albeit innovative ways of generating loyalty among customers:

1. Discounts: Discounts can be given to customers across different demographic groups. This helps bring the customers back to the business. 

2. Referrals: Referrals need to be backed by attractive takeaways based on the product’s price. For example, the reference for an app-based delivery service may add a few hundred rupees into the e-wallet and a referral for an apartment can be rewarded with a gold coin.

3. Rewards: This practice is evident on e-commerce platforms and shopping malls. Here, the customer is given points in the wallet with every purchase. These points can be encashed during the next transaction. 

4. Word of Mouth: Positive Word of Mouth works for any business with or without digital support. This practice is common across local shops or business outlets in rural areas.

5. After-Sale Support: In this content, the support is in terms of dedicated after-sales services and not a 24x7 helpline. Customers prefer to stick to their known brand only if they get a value for their money.

In this current market scenario, customers are oversaturated with promotional content. Thus, companies are trying to associate newer forms of external public relations, stakeholders’ or customer relations. Today, a Customer Loyalty Programme is one among many relationship-building exercises between the business and the public, which does not exactly follow the conventional norms.