Loyalty Programs (incl. Practical Interviews in Dubai) – Essay
Introduction
One of the most active and dominant industry is the Retail Industry. There has been a steady growth in the retail industry throughout the globe. Retailers try to provide convenience and excellent services to consumers in order to pass their expectation levels of retailing. There are many factors which influence the decision of retailers of providing extra services to the consumers. As the number of retailers is increasing, the competition amongst them is getting tougher resulting in cost cuts and increases in customer services. Creating a relationship with the customers is the most profitable way for the retailers. The use of Information Technology and human interaction helps to build the bond between the customer and the retailer and can be used to capture data and analyze consumer behavior (Dawson, 2004). Constant adaptation to the changes in technology and environment by the retailing companies is the key to success.
Theory
Retailers have been gathering terabytes of data on the transactions made by the consumers for a long period of time. The data gathered from the consumers can be processed, analyzed, and mined to develop a better understanding of the consumer patterns of purchases and other information. Information Technology can aid this process but the knowledge to understand and make decisions can be done by humans. By doing so, the consumer can be understood individually and be provided with tailored services. One of the first methods of creating a relationship between the retailers and consumers was done by the introduction of Loyalty Cards. The pioneer was the S&H Green Stamps program started in 1930’s. It is still used by many companies like Marble Slab, Subway, etc still. The consumer get a booklet with empty spaces for stamps, and when the consumer buys from that particular retailer a certain number of times, he is entitled to redeem free products or discounts in return (Wharton, 2006).
Loyalty programs have been introduced in many areas of retail businesses like restaurants for example Subway and Marble Slab, Airlines like Etihad and Emirates, Banks such as Citibank and Mashreq bank, Hotels like Sheraton, Malls like Mazaya Centre, and even Supermarkets like Carrefour. It is no more an augmented product, and it has become the expectation of the consumer which adds to the cost of the retailer but also attracts new consumers, increase the amount spent at the store, convert consumer into regular client and build a strong database. Loyalty programs can be a win-win situation if utilized properly. The retailer uses the loyalty program to reward the consumers for purchasing the product from their outlet, and create a relationship with them so that they visit the outlet frequently. On the other hand, the consumer provides his loyalty to the retailer by visiting and buying the products from that specific outlet always and also to provide detailed product level information relevant to the consumer and purchasing behavior for analysis to make the retailing experience better (Keller, 2008). Traditionally, Loyalty cards increase the urge to spend more in order to be rewarded more, and turn the non-purchasing customers into regular purchasing customers.
Practical
There are five types or Loyalty Programs. Firstly, the Rewards program which gives points for each purchase made by the consumer. The points accumulated can later be exchanges for products or services related or unrelated to the brand. This can be complex as the consumer would like to know the points he has accumulated and what he can redeem with them at any given point of time. An example of this is the Air miles card where the user can accumulate points from the participating outlets and later redeem them. Also, banks like Emirates Bank and Citibank have a tie up with the Airline Frequent Flyer programs, and can exchange their points with the frequent flyer programs like Skywards. Secondly, the Rebate Program where the consumer is offered a discount on the next purchase from the same retailer. The amount or the number of purchases differs between different retailers, and usually this type of program is used to increase sales and the store traffic. For example, Subway gives one free 6-inches sandwich when eight of them are purchased. Similarly, when five ice creams from Marble Slab are purchased, the sixth one is free. Thirdly, the Appreciation program offers retailers own products or services for the points accumulated by the consumer. It is similar to the Rewards program, but it does not offer products of other brands or retailers. This program is not intended to increase the number of new guests, but aims at increase the Life Time Value of the existing consumers of the brand. It is a form of appreciation, as the consumer has been loyal to the retailer and also new products introduced can be reviewed by the consumers. Example is Emirates Skywards program where the users can accumulate Skywards Miles whenever they travel through Emirates. These miles can be exchanged for Tickets, upgrading seats, rooms in hotels having partnership with Emirates, or car rental. Fourthly, the Partnership program is where the consumer can accumulate for the purchases and redeem the points for products and services of the companies having partnership agreement with the retailer. This way it is beneficial to the main retailer and the partners as they acquire new customers and can increase their consumer database. For example, Skywards subscribers can redeem their points to rent a car from Avis, Hertz, and many others. Lastly, the Affinity program is meant for valued customers where the points and rewards are not important factors in the relationship, but the tailored services like offering special ways of communication, extra benefits and to appreciate the value of the consumer. Example is the Gold and Platinum Cards in Banks, and Skywards, where the Platinum card holders are offered premium services and are treated as VIP customers (Summers, 2008).
Analysis
The Interviews conducted were with Skywards, Najm, Standard Chartered bank, and Air Miles. The number of subscribers is increasing in each segment and even the number of retailers offering loyalty programs. This can be seen by the introduction of Najm by MAF group. I will discuss the analysis of each interview individually. Skywards is one of the most popular loyalty programs in UAE and the number of subscribers is increasing every year. Also, the number of partners have increased and the services offered by Skywards. But the major complaints have been related to customer service of Skywards. This can also be seen when booking the tickets online. If the consumer is purchasing the tickets by redeeming the Skyward miles, and it is hard to find seats with the regular required miles. Instead the member has to pay extra miles if he wants to book the ticket on that particular day. This can harm the image of the Skywards, as well as Emirates. Also, the Emirates High Street is very expensive when the price of the miles is compared to the price of the product. Najm card is newly introduced in the market, and therefore the number of subscribers is low but increasing. It is quite innovative in strategy compared to other cards, as it offers discounts on a certain products in Carrefour and other MAF retail outlets. Since it is a new concept and introduced at the time of crisis, it can have positive and negative effects. Positive effects being the people who want to save money on their regular groceries will subscribe. But to stay away from over spending, people might neglect the offer. Standard Chartered bank credit card is similar to the credit cards offered by other various banks. It is very beneficial for a frequent traveler, but other benefits are very much similar. The extra benefit is the priority banking which provides excellent customer service and is an added bonus. Air Miles in the Middle East is not able to provide the same service as in Canada. The interview took 15 minutes for 3 questions as there was a communication problem. The Customer Service attendant was from the Asian Subcontinent and was minimally skilled in English. This reflects the quality of the company and the brand. There is comparatively no extra value added to the consumer as the products available to redeem require a lot of Air Miles, and is not worth the hassle.
Conclusion
Loyalty programs cannot run the business. Retailers should use it to increase customer loyalty towards the brand or retailer, and to provide benefits to the consumer. There are examples where Loyalty programs have not worked. A woman in South Yorkshire was a member of the Tesco Clubcard. Due to the mistake of the staff of adding an item to the promotional column, he added it to the items bought column. Since it was a ‘risqué’ item, it resulted in her relationship breaking up. Tesco had to solve the situation with this female and many others and had to send an apologizing letter along with a check of 100 pounds to all those affected by this mistake (O’Connor, 2009). Moreover, local business like Marble Slab had Loyalty Club Card where after every purchase of 5 ice creams, the sixth one is free. But still Marble Slab did not do well in business and had to shut down many of its locations. Even consistency is important in terms of Loyalty programs. An example of this is Subway in Dubai. A few Subway outlets have the Loyalty program running whereas some say it is discontinued. This portrays poor customer service as well as ineffectiveness of the staff towards Loyalty Program. Loyalty Programs pay back in the long term period but they should be taken seriously from the day it is introduced. Each industry has competitors copying and introducing the loyalty cards. Setting up a winning loyalty program and continuing its success is a major hurdle. Depending on the consumer base, they need to be surveyed about which loyalty program would fit their needs and be most attractive to them. Moreover, the employees of the company also have to be committed to the loyalty program in order to provide each customer a unique experience of retailing, and to build brand image, position, and loyalty. Constant updating and innovation is required in order to please the consumers and to stand out from the competition.
References
Dawson, Ross, “Creating the Future of Customer Relationships”, Date Published: 01/03/2004, Date Retrieved: 06/02/2009, Link: < http://www.ahtgroup.com/futurecr.htm>
Keller, Maura, “Loyalty Programs”, Date Published: 12/09/2008, Date Retrieved: 06/02/2009, Link:http://www.npnweb.com/ME2/dirmod.asp?sid=2DA8740BE6754624ACD0B2E7F6275D66&nm=Retail+Operations&type=MultiPublishing&mod=PublishingTitles&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=81646CB22B894183A161124EFF618860>
O’Connor, Mary Catherine, “Loyalty Programs: Get them Right or Risk Customer Relationships”, Date Retrieved: 04/02/2009, Link: http://www.transformationenablers.com/blog/archives/2008/08/you_and_your_cu.html
Summers, Jeffery, “Five Types of Loyalty Programs: Which one is Right for You? ”, Date Published: 30/03/2008, Date Retrieved: 07/02/2008, Link: http://restaurantcoachingsolutions.com/five-types-of-loyalty-programs-which-is-right-for-you/
Wharton Knowledge,” The Lowdown on Customer Loyalty Programs: Which Are the Most Effective and Why”, Date Published: 06/09/06, Date Retrieved: 04/02/2009, Link: http://knowledge.wharton.upenn.edu/article.cfm?articleid=1545
Interviews
1) Skywards
Interviewer: How long have you been working in Skywards?
Interviewee: For the past one and a half years.
Interviewer: How does the Skywards program work?
Interviewee: The Skywards uses an I.T. program called Tridion which handles the consumer database. Each member of Skywards accumulates points when he books his ticket from Emirates. There are two types of miles, one being tier miles and the other one being Skywards miles. Tier miles are accumulated to advance to the upgraded membership whereas Skyward miles can be redeemed for air tickets, hotel rooms, car rentals, and also products in Emirates High Street which offers premium products.
Interviewer: Do the miles expire?
Interviewee: Yes, the miles expire after three years of publishing.
Interviewer: Have the number of subscribers increased?
Interviewee: Yes, the numbers of subscribers in 2007 were 3 million approximately, and the numbers of subscribers by then end of 2008 were 4 million.
Interviewer: What will be the future of Skywards?
Interviewee: Regular promotions are introduced where flyers to certain destination can earn extra Skywards miles. Moreover, the Emirates High Street is a recent concept, where the members can exchange their miles for products. Moreover, the numbers of partners and members have increased recently which shows that the future of Skywards is bright.
2) Najm
Interviewer: What was the main reason for the card to come out?
Interviewee: It’s basically a shopper’s card. It benefits the shopper at Carrefour or any other MAF outlet.
Interviewer: Are the number of subscribers constantly increasing?
Interviewee: Yes, there are no definite numbers for now, but the numbers of subscribers are increasing even though there is a credit crunch.
Interviewer: Was this taken out in relation to any competition or inspiration?
Interviewee: No there was no direct competition. The only indirect competitions were Geant and Spinneys where buyers can collect Air miles.
Interviewer: What is the predictable future of the card?
Interviewee: It’s to double the sales, come out with more schemes, and to provide better discounts to consumers.
Interviewer: What is the main reason for the buyers to subscribe?
Interviewee: The main reason is the Carrefour Discount as mostly all buyers want to save money on the products which are in offer. Other benefits include Magic Planet Discount, Ski Dubai and Kempinski Discount, 1% cash back, etc.
3) Standard Chartered Bank
Interviewer: What kind of Loyalty Program does Standard Chartered offer?
Interviewee: Standard Chartered has loyalty programs for each of its credit card holders. I’ll talk about the Platinum card for an example.
Interviewer: What are the benefits of the Platinum Card holders?
Interviewee: The platinum card holders are considered as high priority customers and are given VIP privileges like better service and discounted rates at hotels, spas, golf clubs, and car rentals around the world. Moreover, they can access the VIP lounges at 500 airports around the world through the card and get free travel insurance.
Interviewer: Are the any rewards program other than services?
Interviewee: Yes, the platinum card holders accumulate points whenever they use their credit card. These points can be exchanged with Asia Miles to get free air tickets from Cathay Pacific or any other One World Alliance Airline.
Interviewer: Are any extra benefits going to be added for the subscribers?
Interviewee: For now, I cannot answer that question because of the world crisis. But as it stables, more and more features will be added to provide excellent service to the customers, especially priority customers.
4) Air Miles
Interviewer: Are the number of Air Miles subscribers increasing?
Interviewee: The number is increasing, but not at a fast pace like before.
Interviewer: Who are the main users of Air Miles in Lamcy?
Interviewee: People shopping at Al Maya Lals, Paris Gallery, and stores with big amounts of purchases.
Interviewer: Are people generally happy with the Card?
Interviewee: People need to accumulate a lot of points to redeem small products which is disappointing and reducing subscribers.
Due to communication problem, the interview was closed here.
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