Reimagining loyalty programs

A post in last month in featured a Capgemini Consulting global report which found that loyalty programs "are failing to engage digital consumers". Entitled “Fixing the Cracks: Reinventing Loyalty Programs for the Digital Age" the Capgemini report finds that participation rates in loyalty programs are often low with 89% of social media opinions on loyalty programs being negative.

The consulting giant surveyed the loyalty programs of 160 global companies across seven sectors including Retail, Banking, Consumer Products, Telecom, Airlines, Hotel Chains and Consumer Electronics and went on to conduct a scan of 40,000 consumer conversations on social media to gauge customer sentiment towards loyalty programs.

The research revealed that most loyalty programs follow a basic transactional philosophy where rewards are based on purchase. Only a small minority of programs recognize and reward consumers for engaging and interacting with the brand in other meaningful ways. Furthermore, most loyalty programs lack personalization and fail to offer cross-channel redemption services. The negative social media sentiment on loyalty programs stemmed mainly from the lack of reward relevance, rigid reward structures, user experience issues with online channels, and poor customer service quality levels.

The Study's key findings include:

  • Just 11% of loyalty programs offer personalized rewards based on a customer’s purchase history or location data
  • 79% of loyalty programs use the mobile channel, and yet only 24% allow redemption through it
  • 97% of loyalty programs are based primarily on purchases made by consumers

Furthermore, a mere 16% of the programs reward customers for activities, such as taking online surveys, rating and reviewing establishments or referring friends to the program. Only 14% employ gamification mechanisms to reward customers. An example of the latter can be found in Starbucks use of enhanced Foursquare badges for those who check-in and frequently at a store including the awarding of discounts based on "status".  Unsurprisingly, as many as 53% of consumers admitted to abandoning at least one of the many loyalty programs they had signed on to in the preceding 12 months.

For hotels, the news was not as bad as in other industries like retail with 41% of hotel companies rewarding consumers for a range of behaviors that reflected active engagement on the part of the companies but airlines were even further ahead of the curve with 57% of them engaging customers. Hotels were really ahead of most others when it came to the percentage of unfavorable customer opinions on social media with 72% of sentiment on the wrong side of the continuum as compared to sectors like retail and telecom where it approached 100%.  Nevertheless, with an unprecedented and unregulated assault on the hotel model by hospitality poseurs like Airbnb hotels ought to bring that ratio down to well below the 50 mark by ramping up on engagement on the loyalty front.  




Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.