Loyalty programmes have become a popular value add and customer experience enhancer, but until fairly recently, they have been the domain of mainly the largest brands and retailers. Kobus du Plooy, CEO of transactional software platform Celbux, says this is due to the huge cost and complexity that rolling out and managing such programmes has entailed.
The high cost of traditional loyalty programmes
“For years, loyalty platforms have been mostly card-based, and these are very expensive to maintain and run,” he says. “At a granular level, every single rule needs to be managed – for example there might be a certain benefit allocated for a certain action based on total basket value, or for specific items, and these rules likely might change, depending on promotions. On top of this, the retailer would need to run an account for each individual loyalty programme member to provide an audit trail on what benefits they have accumulated and what they have redeemed. These card-based systems must also be configured to work at particular end points. The deeper you go into the rules, the more expensive it becomes.”
Due to the cost and complexity of configuring rules, traditional loyalty programmes will typically offer simple across-the-board benefits, such as a 5% discount at every store in the chain. This prevents individual franchise stores from differentiating themselves by offering larger discounts, while medium sized and small merchants are effectively excluded from offering digitally-based loyalty programmes altogether.
Swamped by loyalty cards
Another challenge with traditional loyalty cards is that they have become inconvenient for consumers, Du Plooy says. Although all consumers appreciate discounts, waiting weeks or even a month to receive their loyalty benefit is simply too long in an age of instant gratification. And because most consumers now belong to multiple programmes, they must carry a number of cards and understand the rules of all the vendors and retailers.
The future of loyalty
“We see a future in which the consumer has a simple, mobile-based loyalty platform that aggregates all their loyalty programmes, allocates loyalty value immediately, and works the same way across multiple endpoints where they spend their money,” says du Plooy.
In the evolved loyalty system, cards, complexity and cost are eliminated, and small and mid-sized retailers are empowered to offer loyalty convenience, configuring rules quickly and easily.
Using advanced new cloud-based platforms, all the complexity is eliminated and the cost burden reduced, giving the power to merchants to manage their programmes through a simple integration layer. “This is what we see as being the key shift – it allows the merchant to make the rules on how value is given to customers, what time stamps are applied, whether value is allocated by individual stores or combination of stores, or even whether cross-brand value is allocated in shared merchant promotions.”
Shared access to the next-generation consumer loyalty programme platform presents a number of benefits to merchants, he says, not least that it presents new opportunities for them to partner and apply rules seamlessly across partners. For example, a mobile service provider might offer customers a cash discount at a particular fast food vendor when they top up airtime; or a bank might offer its customers vouchers and cash discounts across multiple vendor partners.
“Flexibility is important in next generation loyalty programmes. You need to be able to offer value either in transaction or out of transaction, drive traffic to a particular store, create pockets of value for certain promotions, or quickly create combinations of these rules. In the old loyalty card environment, it was much harder to be flexible in this way, and merchants may even have had to change cards according to various rules,” he says.
In a low-cost, flexible environment that removes the logistics and costs associated with cards, both retailers and consumers benefit from simple, instant loyalty benefits. “This is the future, and it’s available today,” says du Plooy.