Here is why we broke up

Tom Steyn a senior executive has been getting in and out of airports in his hi-flying 15 year career and had gathered thousands of frequent flyer miles from his favourite Airlines. With the disruption of the airline industry by Low Cost Carriers (LCCs) providing ease of access to different city airports, greater predictability and convenience in on-time departures and arrival timings, Tom’s unwavering ‘loyalty’ to a select few had now undergone an irreversible change. Research has shown that firms competitive positioning within the industry and market saturation have huge impact on the performance of the loyalty programs (Liu & Yang). Industry biggies or firms operating in the highly expandable product category can build competitive advantage using their loyalty programs: what about firms that are relatively smaller in size and/or operate in product categories where the demand is rigid?

“Loyalty for sale – anyone?!”

Customers such as Tom are willing to pay an incremental cost and switch loyalties, if they are able to get customized and personalized service. The traditional loyalty programs – more often than not built on a rigid frame of one size fits all – will have to pave their way towards a more variable and flexible mode. One of the important considerations determining the efficacy of loyalty programs is the extent to which one can use them to expand the category (Kopalle & Neslin). We are seeing an increasing trend towards customers being given the option to buy, gift and transfer their reward points to friends and family – this is a perfect example of a B2C organization recognizing the importance of a C2C (customer to customer) dimension. What better way to build a ‘collective loyalty’? I am guessing, it won’t be long before customers are allowed to auction and monetize their loyalty points!!! After all, who wants to break up with the customer!?!

“I love where I buy from – not necessarily which brand I buy”

Predicting or gauging the continuing commitment to ‘a brand’ is never easy given the plethora of disruptive options and ubiquitous digital access for the end customer. In today’s context, the loyalty is truly tested because the consumer has broken away from the physical boundaries of the marketplace. The disruption that a multi-brand department store caused to the high street brand is now occurring even more through the digital medium. The consumer today therefore is not restricted by limitations of physical display and access. Loyalty is shifting therefore from a product to the ‘e-platform’ on which it is being made available. Have Loyalty programs of product companies fully adapted themselves to address this reality? Select few – maybe yes!

“I often listen to strangers – not my closest friend”

Decision making has never been easier. One could access a friend anywhere in the world and seek their inputs on a product that has just been launched. At least that is what we thought. But it doesn’t appear to be so. Current trends and practices compel me to listen to staccato reviews from total strangers. We scan their feedback, analyse their quantitative and qualitative views and decide to override the feedback from till-recently-a-very-dependable friend. The friend just lost out to the collective opinion of an unknown and often unseen competition such as Tripadvisor, Yelp etc. As of now, they have evolved to become our trusted advisors.

Technology penetration is exponentially increasing and the consumer today is more dependent on communities and critics, than merely on their own instinct. Communities are emerging as the greatest influencers in consumer buying behaviour. There is feedback and rating on everything – from a mobile app to a car to a restaurant and those words have become the big override.

Companies therefore need to have a real time response system to trap negative comments, provide clarification and influence advocacy more than ever before. The number of organizations that have an organized effort to manage their online brand and reputation is miniscule even today. Businesses are very slowly but surely waking up to the realization that having an active online ecosystem enables customers to not only take a decision but also ‘feel good’ about the decision they have taken.

What was ‘footfalls’ to a high street store, ‘eyeballs’ are, in the eCommerce universe. Number of active users will always be the key currency and major online platforms are doing everything that it takes to get those eyeballs and convert them. ‘Discounts’ and ‘strategic near term losses’ are now being seen as necessary steps to meet this objective. This is a race that is bound to leave blood on the floor. Rather than battle the cost dimension, it would be beneficial to explore personalization, speed, access etc. as a differentiation, unless the company is operating in an industry characterised by high degree of market fragmentation and high switching costs (Liu). Adopting technology to help greet a repeat visitor, personalize content and offer real time pricing elasticity is distinctly doable in today’s world. But, does this guarantee any loyalty? Only time will tell.

The online war in India is making an interesting study at this juncture where consolidation and expansion is happening simultaneously, which is a rarity. While Amazon is using their global base to render a cost advantage to penetrate the market, it is competing with college start-ups who are now being backed by seasoned investors. Series of multi-million dollar deals helped consolidate the market, but it also caught the fancy of a million aspirants who want to grow overnight. In this race, being the cheapest is a race that will fail. The race is about the ‘experience’ and that is bound to ensure stickiness. And in a world full of increasing options, loyalty is bound to be tested severely.

So, while brands struggle to succeed in this competitive marketplace with customers who are constantly experimenting (given the increased options), loyalty has to be bought through an increasing emotional connect and personalization.

Every day, everyone out there is trying to appeal more to the one you love. It is time for marketers to increase their touch points with their customers and innovate in real time. Else, a breakup is on the cards. For sure.

By Hari Thalapalli,  Chief Marketing Officer and Global Head of Collaborative Enterprise Solutions at Tech Mahindra Limited.