How Loyalty can help put your business back on track

The pandemic related impact to the Australian economy is already being felt; airlines to shut down, retailers forced to close, hotels cleared out and filled with returning residents, banks re-focusing to customer support. It’s clear that the ‘stay at home’ measures and the hibernation of many businesses has caused consumers to stop spending. So how does loyalty help these and other industries navigate this health and economic shock?

From a loyalty perspective, BCG have a 4-stage framework which is a useful way to think about it: React, Rebound, Recession, Reimagination. We provide our perspective on how it can be applied.

React (short term)

Most of what we have seen so far in this domain are loyalty program members being hit with two types of messages:

1. A – the useless “Are you ok? We’re here for you” emails: arriving from brands that I hardly remember buying anything from asking if I was OK, or…

2. B – the useful “here’s something to help” emails: from companies who are leveraging their programs to help customers in their hour of need:

3. Foodworks grocery store rolling out special shopping windows for elderly and local residents. The loyalty card (or a pensioner card) becomes the ticket to access the store in the mornings, beating the rush and getting access to in-demand products

4. Nike will focus on digital in regions facing store closures. In the U.S., the digital push includes a “Play inside” campaign, making the Nike Training Club app accessible free of charge and offering up to 40 percent online discounts, free shipping and 60-day free returns

It’s not all positive, there are some punitive measures being introduced – Delta has added some new restrictions to the SkyMiles marketplace. Now only Medallion elite members and Delta Amex cardholders can redeem SkyMiles for merchandise, and the option to redeem miles for gift cards has disappeared entirely.

Rebound (short to medium term)

Brands are recognising that when their business goes into hibernation, so does the customer relationship. Some brands are making big changes to their program to welcome the customer and to be there when the inevitable thawing takes place. This includes resetting the goalposts and providing generosity. Both Virgin and Qantas have extended their status tiers for a year, giving members a reset and extending their tier benefits for when flying inevitably starts again.

Many other programs are extending the points expiry rules, Hilton have paused the expiration of all points scheduled to expire between now and December 31, 2020. Freedom upped their bonus point offers. Cathay is automatically adding monthly increments of points between now and April to get travellers closer to status thresholds even when they cannot travel.

Recession (medium)

Being there for the customer in the post-pandemic environment inevitably means making changes to deal with challenging economic circumstances. Exercising generosity with your program is a likely way that brands will drive engagement with customers. An example is lowering points price on rewards, giving customers an earlier redemption. We also expect to see programs start awarding points for positive engagement, not just sales, posting reviews, blog posts, entering contests with the brand. We’ve seen some other examples already rolled out:

1. Qantas and Virgin allowing redemptions but telling you it could take until after lockdown to receive them

2. Privacy, how you behave now impacts how you’ll be perceived after.

3. Bad: Zoom and Houseparty have both been in the news for collecting personal data (openly – it’s in the T’s and C’s) and sharing it with other third parties.

4. Good: Apple’s evolving brand promise. The old Apple promise was that you don’t have to worry if the tech works. The new promise is you don’t have to worry if the tech is scamming you. Everything Apple showed was about curation, safety and trust. No tracking, no scammy ads, no loot boxes, no weird credit card charges.

Reimagination (long term)

In anticipating this new post-pandemic world and trying to find opportunity in adversity, it’s important to consider several shaping forces: new learnings, new attitudes, new habits and new needs. It’s too early yet to see how loyalty programs evolve as a result (whilst thinking ahead is necessary, surviving the short term is an obvious priority at the moment).

What could we expect to see?

1. A tipping point for card-linking: Allowing customers to link loyalty cards to payment cards

2. E.g. Bink in the UK partnering with Barclays and many retail loyalty programs

3. Digitisation of programs: Overcoming the challenges with physical commerce

4. Move away from physical rewards into digital gift cards and ‘pay with points’

5. Accelerated personalisation of marketing

6. Supermarkets offering double points now to get an unfair share of the spikes now and then have a pre-baked advantage in value coming in the door later (and funded by no specials happening. NZ supermarkets have switched off specials).

7. In tough times, program operators can increase trust in their most valuable customers by making it frictionless to redeem points for cash equivalent rewards. In uncertain times we expect to see a ‘run’ on gift cards as members horde cash but look to avoid risk in their program currencies (remember Ansett!). Rather than fight this, make it easy, perhaps make it a pro-active offer for high status members. In travel programs, when members start to travel again it will be for business first, not leisure so they will not be looking for reward seats/free rooms anyway. But they will remember you helped take away one source of stress from their lives.

8. Subscription loyalty

9. E.g. Amazon Prime for airlines, Airlines selling subscriptions like Air Asia’s now at a discount

Reflecting back to the GFC

There was a polarisation occurring in loyalty during the recovery. Customer loyalty programs boomed as brands doubled down investment in existing customers, and those customers responded to the rewards and incentives. Trade / B2B loyalty programs cratered. These were seen as discretionary so much of the incentives in the channels dried up. It’s a pattern that may repeat; B2C programs become the focus and an important marketing channel to get households back into spending mode.

This article was first published by Customer Network Strategy. Permission to use has been granted by the publisher.