The undeniable significance of customer loyalty in increasing revenues, diversifying revenue streams –
– and most crucially — increasing and maintaining customer retention, makes it essential for us to
continually evolve how we tackle and approach customer loyalty programs, especially in the difficult
economic climate imposed on us by the COVID-19 pandemic.
Customer Loyalty Programs Are a Big Deal
A business’ success can’t be achieved without attaining customer loyalty and sustaining it. Making sure you retain the right customers can make or break your business, and without customer loyalty, customer retention will suffer. Acquiring new customers requires time and resources, so it makes sense. Research backs up that rhetoric with astounding numbers as well. Notably, the work of Frederick Reichheld of Bain & Company tells us that if you increase customer retention by 5%, your profits increase by 25% to 95%! One key way through which you can accomplish customer loyalty and – as a result – customer retention, is through customer loyalty programs.
In this article, we go through how customer loyalty solutions have evolved over time, why this evolution is necessary for them to remain effective and why they’re crucial to business success. We also brush over some of the factors that should influence successful customer loyalty programs in the present and the near-future.
Examples of Customer Loyalty Solutions Over Time
One of the earliest known examples of customer loyalty programs dates back to 1793 in the U.S.; a merchant handed out copper tokens that could be collected by their customers and exchanged for items in the store. A classic “collect and win” scenario that persists to this day, the merchant’s practice spread across numerous businesses throughout the 19th century.
Fast forward to the U.S. in 1909, when now-iconic-brand Kellogg’s Corn Flakes introduced the very first cereal premium: The Funny Jungleland Moving Pictures Booklet. The publication, written and drawn for children, was given as a prize to parents who bought at least two Kellogg’s cereal boxes. It lasted for about 23 years and over 2.5 million copies were distributed! Soon after its introduction, however, it was no longer a giveaway, but a premium mail-in offer that costs a dime.
In 1996 in the Egyptian market, Savola Group’s Rawabi vegetable ghee ran campaigns that encouraged consumers to buy products from the household icon for the chance of winning modest prizes on the inside of its cover, and these ranged from small bills to gold coins. Below is one of their campaign’s ads.
At Dsquares, our Vodafone Red Points project is a recent example of a “collect and win” program. Still running, it provides Vodafone’s customers with the opportunity to collect loyalty points as they make purchases and then redeem those points for diverse rewards from the biggest network of partners in Egypt.
Dean Nicolacakis, PwC’s fintech practice cofounder, thinks that looking at the history of how customer loyalty rewards programs – for example, in the credit card industry – tells us they came about when “the market became very saturated, everybody pretty much had a credit card”.
According to Nicolacakis, for banks, differentiation based on rates and other terms became really hard. Hence, they were willing to share a pretty good portion of the margins they make to pay back to their customers in the form of rewards programs, and then these programs themselves started spreading and, as a result, became quite competitive. You can find out more about our customer loyalty programs in the banking sector, most notably with ALEX BANK and the National Bank of Egypt, here.
It’s quite evident that, even though customer loyalty programs grew more complex and had to adapt to changing consumer behavior and technologies, their essence has pretty much remained the
same. What we can perhaps learn from these examples is that it’s safe to assume that customer loyalty programs started spreading at least over hundreds of years ago based on the intuition that they will make customers come back and drive repeat business. There are no records of any research that suggested they work back then.
Customer Loyalty Programs Work: Between Intuition and Evidence
There are now studies and research about the different aspects of customer loyalty in various sectors. From studying the long-term impact of loyalty programs on consumer purchase behavior and loyalty, to the moderating effect of satisfaction on type and timing of rewards and how consumers perceive rewards-based programs. Recently, research published in the International Journal of Business and Social Science conducted on Jordanians shows that customer loyalty programs — when done right — can build and maintain customer retention (whose significant effect on profits were discussed earlier in the article). Intuition and guts need no longer be the only drivers behind a business’ decision to adopt customer loyalty programs and solutions.
Factors That Influence the Evolution of Customer Loyalty Programs During the Pandemic and in the Future
1) Digital Transformation According to the aforementioned global survey (which included Egypt, Morocco, Saudi Arabia, South Africa, Nigeria, United Arab Emirates and Qatar among the surveyed countries) by Mckinsey & Company, “most categories of products have seen more than 10% growth in their online customer base during the pandemic and many consumers said they plan to continue shopping online even when brick-and-mortar stores reopen.
The pandemic has aggressively pushed businesses into accelerated digital transformation around the world, and customer loyalty programs will need to keep up with that trend. Our end-to-end customer loyalty solutions, as Dsquares, utilize the latest digital technology and are ready for this transformation.
2) Changing Consumer Behavior in Light of the Global Recession Closely monitoring data on the rapidly changing consumer behavior in Egypt and the MENA region is an especially important factor that must affect the evolution of customer loyalty solutions. And even amid a global recession, businesses from a variety of sectors can find golden opportunities to increase customer loyalty.
As an example, if FMCGs offered customer loyalty programs or solutions that provide tangible and essential value to financially disadvantaged shoppers, their customer loyalty could be boosted and their brands will be remembered in the future as having their customers’ backs during a crisis.
At Dsquares, we crafted customer loyalty solutions for more than 60 companies in three different sectors in 60 various projects. And during our work on these projects, we accumulated more than 13,000,000 transactions from more than 2,000,000 customers.
The strategic end-to-end customer loyalty solutions we’ve catered to companies in a variety of sectors have been proven to not only consolidate customer loyalty, but also increase customer spend and boost revenues. And, along our journey, we incessantly work on developing our solutions and staying ahead of customer loyalty’s evolving curve.
Any inquiries about our previous work or what we do? You can check our portfolio or get in touch with us.