The curious case of loyalty points industry

Frequent flier with Jet Airways? Be a part of the JetPrivilege program to earn points with every ticket purchase and convert them into JP miles.

Phone message alert beeps, You have 4,651 reward points as on 30th September '18 in your HDFC Bank Credit Card account. Download the HDFC Banking app and start redeeming.

If you instantly delete such messages from your phone, you might want to read further.

There is no single source of earning loyalty points these days. We can earn them from transactions made through debit and credit cards, as well as purchases made with retail brands, airline companies and now even e-commerce platforms.

The beauty of these loyalty/reward points is that most brands now allow their customers to redeem them at multiple points of contact, instead of only at one place. Customers can earn and burn with a lot of ease now.

Also Read: Loyalty Can't Be Bought

Factors driving the growing popularity of reward points

The enhanced flexibility of redeeming loyalty points through multiple channels marks a significant shift from the scenario a few years back. The Indian payments landscape has traditionally been heavily dominated by paper-based transactions, particularly in the semi-urban and rural markets. Home to nearly two-thirds of the country's populace, these areas also faced significant disparity in income and education levels when compared to urban geographies.

The adoption of digital payment tools in these markets was therefore quite low, which in turn affected the reach of loyalty points.

The adoption of loyalty points amongst the masses wasn't helped by the fact that the entire process of point accumulation and redemption was very slow. Just a few years back, loyalty programs involved traditional plastic cards and gave users points and rewards after every purchase. These points could later be redeemed by physically visiting partner retail outlets and restaurants.

This changed with the 2016 demonetisation initiative. The shift towards digital payments, which only 2-8% of the population previously leveraged, accelerated. As digital payments become more popular in India, the adoption rates of both credit and debit payments have been growing significantly. The dawn of advanced loyalty programs is further adding to the growth of electronic payment methods and vice versa.

Today, loyalty programs are sophisticated and multichannel, with the option of redemption available across different industries, unlike the traditional spend-and-get model. Brands are adopting these omnichannel loyalty programs to connect their customers to multiple touchpoints seamlessly and provide them with the opportunity to be truly rewarded.

For instance, a customer can earn the points at a multi-brand store and redeem the same in a restaurant. On e-commerce websites, loyalty programs are even more instantaneous; consumers can buy products and get instant cashback. As a result, brand marketers are able to capture omnichannel data for driving personalised communications and better customer experiences.

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Loyalty programs of today have also evolved from being a mere mobile number database to identifying customers, as well as charting their shopping behaviour, demographics, and behavioural profiles, through analytics-based insights. Brands, banks, and companies are issuing them to delight and hold on to their customers.

The new-age customer treats the points as personally earned and expects to use them as cash that can be redeemed wherever desired. Online-to-offline gifting platforms are already disrupting the space by allowing consumers to convert their points into their desired brand currency and use them. This is clearly transforming the essence of loyalty, where the customer remains the King.

The future of loyalty programs

Loyalty programs are an indication of a customer's willingness to stay with a brand. Such a feeling of loyalty stems from continuously positive customer experiences, high levels of satisfaction, and a sense of value derived from the products or services of a certain brand.

A loyalty program usually gives customers access to free merchandise, rewards, coupons, and even exclusive previews of released products but all of these elements may not suffice for a business to retain 'loyal' consumers after a certain point of time.

As businesses are now under constant pressure to meet customer expectations with exceptional experiences, they are required to look beyond the complex rewards systems and continue evolving their loyalty programs, strategies and technologies to offer tangible value which is something truly unique to customers.

Also Read: Uber rewards program: Earn points by spending money on rides, food delivery

(The author is CO-Founder & CEO of GyFTR, Vouchagram)