The Curious case of plastic cards

I got into a retail store to buy a pair of socks and on the purchase, the manager at the billing counter handed me a shiny purple colored card with the store’s name embossed on the card. I gleefully accepted the card because I had been a regular shopper at the store and felt that he was going to reward me for that. But then, after I accepted the card, the silliest of things happened. The manager merely noted down my name and phone number In a big book of his.

Now, that gave me a shock. Jeez, someone making a database In a 1000 page notebook? You must be kidding.

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We live n the 21st century, mate. I thought maybe since these guys are Bananas, they were having some sort of attachment to their Red Book and hence adapted this strategy in their database also. I tried to convince myself with the Red Book logic and left after paying my bill. This thing gave me nightmares for a few days following my purchase.

That’s when I decided to investigate what exactly was happening with this loyalty card. I could not ask the store manager directly because there always sat his boss who seemed to be too busy meddling with his computer and had a robotic look on his face.

I had been always intrigued by this man since the first time I made a purchase at his store well over a decade ago and I still don’t know if he ever talks. He merely collects the money and gives you back the change. I decided to cash in on my brand new loyalty card though I had nothing substantial to buy.

That’s when my friend came saying he wanted to purchase a pair of trousers. My Instant suggestion to him was to go to this shop. We entered, made our purchase and I enthusiastically waved my loyalty card at the manager. What he did gave me a real shock bigger than the one at I got with my last past purchase.

He merely took the bill, entered the bill number in the big book of his and asked us to pay the full amount of RSI 3000 on the bill. Is he a Banana or is he faking it? Come on man, you guys are smarter than that.

You guys know the consumer Inside out. Why would you even Issue a loyalty card when you are doing nothing with It? Gathering all my courage, I raised my objection could only collect money and give back the change could actually talk. He said, ?You have to reach a certain number of points for you to cash it]. When would I reach that certain limit? ?We would let you know when that purchase happens]. How do you calculate the points? ?It’s our internal calculation method.

We cannot let you know that]. To hell with this I thought but that was then I realized that even arguably the smartest trading community is Just trying to ape a western technique merely because the others are doing it. A FAIRY TALE WORLD THAT DOES NOT EXIST The loyalty card programmer has been something that airlines had brought into the country in a big way in the late sass’s. They sought to reward their best customers with special benefits.

With the dawn of the new millennium, the country tried to actively borrow more from the western world’s marketing ways and the loyalty card too made its way to India in a grand way. Almost every reputed retailer in the country today has a loyalty card and a program to boot.

Though how successful and what exactly these programs offer is something few retailers have been able to really decipher. The main aim of loyalty programs is to reward the frequent customers with cash back offers, rewards, discounts and many other things to thank him for his loyalty towards the brand or store.

The retailer in turn receives something if properly used can generate greater revenue. This entity is knowledge about the customer’s purchase patterns, preference, frequency of purchase and various other aspects that can be used to market to the customer in a very effective manner. All this brings one to the fundamental question.

Do these cards actually stand for loyalty? Research on the recent trends in the buying patterns and the use of loyalty cards has shown that the customers are not exactly loyal to brands.

While the likes of Baize Ajar of Loyalty Rewards, amongst the top players in the loyalty programs market in the country may argue that the programs are growing at 127% y-o-y, the stark reality mains that these programs do not warrant purchases from one particular retailer but different ones. This was why such loyalty program ?creators] are forced to bring in a group of companies or retailers and create special programs. They clearly know that the concept of loyalty programs will not work out to be very successful with single retailers in the scheme of things.

Most retailers in western countries have woken up to this trend and are moving away from meaningless loyalty programs. This is evident from the article in the July 2013 edition of TIME magazine titled ?A Disloyalty Movement? Supermarkets and Customers Drop Loyalty Programs].

The article clearly points out with numbers that the customers want to opt out of these programs. Also, sax. N. Y customers understand that loyalty programs gather and utilize customer data to make marketing decisions.

If programs are not crystal-clear in providing benefit to the customer in exchange for that information, and are not clear in their privacy policy, consumers tend to back off from participating in the programs.

The retailers too have realized this and are dropping their loyalty programs for better options to retain customers. TIME magazine is not the only one that seems to project the idea that loyalty programs are dying out. Direct Marketing too put out an article which authoritatively stated in October this year that only 16% of the consumers were redeeming loyalty points.

Thus, the signs are clear; loyalty programs are not benefiting the retailer or the service provider but merely the guy who is in-charge of the best person today who understands the unity grittiest of such marketing tactics is of the view that the greater the risk involved with getting a reward?one we have to save for and may never use?the less we value it. He writes: Frequent flyer miles, for example, began with the promise that if you flew an airline regularly for months (or even years) you”d get a free flight.

The airlines oversold the miles and undelivered on the free flights, though, so the reward started to lose its perceived value?too much risk that you would”t get the prize you wanted.

Many of the frequent flyers I know have ceased to ћsave up” and now use their miles for upgrades, moving the benefit closer in time. Trying to bring in the Indian angle to this context, the consumers are against waiting for ages to cash in on the points that he has accumulated. There is also the case when there is absolutely no requirement of the rewards or goods these points can give one.

Hence, the risk is humongous. It is not surprise that the customers are shunning these programs.

Most of the loyalty programs are designed merely for the sake of creating them and the consumer needs or mentality are not taken into consideration before developing such programs. The examples are numerous. Citibank has amongst the lowest conversion rates for a loyalty programmer on its platinum card. The procedures are long and winding and it takes the consumers forever to understand what exactly are the deals and from where they an be availed.

The website in itself is extremely difficult to navigate and the store locations from these offers can be availed are put in a PDF file that is over 150 pages long and without an index to navigate easily. Same is the case with many apparel retailers.

The customer is forced to purchase Upton a certain amount of money to get a certain amount of points. These points too cannot be directly availed but can only be availed if a purchase of above a certain limit is made again. Putting in such riders actually create dissatisfaction among the consumers.

It is hence, better to not go for such loyalty programs rather than go for them and drive away existing customer by frustrating them. Loyalty is definitely not a piece of plastic with a brand name stickseed on it.

It is much more than that. Gooding in his trademark style has defined loyalty: ?Loyal customers understand that there’s almost always something better out there, but they’re not so interested in looking. ] This is the first concept that a marketer has to understand before blindly following western techniques and blindly interpreting the whole concept in the wrong way. Frederick F. Richened, author of

The Loyalty Effect, says this goes straight to the bottom line.

“If a company could turn 5% more of its customers into loyalists, with hooks into their amygdaloidal, profits would increase 25-100% a customer,” he says. Hence, the main idea must be to activate the loyalty hook rather than plastic cards. This can be done only the old fashioned way and not with rewards and points gimmicks. Loyalty is when someone refuses a momentarily better option. There is this common misconception that if you offer better products you have loyal customers while in such a scenario the customers are invariably smart ones rather than loyal ones.

Bragging about having a loyal customer base when you provide the best or cheapest products is nothing more than absolute fallacy. The fact remains that the customer is Just smart and likes you. As stated earlier, loyalty is when the customer knows that there is something better available elsewhere but still prefers your product. There is no doubt that certain brands brands are the best in their category. It’s because these brands make them happy.

The clearest example for this is the faithful Blackberry users. They surely know that the product is no longer the best but they still feel happy with the product and are once called loyal users.

However, one has to understand that loyalty does not last for ever. Once the threshold is breached, the loyalist can be lost for ever. Rewarding loyalty for loyalty’s sake–not by paying people for sticking it out so the offering ends up being more attractive–is not an obvious path, but it’s a worthwhile one. Tell a story that appeals to loyalists.

Treat different customers differently, and reserve your highest level of respect for those that stand by you. Loyalty is all about creating trust in the customer’s mind. If this is initiated the whole puzzle falls into place.

Hal Varian, New York Times columnist, says the price of loyalty can indeed be measured. When Amazon raises prices by 1%, he reports, its sales drop by about a half a percent.

However, if Barnes & Noble raises prices a percent, its sales decline 4% eight times as much. Hal goes on to reason that the loyalty is what is keeping the sales at Amazon afloat. Amazon seems to have clearly worked much harder at building this loyalty than what the traditional book stores have achieved. Though one can argue that loyalty programs cannot bring much in terms of loyal customers, it is something that a brand should never let go of if its customers want it.

Amongst the most vocal requests on Struck’ scrounging platform My Struck Idea which is intended to better the service and products at Struck is on the loyalty programs.

In such instances it is perfectly sensible to have such programs. It is clear that the loyalty is there with the brand and the customers want something back for being such evangelists. The world extremely competitive and dynamic today. There is hence a need to work extra hard to gain real loyalists. This can be done only by differentiating the service and taking active steps to propagate one’s business by creating a buzz.

The example of Jeff Greenfield cited by Mark Hughes in his book Besmearing is testimony to the fact that a great service designed appropriately can do wonders for a brand. The book talks about Greenfield who worked as a magician to pay for chiropractic college and then used besmearing to muscle his suburban-Boston practice to the forefront of the local Joint-manipulating pack. Though Hughes tries to bring out only the buzz creating elements there seems to be a heavy dose of excellent service elements that have gone into Greenfield style of functioning. Great magicians are often great marketers.

They understand consumer behavior ? how to influence people to look in one direction and not another; and how to communicate with people one-on-one in setting up a trick and explaining what’s about to happen. This helped Greenfield in creating an excellent service structure and made sure he marketed himself well.

Greenfield got his business off the ground by taking patients no one else wanted ? those without health insurance and those in very bad condition. Adopting a philosophy of treatment first, he turned no one away, regardless of ability to pay. From some he got nothing. From others he took whatever they could afford.

But he insisted on another form of payment, word of mouth.

He wanted the patients no one else could cure, because when he succeeded with them, he would be viewed as the miracle worker. Patients would tell their friends, bosses, relatives, co-workers ? would delightedly spread the glowing word about the amazing doctor, Jeff Greenfield. Part of Greenfield magic was his unconventional treatment schedule. He eschewed the once-a-week scheduling his competitors used to comply with the insurance industry dictates and treated patients as often as he felt was needed to get them well as quickly as possible.

He saw some patients as often as six days a week. Patients got well fast.

It was not what his patients expected and this emerges as nothing short of a miracle. For the first time in years, they could walk without pain every step. It was these patients who spread the word gleefully about the wonder chiropractor, Jeff Greenfield. Patients also passed out business cards with inspirational messages and an offer of a free examination. This ensured that news about the chiropractor spread like wildfire. Greenfield Family Chiropractic evolved into a multimillion dollar operation with 75 employees.

Eventually it became so successful and Greenfield spent so much time on management that he had no time for patients. So he sold the business to the other chiropractors in the organization. The example of the success of Jeff Greenfield shows how evangelists can be created and be used to spread the word. Though it may be argued that the customers of Greenfield were not exactly loyalists but merely chose the man solely for his superior performance and abilities, one cannot forget that the service being excellent in tauter and the exceptional marketing skills using buzz helped the man do wonders.

However, one needs to clearly understand the logic behind the concepts before they are implemented.

The marketers seemed to have lost out on this front. There is also the need to understand that customer loyalty is become extremely rare. A brand has to differentiate only on the services front. This is especially true because it is an acknowledged fact that very soon most products would become mere commodities because they are easily imitable. It is hence necessary to innovate and gain customer loyalty by creating excellent service designs rather than minting mere plastic cards.