BY SHAJU NAIR ⋅ APRIL 28, 2009 ⋅ EMAIL THIS POST ⋅ PRINT THIS POST ⋅ POST A COMMENT
The Indian Loyalty market is in its nascent stages. Companies and people are just learning about the benefits of loyalty.And therein lays the promise. The size of the Indian loyalty market is humungous – approximately about INR 5000 crores. With a country that has 500 million people under the age of 24, an increasing disposable income and a never-ending appetite for alignment to all things fancy, the loyalty market holds great promise.
Loyalty as it stands today in India
Increased literacy, access to brands, opportunities for international travel, exposure to the global marketplace and realization of value of loyalty are the key drivers for growth of the loyalty market in India.
Increased literacy, access to brands, opportunities for international travel, exposure to the global marketplace and realization of value of loyalty are the key drivers for growth of the loyalty market in India.
However, today the loyalty industry in India is largely segmented. We have the airline loyalty programs, petroleum loyalty programs and retail loyalty programs – all of which have met with varying degress of success.
However, the penetration of these programs is limited. And the reason is that they are brand specific and do not provide a holistic benefit to its patrons.
However, the penetration of these programs is limited. And the reason is that they are brand specific and do not provide a holistic benefit to its patrons.
The psychology of the average Indian
Before we look at the optimal loyalty model for India, it is important to understand the psychology of the average Indian customer.
India is a land of rising opportunities. The majority of Indian consumers have a history of struggle – not just economic but also social. The competitive nature of society manifests in increased expectations, reduced patience and the need for instant gratification.
Before we look at the optimal loyalty model for India, it is important to understand the psychology of the average Indian customer.
India is a land of rising opportunities. The majority of Indian consumers have a history of struggle – not just economic but also social. The competitive nature of society manifests in increased expectations, reduced patience and the need for instant gratification.
These are the needs that any partnership should cater to. The successful ones are those which understand this basic need of the average consumer and come up with schemes to address the unique needs of these people. The Indian consumer has always been a stickler for value for money. She wants to get benefits for every rupee that she spends no matter where she spends it. All the more, she is interested in aggregating the benefits from multiple sources.
The model for India
The lack of a pan Indian reach of brand-specific loyalty programs is indicative of the fact that this model does not work in India.
So what works for India? While airlines and retailers have been the pioneers for loyalty in the nation, the single model that I see succeeding is one that transcends a specific brand and goes on to engulf multiple brands across multiple segments. Technically, this is called Coalition Loyalty. Here, there is one loyalty platform that brings together multiple brands – and consumers gain no matter where they shop/spend.
The lack of a pan Indian reach of brand-specific loyalty programs is indicative of the fact that this model does not work in India.
So what works for India? While airlines and retailers have been the pioneers for loyalty in the nation, the single model that I see succeeding is one that transcends a specific brand and goes on to engulf multiple brands across multiple segments. Technically, this is called Coalition Loyalty. Here, there is one loyalty platform that brings together multiple brands – and consumers gain no matter where they shop/spend.
Challenges faced by Coalition Loyalty
Every opportunity comes along with its own set of challenges. And setting up a Coalition Loyalty within a country like India brings its own set of challenges. These include the following:
Every opportunity comes along with its own set of challenges. And setting up a Coalition Loyalty within a country like India brings its own set of challenges. These include the following:
Partner acquisition
Coalition Loyalty players would find it extremely difficult to get partners that subscribe to the program. More so, the program will be successful only if large businesses having pan India presence and good brand recall are members of the program. In most cases, such brands would already be having a loyalty program in some form or the other and would be very egoistic about their own brand. Coalition Loyalty players would find it difficult to convince individual brands to give up their differences and adopt a single loyalty face.
Coalition Loyalty players would find it extremely difficult to get partners that subscribe to the program. More so, the program will be successful only if large businesses having pan India presence and good brand recall are members of the program. In most cases, such brands would already be having a loyalty program in some form or the other and would be very egoistic about their own brand. Coalition Loyalty players would find it difficult to convince individual brands to give up their differences and adopt a single loyalty face.
Redemption Platform
There needs to be a sound and diverse redemption capability. There are 2 aspects to this. 1)The Loyalty Program needs to have a network of redemption partners and 2)The Loyalty Program needs to have the backend operational strength to cater to redemption requests – activities such as processing, packaging, shipping etc. It’s easier if people can do the redemption online and individual merchants take care of the fulfillment, however, there will be many cases where merchants don’t have that capability and would look up to the Coalition Loyalty Program owner to provide that service.
There needs to be a sound and diverse redemption capability. There are 2 aspects to this. 1)The Loyalty Program needs to have a network of redemption partners and 2)The Loyalty Program needs to have the backend operational strength to cater to redemption requests – activities such as processing, packaging, shipping etc. It’s easier if people can do the redemption online and individual merchants take care of the fulfillment, however, there will be many cases where merchants don’t have that capability and would look up to the Coalition Loyalty Program owner to provide that service.
Education
While loyalty is known to many, there are even more businesses and individuals that need to be educated on this model. Awareness has to be increased using every media available – print, internet, television. For a program to be successful, corporates and individuals need to be aware of the concept of loyalty and understand its value.
While loyalty is known to many, there are even more businesses and individuals that need to be educated on this model. Awareness has to be increased using every media available – print, internet, television. For a program to be successful, corporates and individuals need to be aware of the concept of loyalty and understand its value.
Accessibility
Having a loyalty program is one but having people use it readily is another thing. The program needs to be such that people can access it from anywhere within the country and using a ubiquitous medium such as the cell phone.
Having a loyalty program is one but having people use it readily is another thing. The program needs to be such that people can access it from anywhere within the country and using a ubiquitous medium such as the cell phone.
Financial Feasibility
All good things cost money. And so will setting up the Coalition Loyalty Program. Apart from the costs of Management, IT and Fulfillment, there are other operational costs that also need to be considered. For example, if the program decides to give a loyalty card to each of its members, this is going to be a significant cost. The economic model of the coalition loyalty program should take care of all its costs – both initial and recurring.
All good things cost money. And so will setting up the Coalition Loyalty Program. Apart from the costs of Management, IT and Fulfillment, there are other operational costs that also need to be considered. For example, if the program decides to give a loyalty card to each of its members, this is going to be a significant cost. The economic model of the coalition loyalty program should take care of all its costs – both initial and recurring.
Technical Feasibility
Needless to say, technology forms the backbone of this venture. For any business wanting to launch such a program in India, it is preferable that the technology vendor is also local. If you scan the marketplace for such vendors, there are very few technology houses who can provide a ready-made platform that can scale not just to the volumes but also effectively manage the complexities of a large loyalty program – a platform that is made specifically to meet the demands of a Coalition Loyalty Marketing Program. The other selection criteria should be the focus of the vendor onto this space. You want a vendor who is dedicated to building this product and is constantly monitoring the marketplace to keep track of the latest trends in loyalty marketing and making sure that the product caters to those trends. You would not want to buy a solution from a company that gives you an inexpensive solution without the guarantee of being in business 2-5 yrs down the line.
Needless to say, technology forms the backbone of this venture. For any business wanting to launch such a program in India, it is preferable that the technology vendor is also local. If you scan the marketplace for such vendors, there are very few technology houses who can provide a ready-made platform that can scale not just to the volumes but also effectively manage the complexities of a large loyalty program – a platform that is made specifically to meet the demands of a Coalition Loyalty Marketing Program. The other selection criteria should be the focus of the vendor onto this space. You want a vendor who is dedicated to building this product and is constantly monitoring the marketplace to keep track of the latest trends in loyalty marketing and making sure that the product caters to those trends. You would not want to buy a solution from a company that gives you an inexpensive solution without the guarantee of being in business 2-5 yrs down the line.
How many does India need?
Globally, every successful model gets copied. And this is true about India also. So the natural question that comes up is this: How many does India need?
We as a nation are blessed with such a huge population, one that is young, educated and looking for brand adherence. Loyalty programs have the potential to thrive in such an environment. As long as the Indian psychology of total value for money is catered to, any number loyalty programs can exist. My estimate is that as a nation, we can easily have 10 successful pan-India programs with memberships upwards of 10 million each.
Globally, every successful model gets copied. And this is true about India also. So the natural question that comes up is this: How many does India need?
We as a nation are blessed with such a huge population, one that is young, educated and looking for brand adherence. Loyalty programs have the potential to thrive in such an environment. As long as the Indian psychology of total value for money is catered to, any number loyalty programs can exist. My estimate is that as a nation, we can easily have 10 successful pan-India programs with memberships upwards of 10 million each.
Conclusion
As we go along the path of loyalty, the only model that will find mass appeal is the Coalition model. This is because the Coalition loyalty model shifts loyalty from an enterprise’s tactic to get more business to a customer’s preference for greater value. Increasingly it will be a customer-driven imperative rather than an enterprise driven initiative. While individual loyalty programs would still continue to exist, they would be forced to align with such coalition loyalty programs to remain attractive to their members. The average Indian would stand to gain from the wide partner base thereby getting the much desired value for money.
As we go along the path of loyalty, the only model that will find mass appeal is the Coalition model. This is because the Coalition loyalty model shifts loyalty from an enterprise’s tactic to get more business to a customer’s preference for greater value. Increasingly it will be a customer-driven imperative rather than an enterprise driven initiative. While individual loyalty programs would still continue to exist, they would be forced to align with such coalition loyalty programs to remain attractive to their members. The average Indian would stand to gain from the wide partner base thereby getting the much desired value for money.
-71.4 Million members
-average revenue of $20/member/year
-total annual revenue of $1428 Million
-i.e. total annual revenue of INR5712 crores (@ $1=INR40 )