Will loyalty become a new form of currency?

Will loyalty become a new form of currency?
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Repeat custom is the lifeblood of all commerce, selling a product or service once to a person is easy enough, getting them to buy it again is what enables business continuity. Prior to the coronavirus pandemic, many retailers and e-commerce players in the Middle East were already rewarding customer loyalty through rewards programmes designed to encourage repeat purchase.

With the pandemic however, and the increased retailer presence online, consumer shopping habits began to change and loyalty became precarious, replaced instead by convenience and price. The rise in e-commerce has created a more competitive landscape, with retailers forced to compete for shopper attention. One way to attract that attention is to introduce unique loyalty programmes where points can be used as a form of currency, an offering that will appeal particularly to those suffering financially from the pandemic. 

A Covid Consumer Behaviour survey in December 2020 by Majid Al Futtaim’s (MAF) Happiness Lab found that of 58 per cent of respondents faced a negative financial impact last year with22 per cent increasing their usage of loyalty programmes. In addition, 29 per cent of consumers make purchases based on offers and promotions.

“Covid brought a fundamental change to the way customers think, feel and act. We have found that consumers are now looking to loyalty programmes to add monetary value and also build trust with brands,” says Kashmira Motiwalla, loyalty lead at MAF, whose loyalty programme SHARE allows users to collect and spend points across 2,300 stores in MAF’s portfolio. “There was a significant surge in the use of SHARE points as early as April 2020 and that trend has continued into January 2021. Our customers who have been impacted financially are looking to benefit from the cash back aspect.”

With developments in technology, particularly in the digital payments space, loyalty programmes are becoming increasingly versatile and practical, offering a full-fledged solution to retailers looking to retain customers and boost sales.

“When the pandemic hit, there wasn’t much activity at the beginning due to strict lockdowns. Then users started to turn to points as an alternate currency, people either wanted to save money, didn’t have access to cash or lost their jobs. Once you become aware of your points, you are actively using them,” says Tarek Ghobar, cofounder of PointCheckout, a Dubai-based payment gateway for points and miles.

Earning loyalty

 According to a Nielsen study, 84 per cent of consumers are more likely to engage with a brand that offers a loyalty programme, citing that programmes are the single most common feature that could entice them to increase the amount they spend. However, the Clarus Commerce’s Premium Loyalty Data Study 2020, reveals that nearly two-thirds of consumers say their loyalty is more difficult for retailers to maintain than ever before, while 67 per cent of consumers are not satisfied with traditional loyalty programmes.

The Clarus study also shows that customers are vocal when they're loyal – 89 per cent of consumers said they would recommend a loyalty programme to friends or family members if the benefits were enticing, while 88 per cent of respondents were likely to choose a retailer whose loyalty programme they belong to over a competitor offering a lower price.

“Blind loyalty that takes people for granted is dead. What I do believe in is the more philosophical sense of loyalty, that is when I have a beneficial, reciprocal relationship with the merchant that I am transacting with. That’s when I decide to go back there – that type of loyalty will never go away,” says Omer Gurel, founder of Dubai-based Repeat, a loyalty driven food ordering app. Users are rewarded with points whenever they dine-in or order from a particular outlet which can be exchanged for discounts.

Consumers today are also demanding choice, according to Nida Unas, head of group loyalty at Chalhoub Group. “If they’re not spending time with you, they are spending it with someone else. We’re fighting for share of time, because everyone is time poor,” she says.

However, businesses suffering from the effects of the pandemic may not be able to afford spending valuable resources and burning budgets on low return investments.

A 2021 Loyalty Industry Data Study found that 90 per cent of retailers are planning to enhance or expand their loyalty programme as a priority for 2021, but 57 per cent of them said lack of budget, internal resources or IT support are some of the main reasons for not launching loyalty programmes.

“Every reward programme stopped answering their phone at the beginning of the pandemic, they could not make a decision because loyalty points are traditionally tucked somewhere under the marketing department. The decision making on points and loyalty programmes was all over the place,” says Ghobar.

Personalised versus pre-set

Simply adding more options like new offers for consumers is no longer enough. Consumers are now on the lookout for tailored, more personalised loyalty programmes, giving them both relevant offers in real-time and the freedom to use their points according to their own preferences.

According to a PYMNTS research, 84 per cent of consumers have been spending more time with merchants that tailor their loyalty schemes to end-customers, allowing access to customised products and services and relevant promotions that resonate with users.

“Before Covid-19, most of non-travel and non-accommodation options were not very relevant to the users. They would spend points on goods that are pre-decided as the only options to redeem their points or vouchers. But now, users are seeing the value of points and whether they can use them to buy things that match their lifestyle, and this is the huge opportunity for brands,” says Ghobar.

For example, IKEA in the UAE introduced its “Buy With Your Time” programme, rewarding customers for the time they spend travelling to the store and exchanging them for products, a form of “time currency” as the retailer calls it. Other "currency" driven programmes include ADCB TouchPoints which allows users to convert their points into real currency that can be redeemed across more than 200 shopping and F&B outlets, online and in-store. While mobile wallet and payments solution company PointsPay is enabling loyalty programme members to redeem their points by converting them into more than 150 currencies, to spend in-store or online at over 30 million retailers worldwide.

It’s important to make loyalty programmes “meaningful and relevant” according to Unas.

“We live in an experience economy. Everyone has realised that a transactional relationship will not survive in today’s day and age – the route we’ve taken is through personalised experience,” she says.

According to The State of Mobile Wallet Marketing, 69 per cent of respondents said they are more likely to use loyalty cards if it is on their phone. The focus has shifted from only paying with points to payment options that guarantee ease of use, including points, cards and digital wallets.

“If I send someone a payment link as a merchant, we are in their palm already. We display for them all payment options and choices, including buy now pay later possibilities. So, we are in full control of what we show them as payment options, and they haven’t even left their phone nor gone to any online store,” says Ghobar.

Big data

One reason why attention has shifted to loyalty programmes globally is because they are a goldmine for data. When people use loyalty programmes, they give businesses a whole trove of data they would not typically have access to if customers paid in-store, in cash. This data can include the age, gender, email address and spending habits in its most basic form. Using such data to provide tailored offers is critical to the success of a loyalty programme.

“From a scientific sense any loyalty programme is rubbish without data. I believe in data-driven loyalty and using data to provide you insights into your business to see what you’re doing right and what you’re not doing right,” says Gurel.

A lot of brands have become more data-conscious, turning to loyalty programmes to gain more data, using analytics to try and find trends to encourage their customers to spend more.

“Brands are now realising the power of points in getting [data] out of clients, they will keep using this as a form of marketing intelligence. This is the main reason of using loyalty points, to get customer data, and there is not time more than now that customer data is more important and valuable,” says Ghobar.

The infrastructure of loyalty programmes is extending beyond capturing transactional data to the analysis of digital data so that brands are able to respond in real-time to online interactions when customers are considering a purchase.

With the help of big data analysis, loyalty programmes now collect more data than ever, tracking customer behaviour both offline and online, including through mobile and connected devices. The result is a heightened threat to data privacy, which could influence customer behaviour and willingness to participate in online loyalty programmes.

Next generation

Loyalty programmes put purchasing power back into the hands of consumers, which is particularly meaningful during a global crisis and can also benefit companies wanting to achieve a customer-focused approach.

“We are now looking at a new type of customer who has been forced to develop a crisis aversion strategy, adopted health concerns which never existed before and is adjusting to a drastically changed livelihood,” says Motiwalla. “Loyalty programmes have the potential to build strong customer trust. Customers are looking for loyalty programmes to provide value for money and for brands to ensure not only their safety, but that their values are also in line with their own.”

The next generation of loyalty solutions will disrupt the loyalty industry by increasing adoption and expanding the value of loyalty programmes, enabling consumers of credit card and retail loyalty programmes to access and use their points like currency, seamlessly, in real-time through digital wallets in app or in-stores.

“The trend is definitely continuing, paying with points is growing as an alternative payment together with buy now pay later and digital wallets among others,” says Ghobar.


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