A Formula to Reboot Loyalty

Sunday April 12,2015

Adhish Kulkarni, Chief Marketing Officer, Lumata

Adhish Kulkarni CMO

One of the biggest challenges Telecoms players face today, is how to retain profitable customers in an age of disruption and hyper-competition. Yet, the Telecom operator landscape is littered with 'tired' loyalty plays, characterized by weak customer experiences and generally uninspiring mechanics.

Why is that?

With the millions of marketing dollars being invested, Why haven't Telcos taken advantage of the enormous customer data and access to customers to be more relevant and engaging?

CapGemini's insightful report - Fixing the Cracks: Reinventing Loyalty Programs for the Digital Age provides a stark reminder of how much work the Telecoms industry has to do. The report highlights how current loyalty programs  across industries are ‘unfit’ for the digital age. Most are plagued with negative sentiment on social media (Telcos have the highest at 96%), driven by lack of relevant rewards, poor user experiences and customer service.

The report also highlights how most loyalty programs continue to operate solely with a transactional mindset, ignoring other forms of engagement such as brand advocacy or social ambassadorship as legitimate ‘acts of loyalty. Telcos, once again fared badly in the analysis, with only 7% offering rewards for engagement other than transactional.

This resonates with our experiences at Lumata, working with Telcos around the world on Loyalty initiatives. In our estimate, less than 50% of mobile operators in mature markets have implemented serious loyalty programs driven by C-level mandates. Of these, a mere 10% are thinking beyond traditional approaches.

Part of the issue here is the risk adverse nature of the decision makers, who are unwilling to balance risk and reward by breaking the mould. The data shows us that the most successful programs (e.g. Orange Wednesdays film sponsorship or O2 Priority Moments) have been supported by top level commitment who give their teams a license to innovate. 

Beyond brave decision making, what else do brands need to do to ‘reinvent’ their loyalty offerings? Three things stand out in our experience:

  1. Emotional Brand Engagement: Rewarding Loyalty needs to move beyond simple transactional triggers of ‘spend’ and ‘tenure’. Customers are more sophisticated and multidimensional in how they interact with the brand and rewarding their loyalty should reflect this.
  2. Active and Frictionless User Experiences: Loyalty programs need to be 'active', recognizing that a seamless customer experience is crucial. Passive point collection is dead. It fails to engage customers in any meaningful way. Brands need to prioritize the user experience, making apps or mobile web experiences slick. Can customers find the prize in two swipes?
  3. Personalisation: Loyalty needs to be personal when recognizing and rewarding customers.  In today's data-rich world, there is no excuse to send bland, generic messages or misjudge which rewards customers care about. The negativity this breeds, combined with the drop off in engagement and negative social sentiment to boot, is simply too costly.

Putting it into action with 'Badges'

We challenged ourselves at Lumata a year and a half ago to build a ‘next generation’ loyalty program that would genuinely excite customers and help brands stand out from the crowd. We looked to the world of apps and games for concepts that not only reward customers with personalized messaging, but also invite active engagement from them. We also conducted research asking Telco customers what they liked and disliked about their mobile operator; what motivated them to switch and what incentivized them to stay. These inputs led to the creation of a 'digital badges' program inspired by Foursquare and Waze.

Image representing Lumata's next generation loyalty solution and the digital badges program

We replaced ‘points’ with new forms of recognition for activities such as digital service adoption, brand advocacy, and social media ambassadorship which had historically been ignored in the ‘loyalty’ definition.

We designed the program to make it easy for customers to understand why they were being rewarded. We also focused on reward optimisation (selecting attractive rewards for the customer at the lowest cost for the telco) based on historical customer behaviour across our loyalty programs. And finally, to keep the experience seamless, we designed the program to integrate within existing telco self-service customer apps.

In 2014, we launched the badges program with a European mobile operator - the first of its kind, bringing an entirely new reward, redemption and engagement model for Telco loyalty.

While the program is still in its early days, we have already incorporated a host of strategic partners such as the film industry, media houses and retailers to offer hard-to-get rewards with a high perceived value. Customer engagement and brand metrics continue to deliver above expectations even though we are at the beginning of a 2-3 year journey. In the next phase, we plan to leverage social media to enable customers to jointly shape the future of the program. We believe this will create true brand advocates.

Coming back to the CapGemini report, it is clear that the Telecoms industry has a lot to learn from innovators in other sectors like Starbucks and Sephora, but we believe there is everything to play for.To reverse current trends, Telcos need to look beyond their own backyard for inspiration and need to have a mindset to trying something new. 

Customers are challenging you to innovate... reboot your approach for the digital age. That's the way to win their loyalty. 

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