The December issue of Media Marketing Polska monthly features an article titled “Even more digital” dedicated to loyalty programs. The questions were answered by Mr. Dawid Łuciuk, Sales Director, Junior Partner of i360, who discussed the increase in the role of e-commerce, the impact of the pandemic on programs in the most affected industries, and the current role of loyalty programs in the mix of marketers’ activities.
What is the impact of changes in sales channels on the program market – growth of e-commerce, increasing role of small formats, such as convenience stores?
Transactions moving from the offline to online channel, the digitisation of everyday life and the growing role of e-commerce are very noticeable trends in the last 8 months. We should note, however, that in some cases, especially at the very beginning of the pandemic, the market had to overcome many barriers, such as the availability of products ordered online, long lead times, and supply lagging behind demand for products that consumers considered to be needed in larger numbers in their households.
The loyalty programs of Żabka, Lidl, Orlen, Carrefour, and recently also Circle K have focused on “pay” functionalities that allow you to connect your payment card to the program mobile application and make contactless payments without taking out your payment card or cash from the wallet. All you need is a phone in your hand. Orlen Pay (an app separate from Orlen Vitay, but nevertheless with connected functions), Lidl Pay, Żappka Pay, Carrefour mobile payments, Starbucks Rewards and Green Caffè Nero are solutions that create a new market reality before our eyes.
It is particularly useful during the pandemic. Even through every program does it in its own specific way, they all combine two elements in one activity: participant identification in the program and payment. This tendency to combine the identification of a loyalty program participant at the checkout and payment in one transaction is a significant change on the loyalty program market. At the same time, contrary to expectations, it should be noted that most “traditional” loyalty programs do not use incentives for online shopping. We have also been observing a clear trend of growing role of mobile apps, which are taking over the role of the main medium for programs among Poles from websites and plastic cards.
What is the current activity in the area of loyalty in various industries, such as FMCG, retail, moto? Some of them have been affected more severely by the pandemic.
E-store operators, who have gained new customers thanks to the pandemic, are undertaking many loyalty initiatives. The most interesting of them are done together with payment card operators, e.g. under the VISA Oferty program, which has been operated for many years by i360. Banks are also very active and run their own discount programs based on offers derived from affiliate networks, additionally supported by the budgets of organisers of such projects as Goodie.
At the same time, research on the loyalty programs market, published in August this year, show that the only program that has strongly lost importance is Tesco Clubcard. Just like the entire market, the rest of them have strengthened their position. Participation in loyalty programs has stabilised at 60% of adult Poles. In the group of city residents over 500,000 people, as many as 71% of the entire population, declare participation in at least one loyalty program.
What is particularly noteworthy is the fact that loyalty programs are becoming the domain of the younger part of society. Already 73% in the age group of 26-35 years declare participating in them.
What has changed in consumer attitudes after the pandemic? How can a change in purchasing power affect the programs? The digitisation of consumer lifestyles is one of the essential effects of the pandemic. Will it have an impact on the design of programs?
Changes in consumer attitudes will be particularly noticeable in 2021, after using funds from all existing government financial aids that support the economy. We are currently during the second wave of the pandemic and it is difficult to clearly determine when it will end. We can safely assume that the changes in consumer attitudes will translate into the loyalty program market and that they will be noticeable.
The events observed in the market so far, in particular boosted by the economy lockdown, include: simplifying the rules for registering and participating in loyalty programs. All you need is a smartphone with Internet access and some free time to become a participant in truly modern programs. You don’t have to go to a point of sale, pick up a plastic card, and the organizers do not require you to make purchases, etc. The program exists entirely in the mobile app and the participant needs only the application to be able to actively use the program. This is also associated with benefits in the program, which do not include in-kind prizes ordered to the point and requiring you to wait for delivery, for example.
This makes it easy to participate in the program from the moment you download the app and sign up until you can receive all the benefits offered. Simultaneously with loyalty programs, some concepts are being developed to increase the usability of retailers’ mobile apps (and thus customer satisfaction), such as click&collect, delivery of groceries and meals in cooperation with courier companies specialising in food transport, shopping lists, etc. Many companies have resigned to some extent from marketing activities, while investing in the fight against the epidemic, especially at the very beginning, to earn the loyalty and sympathy of customers.
This has also been practiced by the organisers of loyalty programs, encouraging to spend points to fight COVID-19. We should also mention some timid attempts in Poland and the popularization of paid loyalty programs on foreign markets, mainly in the USA, and the development of further loyalty programs for shareholders.
What will be the role of programs in the mix of marketers’ activities? On the one hand, marketers cut costs, on the other, they need even more effective tools to achieve sales goals. Which attitude will prevail?
At i360, we are not seeing the “cost cuts” mentioned in the question. On the contrary, we have observed an increase in investment in activities that translate directly into sales volume. This applies both to current Clients, who are particularly active under our business-to-business incentive programs, and a large number of enquiries from the market.
They clearly indicate that the loyalty market in Poland will grow over the next several years. But I do agree that the role of long-term loyalty and incentive initiatives will change in a broad mix of activities. The winners will be those who will use advanced analytics and data science to demonstrate the relationship between financial outlays and increased demand from consumers and trade agents.
P.S. At the same time, we also visited the Warsaw School of Economics, sharing our knowledge about loyalty programs with future generations of effective marketers. The postgraduate studies program is based on the existing knowledge of marketing and marketing strategies. We are glad that our organisation takes part in the training of practitioners in such an important business field of knowledge. And since we now live in the times of social distance, the lecture was also held remotely. Over 3 hours of talking to the screen turned out to be a challenge. We look forward to the times when we can meet students personally.0