Indian loyalty market at nascent stages
Coalition schemes the optimal model
The Indian Loyalty market is in its nascent stages, and companies and people there are just learning about the benefits of loyalty.
That is the view of Shaju Nair of travel, transportation and logistics company IBS Software Services, writing in a blog on the firm’s website.
Nair says 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.”
Key drivers for the growth of the loyalty market in India are increased literacy levels, access to brands, opportunities for international travel, exposure to the global marketplace and realisation of value of loyalty.
However, Nair adds that today the loyalty industry in India is largely segmented. There are airline loyalty programmes, petroleum loyalty programmes and retail loyalty programmes – all of which have met with varying degress of success. But the penetration of these programmes is limited. And the reason is that they are brand specific and do not provide a holistic benefit to its patrons.
Nair says that before looking 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.
The successful schemes 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
According to Shaju Nair, the lack of a pan-Indian reach of brand-specific loyalty programmes is indicative of the fact that this model does not work in India.
So what would work for India? Nair comments: “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.”
In terms of how many loyalty programmes India needs, Nair says: “We as a nation are blessed with such a huge population, one that is young, educated and looking for brand adherence. Loyalty programmes 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 programmes with memberships upwards of 10 million each.”
In conclusion he adds that as the Indian loyalty market develops, the only model that will find mass appeal is the Coalition one. This is because it 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.