How To Design A Loyalty Program : Lessons from ZopNowMarch 11, 2013 2013-03-11 14:10
How To Design A Loyalty Program : Lessons from ZopNow
How To Design A Loyalty Program : Lessons from ZopNow
[Editorial Notes: Guest post by Naman Sarawagi, founder of FindYogi.com – a product comparison engine]
With the rise of organised retail in India there has been a flood of loyalty and reward programs in the market. It started with plastic cards from premium stores, which added to our social ego and are now useless bulk in our wallet and at times in email. Most of us don’t know what to do with these!.
In the past few years I have enrolled into every such program that I could and owned a lot of such cards – but there are only 3 that I am actually loyal to and have benefited from:
A. PayBack – Came as a replacement to the rewards system from my ICICI credit card.
B. T24 Mobile– A virtual mobile network from Future Group (Pantaloons, Big Bazaar et al.). You get free talktime for your T24 mobile number every time you purchase at a Future Group store.
C. Zoppies from ZopNow – Points earned on daily household needs shopping at ZopNow.com.
Here are some commendable elements in these 3 systems that sets them apart. You will notice that the Zoppies model can be adapted by a lot of online/offline stores.
1. Minimal effort to credit points:
- Payback – Points auto-credited from the ICICI bank credit card statement. For online purchase, it’s only about copying the card number in a text box hence that is fine. One generally misses-out on offline purchases where Payback card needs to be swiped, one can’t quote the card number or his phone number.
- T24 GSM – The credit note comes along with the invoice. User needs to go to another section in the store. One would take the pain of standing in queue at the credit redemption section only when the credit amount is too high.
- Zoppies – Auto-credited on checkout.
2. Multiple options to earn points:
- Payback is accepted at a lot of places including gas stations, grocery stores, online stores, gift shops and all whole of Future Group retail. But the effort of earning points at any other place, apart from ICICI statement, has a certain amount of friction, resulting in lower usage. My credit card covers all my expenses, so around 30 transactions a month.
- T24 GSM – About all Future Group stores – including grocery, apparels, electronics etc. Covers all kinds of purchases, hence ends up getting used can come back to it about 2-3 times a month.
- Zoppies – Grocery purchase is a weekly activity, so that is about 4-5 transactions a month. There is only 1 store but ZopNow encourages you to change delivery time to a less congested time slot by rewarding more Zoppies. The gain is not mentioned as 10 more Zoppies (only Rs.1), but “25% extra Zoppies”. Higher numbers is always better. Zoppies system is Ad Valorem but not linear – higher the billing amount, higher Zoppies earned per Rupee spent.
3. Minimal threshold for redemption:
- Payback – Redemption options start at less than Rs.200 worth of points.
- T24 GSM – As little as Rs.20.
- Zoppies – At Rs.0.10.
4. Multiple meaningful options to redeem:
- Payback – Can be redeemed for Gift cards, Fuel cards, Products – as good as cash. Payback has started giving coupons, which are readily available, labelled as Gift Vouchers – this reduces the value.
- T24 GSM – Mobile Talktime is almost a currency at low denominations in India. T24 GSM’s network quality becomes a major deterrent. One can only use it as an extra phone for outgoing of random calls or for the household help.
- Zoppies – As good as cash at ZopNow for your next grocery purchase, which is bound to happen within the next 20-30 days.. The dropping out customers can be emailed to redeem their Zoppies.
5. The rewards numbers/value should be high and quantifiable:
- Payback – Each payback point is about Rs.0.25 in value during redemption. This value is not mentioned anywhere explicitly. Earning a point is variable depending on store. The effective reward value could be as low as 0.01% of money spent in case where there is no Ad Valorem credits.
- T24 GSM – Effective about 1-2% in talk time.
- Zoppies – Each Zoppies is Rs.0.10. The effective reward on money spent is 1-2.5%.
All of these sound so trivial, yet no one has been following these simple rules. I hardly save Rs.5-10 every week due to Zoppies but this reward system is so well integrated to the ZopNow experience that they can easily influence our behavior by using this system. Though this system is almost like a closed wallet but the way ZopNow has leveraged this is commendable.
ZopNow will gain majorly by enabling trials of PCGs (Packaged Consumer Goods) and that is when Zoppies will convert from an expense head to a revenue head – earn Zoppies to write testimonial and feedback on products – remember those slogan contests. Indirect competitors, like AaramShop, are targeting this market primarily.
There is an entire industry trying to accelerate the trial of PCGs through rewards such as talktime, movie tickets (Winpin from bookmyshow), free salon/spa experience, mail in rebates (not very popular in India). There is a need for a common currency as rewards for trying new products. The currency has to be valued by the consumer and the cost of distributing that currency has to be minimal.
The currencies mentioned above are inefficient in a way that the rewards delivered to end consumer is at times lower than the overhead incurred. As a result the enabling agencies have to squeeze margins. To make up for the profits, they make the redemption system so complex that they end up earning more from leakage/non-redemption than from the actual agency fees. There is need to change that now and ZopNow seems to be on track for that.