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Dysfunctional loyalty programs in emerging markets that are failing to attract young consumers
Rewards and loyalty programs are essential tools to drive business growth and increase sales because they help businesses to attain visibility, attract new customers, and, most importantly, improve customer retention. According to market research, a 5% increase in customer loyalty can increase the average profit per customer by at least 25%. Also, 68% of new customers come from current customers. Businesses realize the benefits of having reward and loyalty programs; however, operating a program for SMEs in emerging markets is beyond reach due to the lack of technical, financial, and managerial expertise required.
Although 69% of consumers say that the choice of retailer is influenced by whether they can earn rewards points; young consumers are not participating in current reward/loyalty programs for the following reasons: consumers find rewards either unappealing or unattainable; current programs aren’t innovative enough to capture the attention of youth because of lack of engaging user experience; consumers have to install several apps or carry cards for each membership program which makes it confusing and annoying; loyalty points aren’t shareable so consumers cannot send loyalty points to friends or use them with other merchants; finally limited redemption options & flexibility.
Despite the recent growth in loyalty program participation, numerous pain points have prevented such programs from achieving their full potential, and most are failing to attract young consumers; the pain points include outdated legacy systems and user experience, lack of differentiation between different programs, rewards points are siloed in small ecosystems resulting in a low utility value, centralized system with lack of transparency and traceability, and no data privacy & user anonymity which does not serve the best interests of consumers and merchants.
Currently, no solution in the market can serve the best interests of consumers and merchants at the same time and address pain points with current programs, a solution that would offer consumers a fun, engaging, flexible, and trusted platform; and at the same time offer merchants an affordable, seamless, and effective solution.