What has changed in the loyalty business?

In the loyalty industry, the biggest story we talk about is McDonald’s. For years on end, McDonald’s refused to do a loyalty programme. Two or three years ago, they launched a loyalty programme globally. Everyone keeps asking me: Will loyalty die? My common answer is that if you understand loyalty programmes as a structure, it is not dying but moving with the times.

First, it was all about the ability to recognise a customer around the point of sale. It started with American Airlines, which recognised gold members, platinum members and so on. Then it gave you a traceability and tracking mechanism, which is the points currency. And then you got data — not only could it track customer behaviour, but it also gave brands an ability to predict trends. So the insights and analysis and future trend behaviour became a big part of the business. Today, it is also migrating into a lot of AI applications.

Loyalty programmes give brands a zero-party data asset. So there’s no permission requirement and that is becoming a big asset for organisations, particularly with the new privacy law in India.

During Covid, the four North American airlines raised money from banks on the back of their loyalty programmes, whose valuations were really high.

Another change is the whole transition in technology. Earlier, when we did a programme with the Taj, we put an RFP out for software. We had eight big software companies bid for building the software. Now technology is almost readily available off the shelf. And technology has increased the scale of adoption — so today, the penetration, percolation and adoption of loyalty programmes is quite high.

What are the challenges that loyalty programmes face?

Technology helps scale, but it increases sameness in the programme. The rewards portfolio is the same, so differentiation becomes a challenge. And brands always want to have that differentiation. In all of our training programmes, we talk about how the soft benefits of recognition are the most difficult to replicate, and we advise brands to pay attention to that. The term we use is ‘emotional loyalty’.

If redemptions drop, it shows poor engagement with the individual.

In India most programmes would see 40-60 per cent of points expiring. In the West, they had redemption levels in the region of 80 per cent. They target a high 80 per cent redemption and it makes sense, because if you’re not going to get your customers to engage, you’re investing in a white elephant of any technology, resources, processes within the organisation.

The principle is that when a member redeems, they become more loyal to your brand, and they transact more. So understanding that, we felt there was a gap.

How have you addressed the gap?

If you research, globally there’s about $300 billion worth of points floating in individual wallets. In India, as per an RBI report, there’s about ₹8,000–9,000 crore issued by bank credit cards alone annually. Our back-of-the-envelope calculations suggest that the points in individual wallets are ₹15,000–20,000 crore.

I felt members of loyalty programmes will feel a great sense of satisfaction when their unused points can go to help a child attend school or help an elderly person get support. If I can channelise even 1 per cent of that towards charity, we will be able to help our NGOs in a significant way. And that’s my dream and hope.

So when was Points for Good launched?

It was launched first as ‘Points for People’ eight years ago. And, as we went along, we thought it’s better to widen the scope. We adopted the UN Sustainable Development Goals, and said let’s keep it for a larger good. It also increases the business proposition, so you can plant a tree and we can take on plastic recycling and so on.

So we thought it better to rebrand and called it Points for Good three years later.

How many brands are on the Points for Good platform?

We’ve got almost every bank in the country. Technically, today, 100 million credit card holders can donate, but we are yet to hit an inflection point because of an awareness problem. We have so far channelised 100 million points towards charity. You can see the glass as half-full or half-empty... so there’s miles to go.

Does the redemption of points towards charity spike during the Joy of Giving week?

There’s some organic mindset of giving at that time — November, Diwali time. What we’ve also created during that week is a World Loyalty Giving Day. Last year, one of the hotel groups donated 10 million points.