A friend recently told me that brands, instead of being inward about their communication should truly try to become a category of one. Brand Loyalty will be truly achieved when you’re the only one in your category that people will recall and associate with.

Examples —

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Search Engine: Google

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Razor & Shaving Cream: Gillette

If a brand, in 2018, is not making efforts to truly change or develop the category that it belongs in then it is under a high risk of being another me-too in that category.

Having said that, customers in India, have multiple options for everything, especially when it comes to online services. Be it, food delivery, online shopping, e-pharmacy, online furniture, cab hailing, travel bookings, wallets, payment options, online fashion, car renting, accommodation, online grocery, and the list can go on. For a brand to differentiate and create a category of one is truly difficult, in such a highly competitive, price sensitive market.

Nearly 70% of Indian consumers surveyed perceived little differentiation between providers, 50% were not satisfied, and 25% were awaiting a competition trigger to switch, wrote Vineet Ahuja, managing director (partner) – Accenture Strategy, in a co-authored piece for The Hindu Business Line.

From a customer’s point of view, they are no longer loyal to brands. Consumers are constantly looking for the best value and choice that every brand has to offer. To add to that, the businesses that we are talking about here are not product companies which can be evaluated on parameters such as smell, taste, sight or, feel. They are service brands, that are providing an experience that goes beyond the four senses.

Even if, after years of investment you manage to create a category of one, be the pioneer in that category, truly disrupt and organize a highly unorganized and inconvenient offline option, it will not take much time for someone with heavy pockets to disturb that brand loyalty, because the bitter truth is that your most loyal customers are not loyal to you, they are loyal to the “value for money” you provide. Consumers today, especially those of service brands, don’t have an emotional attachment to the brand and hence the cost of switching is low and easy.

Case in point: BookMyShow before and after Paytm

BookMyShow was launched in 2007. All of us remember standing in long queues or buying tickets in black before BookMyShow digitized the whole booking system. The service it provided was very simple, book your preferred seats at a cinema hall near you. The brand was a pioneer and truly created a category of one when it comes to movie ticketing. It was actually one of the few internet businesses in India that actually recorded a net profit of INR 2 million in 2015–16 and INR 32 million in 2012–13 when all others in the e-commerce world were bleeding.

However, Paytm launched its movie ticketing business in 2016. Riding on cash back, discounts, partnerships and, more. With no visible differentiation in movie booking experience, it did not take much for people to switch from BookMyShow to Paytm for their movie ticket booking. By the end of FY 2017, Paytm is already pegged to be 1/4th the size of BookMyShow. It already has tie-ups with 4000 movie screens compared to 4500 of BookMyShow. During the same time, BookMyShow’s net YOY sales growth dropped from 85% in 2015–16 and 61% in 2014–15 to 27% in 2016–17.

Source

We will obviously have to wait and watch for how long can Paytm bleed to dent BookMyShow but for now, it has BookMyShow on its toes and once brand loyal users have no qualms about booking on Paytm.

Case in point: Airtel before and after Jio

The same points can be repeated in similar fashion for Airtel, before and after the launch of Jio, so much so the entire communication strategy has them calling out their customers to try others and then come to us.

So, in these times of extreme competition, what can brands do to make sure that they don’t lose their most loyal customers?

Going beyond miles, points, and stars

Gone are the days when loyalty programs were pushed, instead of pull. There were days when loyalty was measured in miles and points with a rather complicated set of terms and conditions to earn and redeem them.

There have been other successful case studies as well such as the Starbucks Loyalty Rewards program or Shopper’s Stop First Citizen Membership program or the king of all loyalty programs called Jet Privilege which was founded in 2012 and is currently being valued at around INR 7300 crores.

However, the same formula, in my opinion, cannot be applied to online businesses of 2019. Customers with an array of choice easily available to them outside will always look for service that gives them the most utilitarian value of their time and money instantly rather than waiting for some points to reach a certain level for them to redeem something prized.

In fact, miles reminds me of a 2009 movie starring George Clooney where miles actually were the goals. People had bragging rights about what they collected. A gold card was desired.

Forward things a decade, If I look around right now, I don’t care how many miles I have or how much I can further earn, I would go on the cheapest flight there is.

So instead of randomly assigning miles and points, which are more often than not, difficult to understand and keep track of, brands launched something called “membership program”

Loyalty today is sold, not earned

When it becomes difficult for brands to create an offering that is unique to them only, it becomes easier to eliminate a problem that is common to all.

Don’t ask me to “earn” anything, tell me what is “guaranteed”. Every category is plagued by certain operational challenges that become increasingly difficult to negate or overcome.

For example :

Surge pricing for cab hailing or Cab availability during peak times

Cancellation/Rescheduling charges for online flight/hotel bookings

Delivery charges, surge pricing for online grocery or food delivery

and more such examples.

This is when brands realized that the very problems that they created by the virtue of moving people from offline to online can be converted into benefits if their customers are willing to be loyal to them.

You scratch my back, I’ll scratch yours

For a minimum monthly/yearly opt-in upfront price that the customer pays to the brand, it gets rid of all the problems that were a critical deterrent to the development of that particular category but also ensures that loyalty is bought, upfront. Because I have subscribed to a particular brand’s membership program I know I am entitled to a better deal and service than any other brand.

Why this new way of bought loyalty is likely to be more effective in today’s competitive and changing world?

increases the cost of switching

makes the customer more involved because of paid opt-in

collects a revenue upfront to offset the cost of added benefits

increases LTV

once is an accident, twice is coincidence, three times a habit

Examples of loyalty membership programs in highly competitive categories

So how are loyalty programs being designed today, and how are they a win-win for both customers and brands? The onus is not just on the customer’s end to earn something and finally get something in return.

Another leg up over the traditional loyalty programs is that the benefit of these goes beyond freebies, discounts and, promotions. They are more service level benefits.

MMT Double Black

Core Problems it solves

Losing money because of last minute change in plans

Paying extra to get cancellation protection for every booking

Swiggy Super

Core Problems it solves

Surge pricing in delivery fee during peak order time or weather changes

Eliminating delivery fee completely, especially for users who are not comfortable paying Rs. 30 for a Rs. 100 order

Priced at just Rs. 99, I think this program is a steal for people ordering at least more than thrice a month considering they also deliver free super delights in dessert or sides for orders above 99.

Ola Select

Although I doubt how successful this program has been, it again tries to address the category problems and present them as “membership” benefits.

Core Problems it solves

Cab unavailability due to excess demand and limited supply

No peak pricing and a flat fee for your cab ride

Big Basket Star

Getting people to stop buying grocery, fruits and, vegetables offline was a huge ask in the first place but Big Basket has come a long way. To further accelerate this adoption, Big Basket has tried to address the below core problems with online grocery shopping and offer them as benefits for its membership program

Core Problems it solves

Grocery shopping is often last minute, not planned except for the ones planned from one weekend to another. I want, I shall get it by walking 100 m away to the nearest grocery store, vegetable market or even a Big Bazaar. With Big Basket Star membership program you get access to exclusive delivery slots prioritizing your grocery delivery over other non-membership users.

For a Rs. 600 order, I would hate to give a Rs. 60 delivery fee if I can get the same things from my local kirana shop just by walking. And hence, introducing free delivery for Big Basket star members.

OYO Wizard

The first time I got an email from OYO regarding the OYO Wizard program that they just launched was on November 11, 2018. I got another email from OYO on December 23rd 2018, claiming that 500,000 members have already become OYO Wizard members. Assuming that all of them took the basic Wizard Blue membership worth Rs. 99, that is around INR 50 million in OYO’s bottom line within 1 month.

Although it does not solve any core problems in the budget hotel category, it only intends to increase LTV of an acquired user by giving monetary rewards in return of being more loyal to OYO than it’s competition. However, cheaper