What was the initial driver behind the creation of Mastercard’s ‘Achieving Advocacy and Influence in a Changing Loyalty Landscape, A Mastercard Asia Pacific Study’?
With loyalty a key part of Mastercard’s business globally, we wanted to better understand the drivers of loyalty across the region. This was the first time we have done such an extensive study of consumer behaviour and needs, conducting research into loyalty across 7 markets, talking to over 7,000 people across Asia Pacific.
"Loyalty programs must change in order to stay relevant. A digital loyalty experience is key to ensure programs can meet consumer expectations."
The three key objectives were:
1. To understand the changing loyalty
program landscape in the region, the extent of program participation, the prevailing rewards currencies and the typical ‘’loyalty wallet’’;
2. To examine the extent to which
programs are achieving their goal of influencing member behaviour and delivering value to both members and program operators; and
3. To explore how programs can further
engage with members, sustainably deliver greater value and cultivate greater influence.
In general, how have consumer’s perspectives changed when it comes to loyalty programmes over the past 12-24 months across Asia-Pacific?
Things are definitely changing and while consumer perception of loyalty programs is shifting, so too are the behaviours that programs are meant to influence. Consumers are shopping very differently, starting to pay differently with tech giants introducing new ways to pay via smartphone, and they are travelling differently with new players changing the way people travel.
Many consumers are reluctant to wait for a distant reward and are less motivated by point based reward structures that they feel set unobtainable targets. There is a high demand for more immediate rewards in the form of discounts, bonuses and other incentives. In Australia, for example, consumers aren’t seeing value in loyalty programs like they used to. It is a mature loyalty market and they have a lot of choice in when and how their loyalty is to be rewarded. Importantly loyalty is no longer just about rewards i.e. points no longer hold the value they once did, and consumers are seeking personalised experiences to compliment points and demonstrate true value. Wallets remain crowded and consumers are a member of more than 6 programs on average. This includes an average of 2.1 supermarket/retail programs, one bank program, one airline program.
The notion that Millenials are not interested in loyalty is false. Our findings are indicating that Millennials are more active than what we may have anticipated. They participate in a higher number of programs than other segments or generations. They are more responsive to the communications they are receiving from loyalty programs. We know Millennials are the greatest users of digital channels to engage with their loyalty programs and they are also the most willing to share personal information if it results in a more personalised experience. With insights like this, we can see that Millennials offer a bigger opportunity for loyalty program operators than what we thought.
What were some of the key findings of the study and did anything come out of the research which you found surprising?
The consumer loyalty space in Asia Pacific is at a crossroads and is a hotly contested and crowded market. There is an uneven loyalty landscape with markets at different levels of maturity.
Markets like Australia, Hong Kong, Japan and South Korea are highly mature; programs are well established, but customers are seeing reduced value from loyalty programs due to increased regulation and deteriorating program economics. Emerging markets like China, Indonesia, and India present an opportunity to capitalise on a stronger appetite for loyalty among the growing middle classes.
Consumers on average have 7.9 loyalty programs in their wallets, however, there is a difference between a consumer’s participation in a program and what they consider to be the Most Important Program (MIP) – the program that motivates and influences them to the greatest extent, owning the greatest share of their wallet.
There are mixed levels of customer advocacy across the region. By definition, we had a starting assumption that loyalty programs would drive advocacy. For the first time we measured the Net Promoter Score (NPS) as part of the research, and when customers were asked if they were likely to recommend their most important program (MIP) the NPS outcome was –5 across the seven markets.
Mature Market: Australia’s individual NPS -6. Loyalty in mature markets is a well-established concept. For many consumers, there is the realisation is that program value is diminishing – ultimately, rewards are becoming harder to earn, and this is driving the NPS scores down; and Emerging Markets: It is the opposite in India (NPS+37) and China (NPS+14). In emerging markets consumers are still seeing increasing program value and have a strong appetite for loyalty generally, it also appears that the prevalence of real-time cashback rewards in India and digital wallet and social media integration in China are having a positive impact.
The reason why these factors such as MIP and NPS are so important to measure is that they correlate to the overall influence a program is having on their member’s behaviours. For example, in India where consumers are highly satisfied with the programs, they also report that their MIP is influencing their payment, travel and shopping behaviour.
A surprising thing we found was also that it’s all about good experiences within programs. The more personalised the offers, the easier the digital experience, the more relevant the communications the opportunity for the program to influence consumer behaviour was threefold.
The research found strong performance by loyalty programs in the emerging markets, notably India and Indonesia. Why or what do you think programs in these markets are doing well?
Both India and Indonesia are considered emerging markets. Consumers are still seeing an increase in program value and have a strong appetite for loyalty overall. In both India and Indonesia, a large majority of consumers believe the value they obtained from their MIP had increased over the last two years. (India: 75%, Indonesia: 67%)
When we compared the top types of rewards that consumers wanted versus what programs were actually providing – there was a good match in both markets, which would point to higher satisfaction levels. For India and Indonesia, the focus is much more about a “reward me now” culture where instant gratification and recognition of status is very popular. When consumers in these markets were asked: “what benefits are you able to earn as a member of your MIP?” Discounts were highest in these markets (Indonesia 65% and India 53%) and VIP/ special treatment were significantly higher than other benefits (Indonesia 24%, India 21%).
We have seen the concept of loyalty change quite dramatically with the rise of technology and therefore accessible information at consumer’s fingertip – Will this trend continue? What can business do to embrace this trend?
Loyalty programs must change in order to stay relevant. Being able to do this requires the capacity to adapt to market conditions. A digital loyalty experience is key to ensure programs can meet consumer expectations.
There is a significant opportunity to improve the consumer loyalty digital experience. More than 60 percent of consumers in Asia Pacific are now able to interact with their MIP online. This implies 40 percent don’t interact with loyalty programs online, which is a significant opportunity. Only 40 percent of consumers can do so via a mobile app and these metrics vary quite widely across the region. In Japan, 71% of consumers have access to a website where they can track benefits, claim rewards, check latest offers or their points balance but only 29% said they have access to a mobile app where they can do the same.
The research told us that members who can engage with their program via these platforms are more likely to believe programs are increasing in value, they are also more likely to be highly satisfied. In India members who have access to both a website and mobile app, 80% feel highly satisfied, underlining the importance of a digital servicing model to broader program engagement.
In China, 47% of consumers who are members of a loyalty program prefer to communicate with their program(s) through a smartphone app. Chinese consumers are welcoming the value they are getting from WeChat, including promotional messages, news, latest offers and updates on program benefits. What the research is telling us is that this kind of digital, proactive communications are encouraging Chinese consumers to spend more to attain benefits and redeem points, which can lead to increased engagement with their loyalty programs.
Will this trend continue?
While providing a strong digital proposition is a key driver of member engagement and the ability to influence behaviour it shouldn’t be viewed in isolation as a silver bullet. We know that there are three key areas that work together to achieve stronger engagement – effective digitisation, personalisation and relevant and timely member communications.
What are some of the benefits of highly-digital, personalised experiences when it comes to customer loyalty programmes?
Programs delivering strong levels of digitisation, personalisation and communication are most likely to influence consumer behaviour. We found that if consumers can be delivered better experiences in two of the three areas of digitisation, personalisation and communication, or better yet in all three, then the impact on program influence is magnified threefold.
• 28% of consumers who indicated they are highly satisfied with one of the three program experiences reported their MIP is strongly influencing their behaviour; and
• 70% of consumers who are highly satisfied with all three experiences also reported their behaviour is strongly influenced.
Consumers often reported low levels of satisfaction with their ability to personalise their program experience. Regionally, only 36 percent of consumers reported being highly satisfied with the level of personalisation. However, +70% of consumers in AP are willing to share personal information if it results in a more personalised experience, in developing markets this number is closer to 85%
As a concept, personalisation has the greatest opportunity in the developing markets where consumers are more willing to share information and less cynical about program motives in using it.
• Consumers are after loyalty providers to make better use of information already provided before seeking additional information. Onerous experiences can both deter program sign-ups, and get new members off to a bad start with regards to program engagement.
• Programs need to determine how to utilize the existing information that they collate from members. If the information is useful then program operators should cease requesting it.
How are you using these three pillars to drive your business success?
Mastercard is focused on enabling our customers and partners to be at the forefront of digital payments:
1. The broadest set of digitally enabled products and services that drive profitable behaviour;
2. Simplifying access to and integration of our digital assets; and
3. Delivering the best digital experience everywhere
Our platforms are being strengthened, transforming our solutions to enable customers to advance their digital strategy.
We have a personalised offers platform that allows personalization at the individual customer level. Allowing a program operator to truly control the proposition and economics to an individual. The offers are merchant-funded and offer and based on a customer transaction behaviour, at the moment we have several programs live in the region.
Our Pay with Rewards product allows cardholders to use their rewards points to make purchases, wherever Mastercard is accepted – domestic, cross-border, or online. The research indicated this was the number one feature consumers across the region wanted. Pay with rewards is live with 30 customers across 14 counties globally.
Finally, we have a significant array of data capabilities across Mastercard that we are leveraging to develop, segmented, informed customer analytics and communications.
Mastercard has a clear focus and ongoing role when it comes to shaping loyalty across Asia – why is the area so important to the business?
Firstly, Asia is a key region for Mastercard globally given the significant growth potential across the region. The emerging nature of payments in a number of markets (China, India, SEA) combined with the mature payments landscapes in others (Australia, Japan, Korea) makes Asia a fascinating opportunity for our increasing suite of payment capabilities.
Mastercard has the largest global footprint in the loyalty market powered by the fastest and most secure processing network in the world. Mastercard is in a unique position to connect buyers and sellers using strategic loyalty solutions to create valuable customer experiences. Ultimately loyalty programs are seeking to drive behaviour, which in most cases involve a payment and at its heart loyalty is a data-driven business. Through combining our core payments processing business, with many of our acquired capabilities, including Data Analytics, Test and Learn and Loyalty, Mastercard has created a valuable and unique range of capabilities for Card Issuers and Merchants to understand their customers more deeply, improve engagement and influence their behaviour.