How many times have you felt that receiving a token discount on your purchase at the neighbourhood kirana store or salon will make you feel good? I’m sure we all love the word ‘discount’, whether it is big or small. And when we get it, the big smile on our face says it all. Even retail business owners feel a sense of pride in rewarding their customers in the form of ‘reward points’ or ‘cashback’, in the hope that the customers will come back to spend with them and earn more rewards in exchange.
According to a report released by eMarketer, near about 35 Indian companies feature among the global cashback industry leaders. Cashback companies in India have seen significant growth and attracted more than US$ 4 billion in venture capital investment. India is poised as the most exciting market in the global cashback industry at the moment.
E-commerce in India is now valued at more than US$ 525 billion, with more than 250 million active consumers buying online. Online and offline etailers across India are using cashback as a tool for inducing customers to maintain a steady frequency of spending at their outlets. The total number of loyalty programme members in India is estimated to be 50 million. According to the head of a leading loyalty rewards programme, a well-structured loyalty programme should see a redemption of minimum 50% of the rewarded points.
Loyalty programmes in India are basically divided into two types: Customer Loyalty and Channel Loyalty. Customer Loyalty programmes are where a retailer, an airline or a hotel chain rewards its customers through points, miles, cashback offers or other initiatives, every time they spend with the brand. On the other hand, Channel Loyalty programmes are where a company rewards its distributors, and dealers through higher profit margins on products, giving bonus products, gifts, overseas trips or other benefits.
The burgeoning loyalty reward points market in India has another side to its success story. A staggering Rs.30 crore worth of reward points go unutilized every month! If we take an average 10% of redemption discount, the business loss due to unredeemed points is a whopping Rs.270 crore per month.
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