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Mobile loyalty schemes: much more than a good price

In the face of flat growth in subscriber numbers in mature markets, more operators are turning to loyalty programmes as a means of retaining subscribers. A recent benchmark study conducted by Analysys Mason suggests that more than 90% of mobile operators in Europe offer one or more such programmes.

Loyalty is not just about specific programmes, but also about basic ‘hygiene factors’. Loyalty programmes are not a panacea for reducing churn: operators need to make sure the basics, such as customer satisfaction and pricing, are right before loyalty programmes will have an impact. We believe that there are many short-term measures that operators can still use to improve these hygiene factors, such as making sure offers are clear and transparent.

A different approach is required for different customer segments and, crucially, for customers at different stages of their lifecycle. For example, different rewards will appeal to new customers and to customers who have been with their operator for many years: the latter may want a simple 'thank you' for their long tenure. Initiatives to promote loyalty should reflect this.

Loyalty is not only about providing a good price. Pricing is likely to become more stable in a mature market, and loyalty becomes less about functional or transaction items such as less-expensive services or discounts on handsets, and more about psychological or emotional factors, including brand image and customer perception.

Key lessons can be learned from case studies showing international best practice. Despite the widespread deployment of mobile loyalty schemes, their success has been variable. International benchmarking can help avoid common pitfalls, as well as identify best-practice features that an operator can transfer to its own practices in order to improve performance.

Analysys Mason has previously categorised loyalty schemes into three broad types (see below). The programmes offered are very varied in terms of the type of scheme, the target customer, the costs involved in delivering the scheme, and the benefits provided, both to the customer and the operator. The success of loyalty schemes also varies significantly.

Overview of types of loyalty scheme

• Type 1 – points: customers collect points based on spend/tenure, which can be redeemed for telecoms rewards (such as a new handset) or non-telecoms rewards (such as a leather wallet)
• Type 2 – event: customers are rewarded with something special – typically access to events.
• Type 3 – top-up: customers receive rewards each time they top up. Prizes can be telecoms-related (such as free SMS message allocations) or non-telecoms-related (such as a holiday).

Mobile loyalty schemes are becoming increasingly varied and innovative as operators seek to differentiate their offerings. Indeed, some operators now offer multiple schemes within their respective markets. As an example, GLOBUL in Bulgaria offers a number of loyalty schemes as part of its ZAEDNO (‘together’) programme, each with its own package of benefits and conditions. These include:

Loyalty discounts and preferential tariffs for contract customers who have been with GLOBUL for more than a year.

The GLOBUL UBB MasterCard, which offers customers a discount on their monthly phone bill equivalent to 2% of the amount they spent on their GLOBUL credit card in the previous month, up to the value of BGN60 (about USD43).

Shell Smart, a points-based reward scheme offered in collaboration with Shell, which rewards users with points that can be redeemed at Shell petrol stations against products and services in a catalogue, as well as seasonal promotions (depending on subscribers’ monthly mobile spend).

For telecoms operators, the benefits of mobile loyalty schemes vary depending on the type of scheme offered and the extent to which they respond to the target customers’ attitudes and emotions. Get it right, and loyalty schemes can encourage tenure, spend and/or promotions: well-targeted schemes can engage those segments of the customer base that have a higher propensity to churn (the ‘right’ customers). Get it wrong, and the scheme may end up rewarding established behaviour (thereby decreasing revenue to potentially no benefit), alienating certain customer segments for whom the scheme is poorly targeted, or turning out to be costly or complex to administer.

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