Mobile loyalty schemes to take off, consumers say

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By: Wise Marketer Staff |

Posted on July 12, 2011

Mobile loyalty schemes to take off, consumers say

With fewer than one third of UK consumers currently participating in telecom operator's reward schemes to encourage loyalty, and consumers ranking loyalty schemes that offer occasional high value gifts as being the most appealing to them, there is a clear opportunity for mobile loyalty programmes to gain greater traction, according to a study by Buongiorno.

The study, entitled 'How to identify, measure and leverage loyalty in the Global market', revealed that despite UK mobile consumers being familiar with the concept of rewarding loyalty (with 73% of mobile subscribers being members of non-mobile loyalty schemes), only 29% participate in mobile operator reward schemes, and only 27% participate in schemes designed to increase spending.

The research examined consumer attitudes toward mobile loyalty programmes and churn, and found that almost every UK mobile operator already offers some kind of programme rewarding tenure, spend, or a combination of the two. This, coupled with low participation rates, suggests that there is still a significant opportunity for operators to improve loyalty schemes and increase subscriber engagement with them.

The survey questioned mobile consumers in developed markets (the UK and Spain) as well as emerging markets (Russia and Africa), and highlighted key areas for those considering implementing a mobile loyalty scheme to think about.

According to Adhish Kulkarni, global head of telco products for Buongiorno, "Telcos are using marketing budgets to drive mobile loyalty and CRM campaigns, but there is little available research that investigates the effectiveness of such programmes. This study offers practical advice on the creation and optimisation of loyalty programmes."

Among the CRM and loyalty programmes offered in the surveyed regions were tenure-based programmes such as Orange Wednesdays, point- based programmes such as MTS Bonuis in Russia, and ARPU-driving programmes such as Top Up Surprises for O2, Optus in Australia, TIM Italy and Telecom New Zealand among others.

The study concluded that effective loyalty schemes should target the right customers - that is, those who have the likeliest propensity to churn, as identified in the study as "younger subscribers and new customers" with the first 2 years seeing the highest risk of defection. The top three reasons that subscribers said they planned to change providers were:

  1. Wanting a new handset;
  2. Believing they pay too much for calls;
  3. Providers not offering additional loyalty benefits.

A separate survey by Analysys Mason, entitled 'The Connected Consumer Survey', found that in 5 European countries and in the US, contract subscribers with higher ARPUs and higher activity are also likely candidates for churn, with those who spend €30 - €50 per month being most likely to change networks (some 16% - 17% of respondents). That study also found that the consumer's intention to change networks was about the same for both contract and prepaid customers (12% and 10% respectively), while 20% of contract customers wanted to stay with their existing provider but change the package they used.

The key conclusion of both studies is that the same incentives and scheme structures will not work equally well across all markets and subscriber segments. Overall, across all four markets in the study, subscribers ranked loyalty schemes that offered occasional high value gifts as most appealing (76% for prepaid compared to 71% on contract). Collecting points is a favourite method, but subscribers vary in how they wish to use these. Points for a guaranteed prize (e.g. a free or subsidised handset after 12 months) were by far the most popular type of reward overall, being chosen by nearly 50% of contract subscribers across all four countries surveyed.

So, while reward programmes are having the desired impact on subscriber behaviour with more of an effect on reducing churn than on driving spend or adoption of new services in developed markets, designing the loyalty programme is critical: done right, it can generate powerful behavioural change but, done wrong, it can damage the brand in the long term.

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