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Loyalty programs scales new heights in Middle Eastern retail market

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As the matured Gulf retail market evolves itself as one of the key drivers of economic diversification in the region, the Middle Eastern markets are all set to take the lead. A recent report from the Dubai Chamber of Commerce and Industry (DCCI), in particular, stated that the UAE alone is expected to reach AED 200 billion in 2017 in retail sales. These mind boggling figures suggest that the businesses in the region would be under constant pressure not just to maintain customer satisfaction levels, but also to attract new customers. The DCCI report detailed the growth of the regional retail segment at a higher rate, with the UAE burgeoning at a Year-on-Year (YoY) growth of five per cent. The positive momentum the sector would continue to enjoy could be attributed to key factors influencing the market like robust economic growth, increasing purchasing power, an ever growing expatriate population, changing consumption patterns and increasing penetration by international retail players.

The local retail industry analysts predict that the region will continue to attract more international retailers, thus positioning the Middle East as key competitor to established global retail centres. Experts are also quick to note that the emergence of new trends online, internet retailing in particular, has placed the UAE ahead of other larger countries. Growth is expected to be continuous with an increase of consumer confidence, reflecting an upward trend.

From this perspective, customer loyalty programs, is poised to play a significant role in the move to maintain retail growth. Considering the fact that loyalty programs increase the frequency of customer visits and also the amount they spend each time they are in to business, these programs could prove to be highly beneficial for businesses. A well planned and executed loyalty program, can market businesses on a 24/7 basis for, an actively engaged customer could act as an effective way of marketing your businesses as he would provide positive feedback about your business.

The basic strategy on which loyalty programs are built upon: Rewarding repeat customers, thus increasing sales, proves to be a very powerful strategy. These programs have remained the staple for many big companies and corporates. A typical example would be the Seattle-based coffee giant Starbucks. The chain’s My Starbucks Rewards, the customer-retention program, significantly pushed the company’s record growth to new heights.  The company claimed that the program played a key role in its 26 percent rise in profit and 11 percent jump in total revenue in 2013’s second quarter fiscal results. The number of active users in the program grew 28% to 10.4 million in 2014. Yet another evident example would be Best Buy. The retailer, to keep up with major online retailers like Amazon.com and eBay, also turned to customer loyalty after experiencing stagnant revenue growth year after year in its brick-and-mortar stores. To keep up with major online retailers like Amazon.com and eBay, Best Buy increased reward points from 4 percent to 5 percent last year. This strategy of motivating customers to keep coming back, along with additional changes, helped the doubling of company’s stock since early last year.

Not just big businesses, even small businesses too can cash in on the benefits of these loyalty programs. If they can work out on a well-designed program, chances are high that their businesses can reach new heights. Many small businesses have, now, begun to deploy third-party programs that specialize in getting high-value and highly-polished loyalty reward programs. These programs, which come at unbelievably affordable prices, exhibit all the benefits of having an effective program in place, very similar to those seen at Fortune 500s. These start-ups are also making use of newer technologies like cloud computing, tablets and smartphones to enable small enterprises to deploy customer loyalty programs easily. They can reap all these benefits without having to pay exorbitant upfront costs. Small businesses can customize it, such as designating how customers can earn points. For instance, customers can rack up points not just through purchases, but also by posting a message about the business on Facebook or Twitter.

Among the many loyalty programs companies deploy, a coalition loyalty program could prove to be the most effective one, especially for the smaller companies. This program is a loyalty card system that merges relationships with several brands or companies. By offering incentives to customers of two or more businesses, they allow those businesses to collect user data in return. Ideal for small and medium-sized businesses, this program allows a cost-effective way to offer customers a variety of attractive benefits that they would not be able to provide without the support of other businesses. While the program demonstrates strong brand penetration through multiple levels and types of businesses, it also helps the small businesses grow the value of their brand, while increasing visibility and potential footfall.

For the customers, a coalition loyalty program offers a wider range of incentives associated with a single card. Furthermore, since the costs are lower than the individual loyalty plans, businesses may be able to pass those savings on to the customer as more attractive incentives.

Coalition program might prove to be advantageous for the following business reasons:

A typical example of this program would be the US grocery store brand Kroger. The retailer’s Kroger Plus program provided discounts on food and goods. Purchasers also could accumulate fuel points that could be used to buy comparatively cheaper petroleum at Kroger or Shell gas stations. The more fuel points a purchaser accumulated, the cheaper the fuel costed him per gallon. Also, since one could utilise the fuel points only till the end of the month, the customers are always prompted to act on the limited offer.

Among the many trends that would impact the region’s retail space, rapidly advancing e-commerce sector occupies a key position. Experts opine that marketing strategies in the retail space definitely need to shift to digital. But, overall, more retail brands will have to consider e-commerce and m-commerce offerings since the region offers a huge untapped potential in these sectors.