Customer loyalty requires no introduction. The concept has lasted for years – even corner stores offer special perks to everyday customers. In fact, loyalty programs are as ubiquitous as mobile network coverage in today’s context. Brands do it in multiple ways. Some apply a point- or perks-based scheme, while others take a more sophisticated arrangement by segmenting customers on benefit tiers based on their spending. The idea is to incentivise customers with specific benefits that result in a customer becoming a regular with your brand.

As the intention of loyalty programs is to encourage customers to stay longer with the brand, buy more often, engage on social channels, and even advocate the brand to others, there is tremendous value attached to them. Yet, there is strong contest on the success of loyalty programs in driving positive outcomes. If not done right, loyalty programs can backfire too.

In this research we present a framework-based approach developed after studying notable customer loyalty programs from telecom operators in Asia. The four-point checklist outlines guiding points to delivering a holistic experience with loyalty programs.

Figure 1: The four-point checklist to building successful loyalty programs

Why telecom operators must focus on customer loyalty

1. Tech giants give service experience a fresh outlook

Technology giants are now disrupting the telecommunications industry. The likes of Facebook, Amazon, Google, and Netflix (FANG) lead curated experiences, personalised for every user. These companies are setting new standards and benchmarks. Consumers now view every service provider through wider lenses and expect service levels similar to FANG.

2. Competition and commoditisation are increasing

Average revenue per user (ARPU) has been on the decline for most telecom operators. Of course, there are exceptions in emerging markets. However, these markets come marked with high customer churn and a preference for prepaid services, as they do not keep customers tied to long-term contracts with the same service provider. In addition, new disruptors are entering both emerging and developed markets. These greenfield operators are experimenting with alternative business models that enable them to offer services at a third of the prices set by incumbents.

3. Customer journeys go beyond telco core services

Consumers have moved beyond basic connectivity services when they think of telecoms. Popular categories driving consumers to the internet include video and music streaming, social media, online shopping, and e-learning. This shift means a typical customer’s journey now extends beyond a telco’s traditional products. Therefore, telecom operators need to understand and measure how their customers consume, interact, and engage with these over-the-top services.

Changing industry dynamics is making customer experience and loyalty management table stakes for telecom operators. Twimbit analysed the loyalty programs of telcos in the APAC region to highlight their importance in competitive markets.

Figure 2: Notable customer loyalty and reward programs from telecom operators in APAC

Twimbit regards the AIS (leading mobile service provider in Thailand) loyalty program as one of the best in the Asia Pacific. We have outlined some of the key lessons from its journey to success while applying the four point framework.

1. AIS noticed shifts in customer behaviour early on and the increasing industry competition

Our analysis highlights the following triggers for introducing customer loyalty and rewards programs:

Low switching barriers: In the telecoms industry, regulators have constantly worked on lowering the barriers for consumers. In many European markets, operators find it necessary to relax contract switching terms for postpaid customers. In Thailand, the competition was encouraged on multiple levels. One example was the introduction of mobile number portability in the late 2000s, which made it easy for subscribers to move across different network operators.
Launching new services: The aim is to lure subscribers to a newly launched service, particularly early adopters. New services also allow operators to improve the perceived value from the service, as the new technology focuses on more sophisticated users who expect more than the basic service.
Disengaging from price wars: For markets that are seeing irrational competition from challengers engaging in price wars, market leaders can strengthen the quality of service and focus on value-addition to improve customer loyalty. For example, rather than introducing deep discounts, market leaders can build a differentiated proposition by offering more value at existing price points.
Commoditisation of services: Operators are now close to hitting 100% penetration. Now, as network coverage and capacity gaps between operators are shrinking, leading operators are finding new ways to showcase differentiation.

AIS introduced Serenade in 2004

I) Competition started to emerge in the mobile market

Between 2003-2007, the AIS subscriber market share decreased from 60% to 46%
Revenue market share remained the same at 51% in 2007
Competitor, viz., CAT was fully privatised

II) Market saturation led to price wars

The central region of Bangkok and other major cities reached 100-120% subscriber penetration
Challengers chose to launch aggressive price wars rather than expanding coverage to other parts of the nation

III) AIS strengthened focus on quality and service differentiation

AIS already had a rewards program for all subscribers, AIS Plus
It launched AIS Serenade for high-value customers, creating tiers and segmentations with loyalty programs
It also introduced new customer experiences by segmenting subscribers based on their lifestyle activities. AIS formed ten lifestyle groups – Technocrat, Elite, Achiever, Prestigious, Sociable, Traditionalist, Family, Reachable, Butterfly and Wanderer. For each group, it offered a different set of values based on behaviours and other needs.

2. AIS identifies customer retention as an essential step to maintaining the market lead

Subscriber acquisition cost (SAC) vs retention: The cost of retaining subscribers is much lower than getting a new one.
SAC postpaid vs prepaid: Acquiring postpaid customers is much more expensive than prepaid customers. Higher acquisition cost for the postpaid customers means more time for operators to cover the acquisition costs.
Revenue share of high-value customers: Postpaid and high-value customers are important because of their higher contribution to operator revenues.
Profitability of loyal customers: The profitability of postpaid customers is more compared to prepaid customers. For many operators, growing postpaid customer segments have resulted in better profitability growth. Postpaid customers usually stay longer, giving telcos more time to recover acquisition costs.
Lifetime value of loyal customers: Lifetime value is not only measured in the steady income flow from a postpaid contract but the possibilities of upselling or cross-selling other services to long-term customers. By so doing, the customer also benefits from better value for money through various discounts for bundled services.

The Thai mobile market was moving through the next phase of liberalisation. AIS felt the need to protect its high-value customers without launching price wars.

Figure 3: Impact of competition on AIS

Source: Twimbit Analysis, AIS Annual reports

3. Loyalty programs help AIS to ring-fence high-value customers

Customer loyalty programs build differentiated experiences. These are part of customer value and experience management strategies and the tools available to a telecom service provider.
Improve customers’ lifetime value, not short-term promotional giveaways. The purpose is to build a deeper emotional connection with the customer outside of the normal buying cycle. It covers customer journeys and lifestyle.
Personalised source to customer insights. Successful customer loyalty programs deliver personalised experiences. As a result, they serve as an important source of customer behaviour and insights.
Value accretive and tiered. Companies must offer the best value to the best customers. A customer loyalty program should look at ways to share some of the additional value in return for the loyalty a customer has for an organisation.

About 54% of AIS Serenade customers said the service made them feel more special than peers – AIS Annual Report 2017

AIS Serenade builds personalisation

Below are some quick details about the AIS Serenade customer loyalty program and how it builds exclusivity for high-value customers:

A customer relationship program for high-value customers
Customer value defined by high service usage and superior billing record
Designed for sophisticated user segments, buying advanced VAS and non-voice services

Serenade exclusive benefits include:

Exclusive lifestyle privileges: Discounts at various branded stores, golf courses, fitness centres, hotels, resorts, spas, beauty salons, and restaurants. Exclusive benefits and invitations to parties and other lifestyle activities.
Exclusive touchpoints: A dedicated call centre for Serenade customers with round-the-clock free calls, a Serenade Club and Exclusive Corner with a dedicated queue at service centres, and a Serenade Card (privilege card for high-value customers).
Exclusive assistance: Consultation on tariff plans and promotions, mobile devices, and non-voice or wireless services. Provision of international concierge, international travel assistance, and international medical assistance.
Exclusive experience: Reserved parking, Serenade-exclusive trips, pre-booking for new device models, or purchases for limited-edition products.

4. Success is tied to delivering a holistic experience

Offer a unique identity: Creating a one-of-a-kind identity is a way of connecting and engaging better with customers. This identity then ties back to the overall brand positioning of the company.
Add differentiated tiers to the customer loyalty program: Adding tiers is vital to motivate subscribers to engage more with the brand. It also establishes a sense of differentiated or unique value to each customer.
Complement with a simple point-based system: These easy to earn and redeem benefits act as the first steps to a more complex loyalty program. The simplicity of the point-based system attracts customers across all segments.
Build a partner ecosystem: Has the advantage of giving customers more benefits than what a telco alone could offer. Building a partner ecosystem gives telcos the flexibility to quickly add or delete components based on various customer personas.
Offer distinct experiences and wow moments: Creating unique and impactful moments help brands build substantial recall value by exceeding customer expectations. These are about making a personal connection with the customer with empathy, generosity, and gratitude.
Incorporate technology: Enhancing customer touchpoints and extending customer journeys make the role of technology indisputable in enhancing customer experience. Keeping a 360-degree view of the customer involves integrating all customer channels and recording all customer interactions. These steps help in developing a deeper understanding of customer behaviour through richer data. Loyalty management systems help in creating relevant and contextualised offers by analysing customer data from various sources.

Figure 4: Key features of Serenade loyalty program

5. A tiered approach improves service engagement for Serenade users

With loyalty programs, telecom operators should look to drive customer engagement beyond the point of purchase. They can do this by adding new experiences and touchpoints through experiential offerings, such as exclusive and early access to events, products, or services. It is crucial to create a hierarchy or layered structure that encourages customer to engage and obtain these benefits.

i. AIS Point (Earn & Burn)

AIS Point allows customers to earn points based on their spending
For every THB 25 (USD 0.8) spent, users receive 1 point
Customers can exchange points to receive additional discounts of up to 30% – 50% at partner stores
The reward list includes Line stickers, free calls, food, entertainment, shopping, and delivery services
Points are valid for two years
9 million customers signed up for AIS Points

ii. AIS Privilege (Perks Program)

AIS Privilege for every customer
Offers discount privileges
Shopping coupons
Prizes and lucky draws
15 million privilege offers, 8 million subscribers to the rewards program

iii. AIS Serenade (Tiered Loyalty Program)

Serenade is an exclusive program. Participation has links to customers’ monthly spending and the minimum service period with the operator.
Emerald: customers with monthly spend between THB300 (USD9.6) to THB700 (USD22.5)
Gold: monthly spend between THB700 (USD22.5) to THB1,500 (USD48.2)
Platinum: monthly spend of THB1,500 (USD48.2) to THB3,000 (USD96.4)

Figure 5: AIS Serenade- Tiered Loyalty Program

6. Improve the effectiveness of a loyalty program by measuring outcomes

Loyalty programs represent vast portions of a company’s marketing budgets. Therefore, measuring the impact and outcome is essential. AIS has been spending about USD 32 million (THB one billion) annually on the Serenade program. In 2019, the company spent about 13% of its total marketing budget on the Serenade program, which comes to about USD5.5 (THB170) per Serenade customer annually.

Redemption rate: A direct measure to understand the impact of the loyalty program is through redemption rate. This measures how many customers are actually redeeming the offers/discount coupons/points. It indicates if the loyalty programs are effectively engaging the customers.
Customer churn: Measuring attrition among the subscribers helps in knowing the value a customer sees in the loyalty program.
Spending with the brand: Are the tiers or layers with the loyalty programs value accretive? Are they working on improving customer spending with the brand?

Key outcomes for AIS Serenade

01 Serenade customers’ average churn rate is less than 1%

02 AIS leads the industry in NPS. Between 2018 and 2020, customer satisfaction has improved from 88% to 90%

03 Average monthly data usage is much higher for Serenade customers; 94% are 4G users

04 AIS postpaid ARPU stood at THB569 (USD18.3) at the end of 2019, the highest among peers

05 Serenade users represent 60% of the AIS postpaid base

Figure 6: Average spending of Serenade customer

References: hbr.org/2021/05/why-customer-loyalty-programs-can-backfire

Also read our research on customer experience trends in 2021.