but the most important ones in the context of next-generation loyalty are listed below:

• Real-time interactions – the appeal of the ‘instant win’ is not to be underestimated and the top-up event offers a perfect, timely opportunity to say thank you.
• Reward optimization – balancing the allocation of rewards based on their appeal to customers with the size of the prize pool is key to optimizing costs for the operator.
• Gamification – adding gameplay is often overlooked as a key element but it remains the best way for operators to differentiate themselves in the customer’s mind.

Digital loyalty programs need to be fun and exciting; elements such as real-time interactions, instant gratification and gameplay have been proven repeatedly to drive customer engagement.

Points-based Programs

Leading points-based programs like STC’s Qitaf or Rostelecom in Russia represent another tested method of rewarding actions with credits that can be exchanged for prizes.

These programs are successful in their own right but suffer from issues, including points overhang—when operators carry significant points liabilities over time on their books. They are also limited to high spender—over-redemption from small groups of point-hoarding customers who only redeem expensive prizes—and vulnerable to delayed gratification because it can take a long time for most average users to accumulate enough points to exchange for a meaningful reward.

For many operators, points-based programs represent complex collection and redemption mechanics that are barriers to customer engagement. As the ‘points or credits’ mechanics evolve, we expect to see far more flexibility in terms of banking, earning or burning points. Equally important, points can facilitate social interactivity by allowing participants to gift or share points with others. Additional flexibility in points collection and redemption is crucial to incentivize customers to reduce balances at a steady rate to avoid building large liabilities on the balance sheet.

Surprise & Delight

Today, telco loyalty programs can broadly be split between those that offer a ‘known’ set of rewards that customers work towards and those that ‘surprise’ customers with ‘unknown’ prizes. Both approaches present pros and cons.

‘Surprise & Delight’ programs allow operators to deliver the WOW effect of an unexpected reward to a broader customer audience without requiring explicit actions in return or membership of any loyalty scheme. From a next-generation loyalty perspective, the key to success is to make Surprise & Delight mechanics smarter. Since a broad-based program would typically be costly to run, the operator needs to be laser-focused on high value and high-risk segments of the base that need additional incentives to remain with the operator. Increasing amounts of customer profiling and third-party behavior data can help align customer preferences to the reward offers.

We believe that customers actually like a combination of surprise and ‘catalog’ prizes. Why? It's human nature: we all love some level of control but there is nothing like an unexpected surprise to generate goodwill. Going forward, Surprise & Delight programs need to be highly personalized and to prioritize customer segments that matter the most.

Brand Partners Ecosystem

A number of operators have embraced partner loyalty programs, leveraging the mobile device and location capabilities to provide consumers with a bouquet of location-aware offers. The most attractive aspect of this approach is the partner ecosystem that helps operators develop a competitive differentiation. With its app-based program, Three Plus in Ireland is a trailblazer in this space, using a combination of personalization, gamification and sponsorship assets to engage customers and enable brand partners to reach the right audience.