What will it take for Payback to succeed in India? More retailers like Big Bazaar?

Payback is a loyalty card program launched in Germany in 2000 by Metro AG. So the background goes like this - I-mint, India’s leading rewards scheme was taken over by Payback in 2010 and rebranded as Payback India. It was re-launched on 1st July, 2011. Payback has 30 partners in the network, some of them being HPCL, ICICI bank, Big Bazaar, Megamart,, UniverCell, Food Bazaar, HomeTown, Ezone, Brand Factory,, Central and Loyalty Partner (parent company) owns a majority stake in Payback India. ICICI Ventures and Peepul Capital are also investors in Payback.

In 2011, Payback tied up with Future Group, promoters of India’s leading retail format to launch its loyalty program. With this, a customer can redeem their points at any of the 1500 plus Future group stores and he will not be tied to one point of purchase. Nothing new in the international context right? but in the Indian market which is difficult to crack and quantify for such products, Payback currently has over 10 Mn members that have been inducted into its loyalty program which makes it one of the largest loyalty program companies in India, according to Knowledgefaber.

Payback also partnered with Pantaloons India, one of the largest fashion retailers in 2012. Almost 45% of the group level billing has come through customers engaged in the loyalty program according to September 2012 data of the company. For Pantaloons 70% of the billing comes from loyalty program customers.

The nascent loyalty industry in India is poised to see explosive growth. In its latest Indian form, loyalty is moving beyond points, and beginning to take the shape of services, facilities and lifestyle experiences that money can’t otherwise buy says Vijay Bobba, CEO and Managing Director, Payback India. 1 in every 2 households in Germany holds a Payback card which accounts for 10% of total retail sales in Germany. Around 95% of the cardholders redeem their points. Future group stores attract more than 220 million people every year which makes it the Ideal choice for a loyalty program in India as a merchant. Payback also has online stores through which the customers are allowed to access and redeem their points for gifts and rewards. Payback also informs customers before the deadline for coupon redemption.

Payback has been honored with the ‘Best in Customer Service Business Services Category’ at the Retailer Customer Service Awards by Franchise India. However the usage of such loyalty cards and programs seems to be rather low in India? Either the points accrued are relatively less, or the ease of use is missing or maybe the customer are grappling with the issue of carrying too many cards and don't want one more. I also recall some domestic and international companies launching card based loyalty programs only to roll it back a few months later. One of the other incidents which I would like to share is when I used a loyalty card at a fuel station and I found out that the machine which read loyalty cards was malfunctioning and points could not be registered. Would such incidents and bad experiences affect the acceptance of loyalty programs?

We wanted to investigate further. A unified loyalty program or coalition program does not work as desired and as easily in India. The Indian retail industry is estimated to be $450 Bn out of which only $30 Bn comprises the organized sector. In general, a lot of average Indian customers prefer to walk into a store which offers large discounts on its products, rather than accumulate points and redeem them later. The number of merchants on the loyalty platforms in India also seem to be limited at this point of time.

Customers don't want to have 5-6 different cards (credit, debit, loyalty) and keep thinking about which ones to use at the POS. Another area of concern is that the world is moving towards Mobile loyalty systems and maybe in India we can directly jump to that, rather than adopting something that doesn't provide the 'wow' level of convenience and ease. Solutions that combine loyalty, shopping and gifting and bring them to mobile are coming up and that could be really useful for consumers.

Other Companies/Startups in India, in the field of loyalty programs are Accentiv, Loyalty Rewardz, UnionRewardz, FreedomRewardz and MintM. The competitors' approach to loyalty programs is similar to that of Payback.

LTP View: Payback has played a major role in helping merchants understand customer behavior and decipher trends while rewarding loyalty points. Companies benefit extensively from Payback’s top level tools, processes and direct marketing services. Its marketing campaigns are beginning to register in the minds of the Indian customer. The highly fragmented Indian retail sector and the nuances of building a product company in India are the biggest challenges. The loyalty program presents numerous advantages over the traditional, stand alone loyalty systems which are restricted to one brand alone.