Oct 17, 2016 9:29:41 AM | 7 Min Read

Five Fresh Ways to Leverage Loyalty in the Sharing Economy

Posted By Snipp
Five Fresh Ways to Leverage Loyalty in the Sharing Economy

The sharing economy is here to stay. If you’ve ever taken an Uber instead of a taxi, or stayed at an Airbnb instead of a hotel, or used a WeWork workspace instead of a traditional office, you’ve participated in the sharing economy. According to Time magazine, one in five Americans say they’ve worked in the sharing economy, and two in five say they’ve used services through it. The sharing economy is currently estimated at about $15 billion, but PricewaterhouseCoopers projects revenues from sharing in the travel, car, finance, staffing and music and video streaming sectors to reach $335 billion by 2025.

Broadly speaking the Sharing (aka ‘collaborative consumption’, ‘on-demand’ or ‘gig’) Economy describes a business model that utilizes digital technologies (mainly mobile) to directly match service and goods providers with customers, bypassing traditional middlemen.

Given its increasing ubiquity, the sharing economy is increasingly impacting the way brands interact with consumers. Building loyalty in the sharing economy comes with its unique set of challenges: while customers tend to be more receptive to new ideas and willing to try out new products and services, the flip side of the coin is that they are also more willing to buy other brands if it saves them time or money (according to a recent YouGov survey). And with mobile technology making it easier than ever to compare prices and services and provide instant feedback, competition is fierce.

As consumers become increasingly comfortable with the sharing economy model, they have come to expect traditional companies to offer elements of the sharing economy. Loyalty programs too must adapt to the sharing economy business model. This article examines key strategies to consider for loyalty programs looking to incorporate the sharing economy.

1.Create Loyalty for Suppliers.

In the sharing economy, suppliers are often individuals who not only choose how much to participate, but also whether to participate at all. And since it is these suppliers who control the quality of the brand experience, it becomes increasingly important for companies in the new economy to attract, train and retain quality suppliers. Sharing economy loyalty programs have to focus on incentivizing not just their consumers but their suppliers as well. The latter may well be more important than the former.

For example, Lyft’s loyalty program for drivers uses a tiered rewards program that lets drivers accumulate perks based on the number of rides they provide each month. These perks include help with taxes, discounts on car maintenance and gasoline, roadside assistance and priority support at the ridesharing company’s headquarters for higher tier members.

2.Use Loyalty to Control the Experience (Since you Can’t Own It).

One of the hardest things to adjust to in the sharing economy is the realization that your company doesn’t own the customer experience end-to-end. Rather, the business simply provides a platform to facilitate the exchange of goods or services. What makes this even more tricky is the fact that consumers will happily transact directly with other people in this peer to peer world, but should something go wrong, will immediately look to the company for redress.

If my Airbnb is dirty or my Uber driver drives rashly, who am I going to call?

Brands have to navigate the difficult balancing act of providing a quality customer experience without actually controlling the entire experience. Rather, companies have to use a combination of carrots and sticks to incentivize producers.

In this context, loyalty programs are an especially potent way to engender the appropriate behaviors in suppliers and customers alike. For example, Airbnb’s Superhost rewards program creates an aspirational tier for Airbnb suppliers. Highly ranked suppliers receive a host of extra perks including recognition (with a Superhost label displayed on their listings), along with travel coupons, priority support and invitations to exclusive events – increasing the incentive for all suppliers to provide high-quality services in the hopes that they too would qualify.

3.Incentivize Interactions Not Transactions.

In a sharing economy, your customers could also one day be your suppliers. For example, someone who rents out her apartment in Manhattan on Airbnb could use Airbnb to book her stay during a trip to Chicago. So trying to win loyalty only by incentivizing purchase-based transactions (and thereby failing to encourage non-purchase interactions) simply won’t work.

Referrals and reviews are crucial for establishing consumer confidence in your brand and business model – users who refer their friends and post helpful reviews must be rewarded for their interactions in order to grow your customer base and establish legitimacy. For example, Airbnb offers credit to users who recommends them to a friend, and the friend gets a discount on their first trip.

4.Rank and Recognition Replace Traditional Rewards.

The collaborative economy business model hinges upon trust, so there is greater emphasis placed on transparency, social standing and reputation. The reputation capital imparted by stickers, badges, reviews, stars and other social perks are increasingly much more valuable than traditional points, discounts and offers. Why? Because in order to receive these status markers, you have to be vetted by the community – the higher your social capital, the easier it is for you to participate as both a consumer and a supplier.

In business models where the consumers must be vetted, such as Airbnb, the higher my guest ranking, the higher the likelihood of a supplier being willing to share their assets with me. If I am a supplier with a high rating, then it becomes easier for me to participate because consumers will likely choose me over another supplier with a lower ranking and the company benefits from promoting me as a model service provider.

Rewards for loyalty programs need to embrace elements of gamification such as status and rank to leverage the social capital inherent in the sharing economy.

5.If You Can’t Beat Em, Join ‘Em.

Many large, established companies are partnering with peer-to-peer service providers to generate new revenue streams based on sharing, improve the utilization rate of fixed assets and increase demand of their products. Home Depot rents out tools and trucks instead of having to buy equipment that will only be used once. BMW cars has partnered with JustPark to enable drivers to find and book a parking spot from their steering wheel. GM invested in Lyft with the idea of exposing GM cars to Lyft riders and generating future demand. Marriott partnered with LiquidSpace to create ‘Workspaces On Demand’, enabling better utilization of conference space in hotels while engaging younger audiences (56% of Workspaces On Demand users are from Gen Y).

Established retailers and CPG manufactures are also tying up with sharing economy service providers such as Uber, Lyft and TaskRabbit to provide incentives for their loyalty programs.  A growing number of loyalty programs are providing shared services as incentives for rewards for programs. For example, Sears recently partnered with Uber to promote the Sears ‘Shop Your Way’ loyalty program. Through this partnership, Uber drivers receive points redeemable for products at Sears, Kmart and Lands’ End, as well as discounts on vehicle maintenance and repairs at Sears Auto Centers. The ‘My Starbucks Rewards’ loyalty program has partnered with Lyft. Starbucks Rewards members earn points for coffee and food at Starbucks every time they use Lyft, and Lyft drivers earn loyalty points, too. In a fun twist, riders can also tip their drivers with Starbucks points.

Conclusion: Wield Loyalty Carefully.

The sharing economy creates several opportunities for innovative and exciting loyalty programs across a wide range of industries and sectors. Companies participating in the sharing economy must be aware that not only are their customers more brand conscious and connected than ever before, they are also more fickle. In this context, loyalty can be a double-edged sword that needs to be wielded very carefully: if done well, it can reap great benefits by bringing your suppliers and consumers closer together and ensuring a consistent quality experience; if not then it will just amplify all the issues that existed to begin with.

With the sharing economy market expected to grow by over $300 billion in the next 10 years, loyalty practitioners must stay ahead of the curve nonetheless! 

Ritesh Bhavnani, President – Snipp Interactive
This article first appeared in Loyalty360. October 17th, 2016.


Topics: SnippLoyalty, Mobile Receipt Processing, Loyalty, Mobile Marketing 101

Recent Posts

New Trends in Loyalty Program Data Science

When it comes to loyalty program science, Loyalty360 talked to Eoin O’Sullivan, global director of ...

Read More

5 reasons why traditional mail-in rebates are broken

This article  first appeared in Mobile Marketer, May 8, 2015.
Read More

New Connections – Loyalty In The Grip of the Sharing Economy

The sharing economy is here to stay. If you’ve ever taken an Uber instead of a taxi, stayed at an...

Read More