Tata Neu: Stripping the hype

Is it even a super app? Or a coalition loyalty programme? A loyalty business veteran dissects the challenges and complexities the Tatas—and customers—will have to grapple with

Harsh Vardhan

[Tata Neu logo from tata.com; others from Unsplash]

Much has already been written about super apps and how they are taking over the world of ecommerce. However, there are several important perspectives that seem to escape our attention underlying such apps, especially the Tata super app. The question however is whether Tata Neu is actually a super app like Amazon or Tencent, or is it a simple coalition loyalty programme run digitally? This is what the press release in one of the media says:

“The all-in-one app will have a loyalty program for retaining customers. Each brand on Tata Neu is ‘connected by a common reward called NeuCoins, which can be earned across all brands online and at physical locations and can be used similarly as well.’”  

To me it sounds more like a coalition or a shared programme and not really a super app except for an additional benefit like unified payments. Why? In a super app like Amazon the customer has a choice to buy from whichever vendor, brand, category—the choice is virtually unlimited across different organisations. There is little that the brands in Amazon’s portfolio have in common by way of associative value, and the customer doesn’t care. It is purely transactional for them. No loyalty factor exists. Moreover, you may not find any super premium brands like Gucci or Louis Vuitton, fearing commoditisation.

The underlying assumption of Tata Neu is that the same customer would buy different Tata brands at different points in time, thus consolidating their purchase. In doing so Tata Neu would build a loyal base of customers for the pool to be exploited by other brands in the group. 

Incidentally, this is Tatas’ second attempt at building a cross-brand loyalty programme. Back in 2012, the group had attempted a common loyalty card for clients within and outside Tata group. However, the plan never took off. Back then, the Tatas did not have a high frequency category like online grocery retail, as it does now with BigBasket. Trent was simply too small. It also has a substantial presence in the airline business with Vistara, Air India and Air Asia.

So, will the second foray pay off?

This time around, I see three distinct drivers of this Tata Neu programme—ease of buying across categories, a common rewards pool and a superior buying experience. So, where’s the problem?

Value lies in associating with the likes

Leaders in this field are Nectar, Hilton Honors, Virgin Red and several others. Nectar (www.nectar.com) launched in 2002. With 17.5 million members worldwide, 50 billion Nectar points issued annually and with incremental spend of 15%, it is clearly the most sought-after programme and a Harvard Business School case study. It has brands like Sainsbury, British Airways, DHL, and several top tier hotels benefitting from sharing a common pool of customers and aggregating their rewards, besides bringing in superior customer experience across brands. There is a great associative value among the brands that were carefully selected to be coalition partners. In the case of Nectar, they all happen to be premium, extremely well known and respected brands in their respective categories. All of them have over the years built an impeccable reputation and strong customer loyalty. There is a steady flow of customers within Nectar, buying across brands. It now aims to become the UK’s largest digitally active programme. Nectar is also a case study on how a well thought out traditional coalition loyalty programme has migrated to a digital platform with 8 million members having migrated already. Most of the global programmes have already launched their digital apps.

In Tata Neu, this may not entirely be the case. Experience, value associations, etc across Tata brands vary vastly. The ‘Tata Trust’ factor too may not be the same across companies. My associative value with the Taj hotels is vastly different than that of Croma. The two cannot be put in the same bucket at all. One is super premium and the other is a mass brand. Or Titan for that matter. The passion with which Xerxes Desai built a world class premium brand showed in the consumer response to the brand. So great was his passion for building a great watch brand, and which he did with great aplomb, that even the Swiss were worried. I saw that passion when I worked closely with him and his team to launch Insignia (unfortunately ahead of its time). Surely the one that equalled the Swiss watches both in engineering and style. I heard that the Swiss guys once tried their best to keep him away from attending one of the world’s largest watch fairs in Geneva.

The kind of loyalty which the customers show for the Taj hotels and Titan could not be equated with say, Westside or Croma, though they too are strong brands in their own right. Buying behaviour and attitude towards the two sets may not be the same. Would a Taj Inner Circle member be more likely to buy from a super-premium store at the upscale Palladium mall in Mumbai or would they visit Westside? Tata Cliq is surely an option though.

Individual power vs programme power

Several companies in the Tata group like Titan, Taj, Vistara, Air India have pretty strong existing loyalty programmes. They have invested heavily in it for over two decades. Members have developed a strong affinity towards the preferential treatment and the accumulated rewards. Would they be satisfied with a programme built on a common denominator where customer orientation may vary significantly?

I was associated with the launch of the Air India FFP in 1994, and the Sheraton rewards (Welcomawards) at ITC Hotels. I recall ITC Hotels’ chairman Yogi Deveshwar (YCD) would go through great lengths to monitor the programme launch personally and the kind of detailed and rigorous training that was imparted to us was unapparelled in the Indian loyalty space. No wonder the ITC reward programme became a gold standard in the hospitality industry. I again got a chance to work with him when he was the chairman of Air India to launch the Air India loyalty programme. Again, a similar approach to setting up a process across all airports and AI offices. YCD again was fully involved in it, despite his extremely busy schedule. Both the ITC and the Air India programme show that customer experience is the key and every employee connected with it, no matter how remotely, has to be trained well. This at a time when we had very basic computer services and no internet. Such programmes have a proud history and unmatched customer franchise even today, and serve as lessons for managers even in this new tech-driven world. The basics cannot be compromised in such customer-sensitive programmes. The success of such programmes depends on how the top gets involved.

The drivers and the key success factors are vastly different than in a retail loyalty programme. The architecture and the programme construct are built on a different set of values. Any attempt to bring them to a common ground would hurt the superior brand. Can Tata Neu replicate the uniqueness of a Taj Inner Circle programme? A Taj or an expensive Tanishq jewellery customer would perhaps rarely buy from Westside. No amount of rewards can convert them to a mass store customer. Then where is the gain from the pool of customers? I suspect most of the top-tier customer of Taj and Vistara will continue to burn their points for their travel-related business, which incidentally gains the maximum traction in any loyalty programme. (More about this in the ‘earn and burn’ section.)

Accumulated rewards or accumulated headache?

What happens to the already accumulated rewards? How would they be clubbed with the new ones? At what exchange rate? What would be the loss and gains in such an exchange? It is a bit early to analyse Tata Neu, but the key question is whether the earned points from a partner will be redeemed for the same partner’s merchandise or will there be cross-redemption across the group members. Unredeemed points are a headache for the company and sometimes have legal ramifications.

Sometime in 2006, when Shoppers Stop decided to review their rewards programme and brought down the value per point earned, there was big backlash from the customers. The management had to hold back the decision. I had written a piece on this in The Times of India’s Mumbai edition then. It was a case of huge debt by way of unredeemed points. That had to be brought down. The company decided to bring down the value of each point by some percentage points. It did not go too well with the members who saw their rewards coming down. The case of AAdvantage Miles programme of American Airlines serves as a global case study on how unredeemed points can have an adverse impact on the business.  The US’s five most valuable airline loyalty programmes ended 2020 with a combined $27.5 billion in rewards programme liabilities, according to a new study. Unredeemed rewards continue to be a big headache for the companies.

Another big question is whether the existing loyalty programmes of Titan, Taj, Vistara will be migrated to the common programme. In my view that would be disastrous.

Earn and burn

It is an age-old paradigm in the loyalty business that much of the earned rewards are never used. The only programmes where these are well redeemed are the airlines for free airline tickets. Some do in the hotel programmes. Which means that members who fly Vistara and Air India and accumulate miles would eventually use them for free tickets. The same holds true for the hotels. These will most likely not be used for other Tata merchandise. Those who earn points on the retail side will realise that the earn rate is woefully slow. It’ll take them a lot of spends to be able to get even a small item redeemed, let alone a Vistara ticket or a Taj holiday. Given that programmes typically allow 1 – 2% of the bill value for earning loyalty points, a member will have to spend Rs 5 lakh to earn 10,000 points, which might get him a free airline ticket. Going by what I saw in one of the pieces of customer communications at BigBasket, it is not very clear what the value per point is, even though it shows a 5% earn on the bill value. Is every point equal to one rupee or fifty paisa or less? This makes a big difference in the earn velocity and that is something members do not always know.

Loyalty programmes tend to be aspirational. Members hoard points for a bigger gift. And many times, it frustrates members when they find the earn rate is woefully slow and not enough at a time when she wants to redeem it for something meaningful. Thus, by sheer usage pattern the entire programme might eventually get divided into the premium category and the mass category. Benefits would rarely flow across these two segments, making the programme essentially a mass retail loyalty programme comprising Westside, Croma, Big Basket and similar entities. With Tata Cliq being an outlier, more in the super premium category. But here too I find the merchandise very limited, despite some well-known names being there.

Digitally oriented customers do not much care about loyalty

Several studies on the digital native and their buying behaviour and attitudes show a highly fragmented buying behaviour. Consumers who shop in the digital world of Amazon and other large digital shopping entities show a lot less loyalty and affinity towards a single brand or selected portfolio of brands. They are now being spoilt with never before choices, and are spreading their buying across several brands and categories. There are discounts and offers galore. According to a McKinsey report, consumers are switching brands at an unprecedented rate. Almost 70% of consumers try a new brand.

In a promotionally charged market, loyalty programmes and coalition programmes tend to lose some of their relevance. If one partner, due to business exigencies, decides to do a promo, overriding the programme boundaries, it is viewed as a conflict by other partners, weaning away customers by discounts. Such aberrations do pose a challenge to such coalitions. Tata Neu could look at establishing guidelines for all its partner companies to ensure fairness across all partners.

A unified, standardised experience?

Programmes that do not offer exceptional customer experience standardised across partners, tend to lose steam. Globally many such programmes—like Plenti from American Express—have run out of steam after a brilliant start. But cobbling together a nebulous network of seemingly unrelated partners never really caught on. Then all of the partners began to peel away, and AmEx finally threw in the towel. A good coalition programme ensures extremely well-orchestrated customer service and a seamless customer experience across brands. Ensuring every partner benefits from the pool of customers and a cross-board redemption of points are essential to the survival and growth of such programmes. For Tata Neu this would certainly pose a challenge.

While the Tatas have the trust factor, perhaps more than any other conglomerate does, this alone may not be strong enough to lock in the customer in this new highly charged consumer environment. Each company’s ability to handle customers is so vastly different.

However, there does exist an opportunity for the Tatas to look at a differentiated programme structure: With Tata Neu as a strong retail coalition programme built on like-minded mass brands in the stable, keeping out the premium brands like the Taj Hotels, Vistara, Air India (which is now being relaunched by the group as a true international airline of the yesteryears fame), Titan, Tanishq and Tata Cliq. These brands form a special place in building the Tatas luxury face. Would a luxury coalition programme with these brands partnering with each other be yet another way to leverage their equity? I think so. There are several retail programmes in India, but no luxury coalition programme. Maybe it’s time to think of one. The Tatas could take the lead.

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Srikanth Rajagopalan on Apr 18, 2022 6:19 a.m. said

Brilliant analysis.

Tata Neu is caught in an identity crisis. The app is super buggy, simply a redirect to e.g. Westside's own shopping site rendered as a webapp. Several things go wrong - the redirect times out, the brand's page has its own look and feel, and the brand handles its own fulfillment and customer service. So Tata Neu is simply an aggregator, not an app. Tata Pay is nth payment app in an industry with no revenue streams thanks to the zero MDR regime. I can't see the additional wow factor of having an "in-house" payment app vs plugging in a provider like razorpay.

As you've articulated so superbly, even the loyalty angle is fraught with strategic conflicts and execution & financial risks. Even well-architected coalition loyalty apps like Payback (earlier iMint) got sold to Amex and later PhonePe because the financials were unsustainable. Liabilities towards unredeemed points were a big millstone. Assuming Tata Digital books the liabilities for unredeemed points, the P&L is off to a terrible start from day one.

While I do have a soft corner for the Tata name - as any Indian would - I can't see how this is a good use of capital by a listed company that is answerable to shareholders.

About the author

Harsh Vardhan
Harsh Vardhan

Strategy Consultant

Harsh Vardhan is a senior industry professional with over 40 years of experience in marketing, strategy, sales and loyalty management. He has worked with HCL, ITC, JWT, O&M, McCann and Draft Worldwide in various leadership roles. He has had a track record of developing and launching new products, and turning around underperforming businesses. He worked closely with clients like General Motors, Air India, Warner Lambert, Danone, Columbia Pictures, Bacardi, Unilever, Iridium, Titan, and several others. He was responsible for setting up large scale loyalty programmes for leading Indian and global companies. During his entrepreneurial journey he launched several start-up ventures in marketing technology.

Harsh now consults with organisations in business strategy and marketing, and mentors start-ups. He is a faculty member at leading business schools in India and abroad teaching courses in strategy, consulting and entrepreneurship. He has done significant work in the area of value innovation in the current tech-driven environment. He is an alumnus of XLRI, Jamshedpur.

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