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How Section 194R is Killing the Soul of Loyalty Programs in India

Loyalty programs have been a popular marketing tool for businesses to retain channel partners, customers, and foster brand loyalty. However, the introduction of Section 194R in the tax regulations has profoundly impacted the effectiveness and viability of loyalty programs.

In this blog, we will explore what Section 194R entails, its main associated rules, the problems that brands and channel partners face, and potential solutions to mitigate the challenges.

Understanding Section 194R:

Section 194R is a provision in the tax regulations that aim to deduct TDS on payment of rewards as mentioned in specific loyalty programs. It applies to brands that offer rewards and incentives as part of their loyalty programs. This provision intends to ensure tax compliance and prevent any potential misuse or evasion of tax liabilities.

Main Rules of Section 194R:

  • Tax Deduction at Source (TDS)
    Section 194R mandates that the person responsible for making the payment to the recipient under the loyalty program shall deduct a tax of 10% (if the pan card of the receiver is available) or 20% (if not) before making the payment. 
  • Threshold Limit
    If the total payment amount to a recipient doesn’t exceed Rs.20,000 during the financial year, TDS is 0%. 

Problems Faced by Brands and Channel Partners

  • Increased Administrative Burden
    Section 194R has imposed additional administrative tasks, such as maintaining records of payments, calculating and deducting tax, and filing TDS returns. It has increased the workload for businesses and channel partners.
  • Impact on Program Viability
    Due to this rule, channel partners have to include rewards in their income, making them more liable to pay extra income tax, making their effective earnings less than they used to be. It affects the motivation and engagement of channel partners, thereby undermining the effectiveness of loyalty programs.
  • Complex Compliance Requirements
    Complying with the lengthy and complex rules and regulations of Section 194R can be challenging for businesses, especially those operating in multiple states or regions. Understanding the nuances of tax deductions and thresholds can lead to confusion and errors.
    For example, let’s take a scenario where you want to know if you should deduct taxes under 194R. For that, you have to read Sections 192 and 195, and there are two more conditions where you will be exempted.  

Solutions to Overcome the Challenges

  • Turn Rewards into Experience
    Brands should get used to offering rewards in the form of experiences. They offer their channel partners exclusive excess to events, training sessions, and some form of Virtual Digital Assets. This way, channel partners will be rewarded for their hard work without raising their income tax slab.
  • Collaborate with Experts
    Brands should seek guidance from experts and professionals who specialize in loyalty program management who can help them navigate the complexities of Section 194R. Their expertise can ensure compliance while maximizing the benefits of loyalty programs.
    Almond Solutions, a leading platform for loyalty program management, offers a comprehensive suite of tools to streamline these tasks.
  • Embrace Technology and Automation
    Businesses can leverage technology solutions to automate tax deduction calculations, maintain accurate records, and simplify compliance processes. It will help them to streamline the process. It resolves the internal problems but not the external ones, where channel partners are becoming unengaged with brands or shifting towards local brands that don’t follow the tax code too seriously.
  • Enhance Program Value Proposition
    Brands and channel partners can counter the impact of tax deductions by enhancing the value proposition of their loyalty programs. It can include offering personalized rewards, exclusive privileges, and tailored experiences to incentivize customer participation.
  • Threshold Monitoring
    Implementing a system that monitors the threshold limit for TDS applicability helps businesses stay compliant. This way, businesses can offer rewards up to the threshold of Rs.20,000 and then, after that, can get rewards in the form of experience and exclusive excess. If a brand wants to adopt this solution, it should track the live rewards distribution.
  • Create a TDS Help desk
    Organizations can specify a team that resolves the channel partners’ issues as soon as informed. This team should be well informed about the programs and regulations like TDS and income tax. They can also use this team to promote loyalty programs and schemes too.
    Organizations can always outsource this task to their loyalty program management company. Almond Solutions has been doing this for its clients for many years.

Section 194R has undoubtedly presented significant challenges for brands and channel partners in maintaining effective loyalty programs. However, with proactive measures, collaboration with experts, and leveraging innovative platforms, businesses can navigate these challenges and revive the essence of loyalty programs. 

Lastly, suppose a brand doesn’t want to have too many headaches. In that case, it can outsource the loyalty management to a company leading in the segment and constantly taking bold moves to ensure growth in engagement and revenue, like Almond Solutions.

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The Pros and Cons of Airline Loyalty Programs: A Comprehensive Review

Airline loyalty programs have been around for decades, offering frequent flyers the opportunity to earn miles or points that can be redeemed for flights, hotel stays, and other rewards. While loyalty rewards programs can significantly benefit travelers, they also have their fair share of drawbacks.

In this blog, we will review the pros and cons of airline reward programs and explore how airlines are navigating these challenges.

Pros of Airline Loyalty Programs

Airlines have introduced frequent flyer programs as these can increase loyal customers. Some advantages that lead to this conclusion are as follows:

Free Flights and Upgrades

The most significant benefit of airline reward programs is free flights and upgrades. Frequent flyers can earn miles or points by booking flights, using credit cards, or staying at partner hotels. These miles can be redeemed for flights, upgrades, or other rewards, significantly saving travelers.

Take an example of Delta Air Lines’ SkyMiles rewards program, which allows travelers to earn miles by booking flights, using Delta’s credit cards, or staying at partner hotels. These miles can then be redeemed for flights, upgrades, or other rewards, providing significant value to frequent flyers.

Priority Treatment

Another benefit of airline reward programs is the priority treatment given to frequent flyers. Elite members of reward programs are often given priority boarding, access to priority security lines, and other perks that make travel more comfortable and convenient.

For example, United Airlines offers a MileagePlus rewards program, which offers Premier status to its most frequent flyers. These members are given priority boarding, access to priority security lines, and other perks that make travel more comfortable and convenient.

Partner Programs

Airline reward programs often offer partner programs, allowing members to earn miles or points through other means, such as credit card spending, hotel stays, or car rentals. It provides more opportunities for members to earn rewards and other incentives, even when they are not traveling.

American Airlines offers its AAdvantage rewards program. It is considered one of the best airline loyalty programs, which allows members to earn miles through credit card spending, hotel stays, and car rentals. It provides more opportunities for members to earn rewards and redeem them for flights or other rewards.

Cons of Airline Reward Programs

Even though loyalty programs are profitable, some checks and balances should be considered. Airline companies must consider these checks while creating and running loyalty programs.

Complex Rules and Restrictions

In airline loyalty programs, redemption options can be limited, and blackout dates and other restrictions often make it challenging to redeem rewards.

For example, some airlines may limit the number of reward seats available, making it difficult to redeem miles for a flight. Similarly, some airlines may have blackout dates during peak travel times, making redeeming rewards during these periods challenging.

Expiration Dates

Another drawback of airline reward programs is the expiration dates that come with the rewards. Miles or points earned through reward programs may have expiration dates, making it challenging to accumulate enough rewards to redeem for a significant benefit

For example, Delta Air Lines’ SkyMiles rewards program requires members to earn or redeem miles every 12 months to keep their account active. Failure to do so will result in the loss of any accumulated miles

Devaluation of Points

Airline reward programs can also suffer from the devaluation of points, which occurs when airlines increase the miles or points required to redeem them. Frequent flyers can find it challenging to accumulate enough rewards to redeem for a significant benefit.

For example, in 2014, Delta Air Lines increased the miles required to redeem some of its rewards, making it more challenging for members to redeem them

Navigating the Pros and Cons

While airline reward programs have pros and cons, airlines constantly work to navigate these challenges. For example, some airlines are introducing more flexible redemption options, making it easier for members to redeem their rewards. Others are introducing new partnerships to provide more opportunities for members to earn rewards.

For example, Delta Air Lines introduced its SkyMiles program, offering members benefits such as priority boarding, free checked bags, and discounted Delta Sky Club memberships. This program allows members to earn rewards without accumulating miles or points, providing more flexibility

Another example is Southwest Airlines’ Rapid Rewards program, which allows members to redeem rewards for any available flight with no blackout dates. It provides members with more flexibility in redeeming their rewards and makes it easier to find available flights to redeem their rewards.

In addition to these changes, airlines are working to improve their reward programs by providing more value to their members. For example, some airlines are introducing more premium rewards, such as access to exclusive airport lounges, private jet charters, or experiences such as culinary tours or concert tickets

Conclusion

Airline reward programs offer significant benefits for frequent flyers, such as free flights, priority treatment, and partner programs. However, they also come with drawbacks. That’s why airlines constantly work to improve their loyalty programs and provide more value to their members

As travelers navigate the post-COVID world, airline loyalty programs may become even more important as airlines look to attract customers back to the skies. By understanding the pros and cons of these programs and how airlines navigate these challenges, travelers can make informed decisions about which reward programs to participate in and how to maximize their rewards.

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5 Surprising Benefits of Retailer Loyalty Programs You Didn’t Know

In today’s retail world, businesses constantly strive to increase their customer base and retain existing customers. One way to do this is through loyalty programs. These programs offer customers rewards for their loyalty and encourage repeat business

Retailers are businessmen who always consider what is best for them and their customers. So, they have different requirements. These requirements differentiate them significantly. These differentiations are based on many factors. So, there are many things about retailer loyalty that brands may need to learn. This blog will discuss five things you didn’t know about the retailer loyalty program and its members.  

Likely to spend more money

Retailers in loyalty rewards programs are more likely to spend more money than non-members. According to a study by the Nielsen Company, loyalty program members spend an average of 13% more per visit than non-members. It is because loyal members feel connected to the brand and are more likely to make repeat purchases

In addition, loyalty programs often offer rewards for spending more money, incentivizing members to spend more.  

| “Six-in-ten retailers have used or plan to use buy now, pay later services, compared to 13% not enrolled in loyalty programs.” |  

To take advantage of this, brands should consider offering rewards encouraging retailers to spend more money. For example, brands can offer bonus points or discounts to reach a certain spending threshold. It increases revenue and strengthens the relationship between the retailers and the brand.  

Likely to Recommend Your Business  

Loyal retailers are more likely to promote your business to others. According to a study by Bond Brand Loyalty, 81% of retailers are likely to recommend the brand they are loyal to. It is because loyalty programs positively perceive the brand and are more likely to share that with others.  

To capitalize on it, brands should encourage retailers and other channel partners to refer to the loyalty program to friends and family. It can be done by offering referral rewards, such as bonus points or discounts. Brands can also use social media to encourage referrals by offering exclusive promotions to retailers who share their loyalty program with their followers.  

Engage with Your Brand

According to a study by Bond Brand Loyalty, loyal channel partners are 70% more likely to engage with a brand on social media than non-members. It is because they feel connected to the brand and are more interested in what the brand has to say.  

To take proper advantage, brands should engage with their loyal members both online and offline. It can be done by offering exclusive promotions and discounts to members based on their engagement, sales performance, and experience on social media. Brands can use events, and in-store experiences as well.  

Negligence if Minor Issues Occur   

Loyal channel partners are more forgiving regarding mistakes made by the brand. According to a study by Accenture, 77% of loyalty program members are willing to forgive a mistake made by the brand if they have a good loyalty program. It happens due to the positive perception of the brand.  

To take advantage of this, retailers should address any mistakes made by their loyalty members. It can be done by offering apologies and compensation, such as bonus points or discounts. Retailers should also communicate with their loyalty members and keep them informed about any issues that may arise.

Preference for Personalized Experiences  

Loyalty members want personalized experiences when interacting with your brand. According to a study by Accenture, 56% of loyalty program members expect personalized experiences when interacting with a brand. It is because loyal members want to feel valued and appreciated by the brand.  

| “ When cardholders receive personalized offers, issuers see up to 18% spend increase from retailer who redeem, and a 75% reduction in churn.” By Mastercard Study |  

Brands must offer personalized experiences to their loyalty program members. It can be achieved by sending personalized emails and promotions based on the member’s purchase history and preferences. Brands can also use data and analytics to offer personalized recommendations and product suggestions based on the member’s past behavior. By providing personalized experiences, brands can increase satisfaction and engagement of retailers.  

Lastly, retail loyalty programs are a powerful tool for businesses to increase customer retention and drive revenue. Loyal members are more likely to spend more money, recommend your business to others, engage with your brand, forgive mistakes, and want personalized experiences. By understanding these critical insights, brands can develop loyalty programs that cater to their channel partners’ and customers’ needs and preferences. By doing so, they can build stronger relationships with their customers, increase customer satisfaction, and drive long-term growth. 

 

 

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Importance of Data and Insights to Ensure a Healthy Loyalty Program

In today’s business world, customer loyalty is essential for the long-term success of any company, and so is the channel partners’ loyalty. A loyalty program is an excellent way to cultivate partners’ loyalty, but how do you know if your loyalty program is working well? The answer lies in data and insights.

| “According to the Incentive Research Foundation (IRF), businesses that invest in channel partner reward programs see a 32% increase in revenues and a 30% increase in market share.” |  

As a brand, you have likely invested time and resources into creating a loyalty program tailored to your members. You have carefully crafted rewards that appeal to them, made special personalized offers, and sent out rewards & incentives at the right time to keep them engaged.  

But simply having a loyalty program in place isn’t enough. You need to be able to measure its success and make adjustments where necessary to ensure that it continues to meet the needs and expectations of your channel partners.  

This is where data and insights come in. By tracking and analyzing channel partners’ behavior, sales pattern, and engagement, you can gain valuable insights into what is working well and what isn’t.

This blog will explore the importance of data and insights to ensure a healthy loyalty program.

How Data and Insights Leads to a Successful Loyalty Program  

By leveraging data and insights, a loyalty program for channel partners can be a powerful tool for driving business growth and increasing revenue. Additional benefits include:  

  • Increased Engagement and Participation 

    A loyalty program backed by data and insights can help increase engagement and participation among channel partners. By analyzing past sales data and customer behavior, businesses can identify which products or services are most popular among their customers and incentivize b2b channel partners to focus on these areas.   

  • Customized Rewards

    By analyzing channel partners’ data and behavior, businesses can identify the most appealing rewards and tailor their rewards program accordingly. For example, if channel partners are more likely to respond to rewards for selling specific products, the loyalty program can offer incentives that align with those preferences.  

  • Improved Communication 

    A loyalty program backed by data and insights can also improve communication between businesses and their channel partners. By analyzing customer behavior and preferences data, companies can provide channel partners with the insights and tools they need to understand their customers better and target them more effectively.   

  • Increased Sales and Revenue 

    By incentivizing channel partners to focus on the most popular areas among customers and offering customized rewards, businesses can drive more sales and revenue. In addition, by providing channel partners with the insights and tools they need to understand their customers better, businesses can help them target customers more effectively and drive even more sales and revenue.  

The more your channel partners engage with your loyalty program, the more you can drive your overall business growth.  

It is clear that a well-designed and data-driven loyalty program can significantly boost your business growth by engaging your channel partners. Data and insights are essential for steering your loyalty program in the right direction. By leveraging the power of data, you can make informed decisions that will help you optimize your program and drive greater customer engagement and loyalty.  

At Almond, we understand the value of quality data and the insights it can provide. Our customized loyalty platform, powered by Channelverse, is designed to cater to your business and channel partners’ unique needs. With our cutting-edge technology and online engagement tactics, we ensure that your loyalty program is engaging and effective. So, if you want to take your business growth to the next level, partner with Almond and let us help you build a loyalty program that drives results.  

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Break Free from Grandparent Tactics to Revitalize Your Business

As the business landscape continues to evolve, so do businesses’ tactics to reach their target customers. However, some marketers still rely on outdated methods. These are also known as “grandparent’s tactics,” to persuade their partners in the market.

But what are grandparent tactics, and why should businesses avoid using them?

Grandparent tactics refer to outdated and ineffective strategies that were once used by older generations to influence their channel partners. In the B2B market, these tactics can include:

  • Flattery:
    It is the act of giving insincere praise to gain favor, and it can lead to increased likability and cooperation in business relationships for the short term.
  • Exaggeration:
    The act of overemphasizing or overstating the truth. It leads to skepticism and the downfall of your business’s credibility.
  • Fearmongering:
    It is the display of power to make an environment of fear and anxiety, to influence the behavior and decision of others in your favor.
  • Use of Personal Contacts:
    The use of personal contacts or networks may lead to new opportunities, referrals, and collaborations. But it is limited as you depend on others.

While these tactics may have worked in the past, they are no longer effective and can harm a business’s reputation and relationships with its clients.

In this blog, we will explore why using these tactics in B2B channel marketing harms your business and how to overcome it by implementing modern strategies, such as loyalty rewards programs and channel engagement.

Why avoid using grandparents’ tactics?

Using these tactics in the B2B market can be harmful to your business in several ways. Some of them are as follows:

  • Damage Reputation
    Using these tactics can make you appear desperate, unprofessional, and manipulative. It can harm your reputation and create a trust issue within your clients.
  • Damage Relationships with Clients
    If clients feel that they are being manipulated or pressured into making a decision, they may become resentful and lose trust in your business. It harms your relationship with them, making it challenging to develop long-term partnerships.
  • Hinder Sales Efforts
    These tactics can make it more difficult to close deals, as clients may be wary of doing business with someone using outdated and manipulative tactics.

What are the Options?

Businesses must implement modern strategies that build genuine and meaningful relationships with their clients. Here are some strategies that companies should use instead of grandparents’ tactics:

  • Implement Loyalty Rewards Programs
    Loyalty and rewards programs can help businesses build strong relationships with their channel partners by giving them incentives and rewards for their sales and engagement. It allows companies to establish trust with their channel partners and create a sense of loyalty that goes beyond a single transaction.
  • Use channel marketing Effectively
    Channel marketing involves working with partners, such as distributors or retailers, to reach new customers and markets. It expands businesses’ reach and establishes a strong presence in the market.
  • Focus on Value and Personalized Experience
    Instead of using traditional tactics to persuade clients, businesses should focus on providing value by offering insights, resources, and solutions that address their client’s needs and pain points. It builds trust, and businesses establish themselves as trusted advisors and thought leaders.
  • Build genuine relationships
    Businesses must build genuine connections based on trust and mutual respect to build successful relationships with their partners. It means being transparent, honest, and authentic in all their interactions with clients.
  • Utilizing technology
    Technology can play a crucial role in helping businesses overcome grandparents’ tactics and build successful relationships with their clients. Tools such as customer relationship management (CRM) software can help businesses manage their relationships with clients more effectively and provide them with the insights they need to make informed decisions.

In The End…

Using old and basic tactics in the B2B market can harm your business’s reputation, relationships with clients, and sales efforts. Instead, businesses should focus on implementing modern strategies, such as loyalty programs, channel marketing, and providing value to build successful relationships with their partners.

Moreover, businesses should utilize technology to their advantage, whether it be through CRM software, marketing automation, or other tools that can help streamline their sales and marketing efforts. It allows for more efficient operations and provides businesses with the data and insights they need to make informed decisions and optimize their strategies.

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