5.1 The industry
The pandemic has rocket launched the digital evolution and adaption in many industries at record speeds. Prior to the pandemic, the digital evolution was already in growth, but the pandemic has further accelerated this speed.
The digital loyalty program industry is in rapid growth and is expected to grow at a CAGR of 20,92 pct. in the forecast period of 2020 to 2027 (Data Bridge, 2020). Sources disagree on the total market value of the digital loyalty program industry, but it is estimated at a
$181b market value as of 2019 (Beroe, 2019).
But what is loyalty? There are many ways of defining loyalty, throughout philosophy, psychology, business, and personal definitions. For this research, I will look at business
27 of 87 loyalty as the relationship between the customer and the company, and the desire to do business together. Loyalty will be based around three desires, the rational, the emotional, and the social / community based desires. The rational desires are the classic rewards based loyalty. The emotional desire, is best known in Apple products, where loyal
followers will go above and beyond to purchase and promote Apple products. The social or community desire is how the relationship creates a sense of belonging and meaning.
Looking towards Denmark, the country has not been adapting to the new technology and loyalty trends as fast as compared to Sweden and Norway. In Sweden 85 pct. and in Norway 56 pct. of retail companies has a loyalty program in place, whereas that number is only 32 pct. in Denmark, which indicates great future potential in the market (Omnichannel Index, 2020).
The app industry is booming, with a 6,9 pct. increase from 2019 to a total of 218 billion mobile app downloads worldwide in 2020 (Statista, 2020).
The mobile gaming market is also in great growth, which is also an indication for the growth of gamification technology, which plays an important role within the digital loyalty industry. By gamification I will use the definition by Oxford Language (Oxford Languages, 2021):
‘’The application of typical elements of game playing (e.g. point scoring, competition with others, rules of play) to other areas of activity, typically as an online marketing technique to
encourage engagement with a product or service.’’
The revenue generated through mobile gaming in Denmark increased by 19,23 pct. from 2019 to 2020 to a total of €93m a year. The revenue is expected to show an annual growth rate (CAGR 2021-2025) of 9,15 pct., resulting in a projected market volume of €147m by 2025 (Statista, 2021).
The new growth is also defined by new customer behaviour, as the lockdowns has influenced society as a whole. A McKinsey study from 2021 of US customers show that users are browsing faster and jumping between different websites, apps, brands, stores,
28 of 87 and are more willing to try out new products, now more than ever before (McKinsey,
2021).The same study reveals that 75 pct. of consumers have tried different digital purchasing experiences and brands during the pandemic. 60 pct. of these consumers intent to continue with the new purchasing behaviours and to integrate the new brands into their lives. As explained above, MyLoyal is primarily a loyalty app developer but the
company is also moving into offering web e-commerce plugins.
The development in the mobile app industry, e-commerce, gamification and digital loyalty programs reveal an exciting and blooming industry. These factors leads us to the definition of The Digital Loyalty Industry which will be the departure for the rest of the thesis:
‘’The Digital Loyalty Industry includes loyalty app platforms and web e-commerce loyalty technologies’’
5.2 Competitor Identification
The competitors can be divided into three overall categories:
• IT Consultancy
• One Brand
• White Label
IT Consultancy strive on high customizability and high prices. The consultancy houses are often the most premium providers of digital solutions, and the companies include names such as Netcompany and Nodes.
One Brand providers in the industry are providers of technology in the providers own brand name. MyLoyal was as explained in the previous chapter categorised as a One Brand provider of digital loyalty, as its clients would subscribe to be a part of the MyLoyal app.
Currently there is very low competition within this category in Denmark, but the players include Stampz and Stamp Me.
White Label providers of digital loyalty are the closest to direct competitors to MyLoyal.
The White Label providers in Denmark are Lobyco the spin-off company from the successful inhouse developer team from COOP, and Loyalty Key who provides white
29 of 87 labelled payment integrated technology. The development of the industry in other parts of Europe and especially the UK is significantly more developed than in Denmark. There are four significant White Label providers in Europe, namely Talon.One, Loyax, Bobile, and Loyalty Prime. These players are currently not operating within EU but they are potential future competitors. An overview of the competitors in the industry is illustrated Figure 8.
Figure 8 Competitor Matrix
Source: own creation
Besides the different categorizes of companies within the Digital Loyalty Industry, there are many different factors that define the competitive environment. The overall competitive environment will be elaborated in the Porters Five Forces analysis, but there are two primary factors which will be defined here, namely price and customizability which is illustrated Figure 9.
30 of 87 Figure 9
Competitor Position Matrix
Source: own creation
MyLoyal is currently positioned in a niche on the Danish market, with medium pricing and medium customizability. The closest competitors are the White Label companies Loyalty Key and Lobyco followed by the IT Consultancy companies Nodes and Netcompany, illustrated in the above group 1.
Though the international companies, illustrated in the above group 2, are also relatively closely positioned in technology compared to MyLoyal, they do not yet operate within the Danish market, and will therefore not be the focus from this point and forward in the thesis.
It is noted that there are a final type of competitors, who has not been listed above. These are namely the secondary competitors, Forbrugsforeningen and the PlusKort.
Forbrugsforeningen is a big Danish loyalty club, which provides simple loyalty offerings to their customers. The PlusKort is a loyalty offering, especially targeted to specific Danish union members. These are not mentioned above and will not be included in the following
31 of 87 research, as the purpose of the solutions are to only generate traction towards the end-users, but the customers don’t acquire any insights and data on their own customers (end-users). This is strategically a very different way of working with loyalty.