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Conclusions from the South African loyalty summit
The
Wise Marketer - September 4, 2006, (Live) |
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| South Africa's loyalty
marketing challenges are not unique, but as an emerging
market, the environment is. While many South African
marketers tend to think that South Africa is the
world's only emerging market, Achievement Awards'
second annual Loyalty Marketing Summit put this
right. |
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| Building brand loyalty in emerging
markets offers challenges and opportunities that
first-world loyalty models often don't address.
For emerging market loyalty practitioners, benchmarking
against best practices in the U.K. and the U.S.
is an interesting exercise, but far removed from
local market realities. |
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| The conference, held in Johannesburg,
South Africa, sold out completely; in fact the organisers
had to move it to a larger venue in the same complex
to accommodate last minute registrations. The theme
was to redefine loyalty in emerging markets. Speakers
were drawn from China, India, Malaysia, Brazil and
South Africa. |
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| According to Deon Olivier, Achievement
Awards' Director of Loyalty: "The loyalty space
in South Africa is more dynamic than ever before.
Credit card loyalty offerings are growing and the
healthcare and life insurance sectors are developing
as well. South Africa's loyalty marketing challenges
are not unique, but as an emerging market, the environment
is. So, while international best practice loyalty
solutions may apply some of the time, it made a
lot of sense to pull together a group of loyalty
leaders from other emerging markets and hear about
their experiences. Sitting here at the bottom end
of Africa, we sometimes tend to get too inwardly
focused and forget that we're not the only emerging
market in the world." |
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| The view from China |
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| The keynote speaker, Shanghai-based
Henry Winter, CEO of SmartClub, told delegates that
in developing countries clients need loyalty, but
often not as badly as they need more fundamental
programmes, and that many remain focused on simply
increasing sales and acquiring new customers rather
than up-selling or building retention. It's a mindset
that has to be worked around. With this in view,
he changed the fundamental thrust of SmartClub from
a loyalty programme that focused on building loyalty
among its clients' existing customers to a programme
that focused on building a strong, dedicated consumer
base which could then be used by clients to build
sales. SmartClub's sales cycle changed from a minimum
of half a year of convincing clients that they need
a loyalty programme, to half a hour: "We have
lots of members. If we get them to buy from you,
then you pay us a commission (after they have bought)". |
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| Part of the commission that the
clients pay to SmartClub goes to reward the consumer
and the rest is shared by SmartClub and its partner
websites. He says that he has discovered, the long,
painful and expensive way, that retail partners
do NOT want a loyalty programme to work for them
- they want it to work for the members. They want
the programme operator to build a large, passionate
member base that will go anywhere SmartClub tells
them; then the client is happy to pay a commission
- after the sale. SmartClub now focuses on delivering
large numbers of educated, internet-using 17-35
year old consumers with good income to any retailer
who will pay a ten percent commission on the sales
they generate. |
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| The internet is central to the programme
- ways of encouraging members to interact with each
other have been developed, and the data generated
(from both a detailed membership application and
actual purchasing behaviour) is put to good use.
A very valuable point that Winter made was that
if something isn't working as you want it to, and
you can't fix it, don't be scared to change it.
He also made the point that any reward only has
value for the consumer if it's redeemed - until
then, it is valueless. So it might pay operators
to offer two paths to redemption: the normal way
offering best value for points, and an express,
easier way funded by smaller rewards for the same
number of points; the customer could then choose. |
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| The view from Malaysia |
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| Nyang Koon Seng, CEO of Customer
Loyalty Solutions (CLS) in Malaysia, explained how
to get the first step of developing a loyalty programme
right. A critical point that he made is that while
it's quite cheap to collect information, it can
be expensive to change behaviour. His comprehensive
presentation covered critical success factors, objectives,
strategies (coalition vs private label; in-house
vs outsourcing), processes, technology, communication
and benchmarking. |
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| An important 'take away' concept
was the advice to segment customers into tiers based
on their transaction patterns, then to offer them
'soft' benefits (recognition, personalisation, and
privileged access) as well as the 'hard' benefits
that all members get. This is a point of differentiation
from competitors and a source of delight for the
customers. Another point was the need for careful
and ongoing training on all levels and the need
for mystery shoppers who can test customer-facing
employees' awareness of and enthusiasm for the loyalty
programme. |
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| The view from India |
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| Praphul Misra, CEO of India-based
NetCarrots, dealt with six common myths of loyalty
programmes: loyalty is the job of the marketing
department; points are a prerequisite of a loyalty
programme; a loyalty programme should have use just
one type of reward; a loyalty programme will bring
new customers; that a co-branded credit card is
a loyalty programme; and that CFOs hate loyalty
programmes. He showed how customers interact in
many ways with a company - not just through marketing
efforts - and all of these ways present opportunities
to give them value from a loyalty programme. |
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| And while points are a good reward
mechanism, there are many other ways that offer
special advantages. Economical benefits provide
granularity and a means of measuring the relationship,
ego benefits add brand veneer and a feel-good feeling,
and emotional benefits can be given to selected
members only. Misra pointed out that there is often
a conflict of interests with co-branded credit cards:
while the bank wants only creditworthy and card-wanting
members, the retailer wants all desirable customers.
While the bank wants more card usage, regardless
of brand, the retailer wants usage of its own brand.
While the bank wants redemption only up to a certain
limit (he quotes an example of a credit card company
closing programmes in which redemption exceeds 32%),
the retailer aims at maximum redemption. And while
the bank regards the card holder as primarily its
customer, the retailer wants special treatment of
its customer. |
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| The final myth, that CFOs hate loyalty
programmes, seems to boil down to deficient presentation
of the case. The common objections put forward by
CFOs, their translation into what they really mean,
and the correct rebuttals were one of the high points
of the day for your editor. They are so interesting
and useful that they deserve a whole article on
their own. Watch this space! |
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| Views from the South African market
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|
| Jeremy Sampson, CEO of brand consultancy
Interbrand Sampson, told delegates what brands are,
why they are important, what defines the brand,
and where brand credibility is created. He discussed
how a brand can deliver consistent customer experience
and satisfaction, and thus build loyalty, so business
strategy should be built on brand strategy (not
the other way around, as so often happens). The
brand is a valuable asset: more than a third of
global stock market value is attributable to brands. |
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| Refiloe Mataboge, executive director
of Research Surveys SA, presented the findings of
research carried out the new South African black
Middle Class, known as 'Black Diamonds'. Since the
political changes in South Africa in 1994, there
has been massive growth in black ownership, achievement
and status. Education is a key driver: there has
been a 334% increase in the number of black graduates
between 1990 and 2004. Nationwide, Black Diamonds
make up 2m of a total population of 28.8m over 18s.
The group's buying power is ZAR130bn of a total
of ZAR600bn for all consumers. There are fewer than
100,000 black yuppies (called 'buppies') who drive
flashy cars, wear designer labels and eat at exclusive
restaurants. Contrary to common belief, there is
a high level of job stability among Black Diamonds,
with almost half being in the same job for the past
five years. |
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| The view from Latin America |
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| Roberto Chade, CEO of Dotz, which
operates the largest coalition loyalty programme
in Latin America (70 sponsors and 1.5m members),
spoke about the dynamics of coalition loyalty programmes,
and why they work so well in emerging markets. They
overcome the lack of critical mass that exists in
most individual sectors and they allow consumers
to spread their spend in order to obtain a significant
reward in a reasonable time while keeping reward
costs in line with the slim margins often made in
these markets. They can also be made simple and,
because they apply to a wide range of purchases,
present customers with one set of rules for most
of their shopping. Chade's rules for operating a
successful coalition programme include: pick the
right partners, manage expectations, constantly
evolve the programme (new opportunities for partners
and consumers), respect data and use it carefully,
demonstrate measurable results to partners, share
your passion and belief in the programme, and focus
on the long term and don't stint on investment. |
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| Summit highlights |
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| Some of the key take-away thoughts
cited by delegates after the conference included: |
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- "Start with knowing your customers. Today
has made it clear to me that we don't."
- "This has changed my perception of coalition
programmes."
- "Money won't buy loyalty."
- "Loyalty is not just about points but
how rewards, appreciation, partnerships and
affinity play such an important role in the
development and implementation of a rewards
programme."
- "This has opened my eyes to other loyalty
programme ideas, and what I should be thinking
about going forward."
- "The transformation of data into meaningful
information - used effectively - is key to success."
- "A loyalty scheme must serve the customer,
not the retailer."
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| For additional information: |
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· Visit Achievement Awards
at http://www.awards.co.za
· Visit SmartClub, China at http://www.smartclub.com.cn
· Visit CLS, Malaysia at http://www.cls.com.my
· Visit NetCarrots, India at http://www.netcarrots.com
· Visit Dotz, Brazil at http://www.dotz.com
· Visit Interbrand, South Africa at http://www.interbrand.com
· Visit Research Surveys SA at
http://www.researchsurveys.co.za |
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| Loyalty
Programs :: Relationship
Programs :: Technology |
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