Conclusions from the South African loyalty summit
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. 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.
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."
Speaker Quotes From Global Loyalty Professionals
The view from China 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)".
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.
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.
The view from Malaysia 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.
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.
The view from India 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.
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.
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!
Views from the South African market 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.
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.
The view from Latin America 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.
Summit highlights Some of the key take-away thoughts cited by delegates after the conference included:
- "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."