New Loyalty Programme sweeps through New Zealand

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By: Wise Marketer Staff |

Posted on November 5, 2001

New Loyalty Programme sweeps through New Zealand

Katchingo! And the cash register drawer opens again! New Zealand's latest loyalty programme has set it's sights on the rest of the world too.

Kachingo! was launched in New Zealand less than a month ago, and is already taking the country by storm. According to statistics from online competitive intelligence service, Hitwise, Kachingo!'s website was the hottest NZ site during October, rising from almost nowhere to, within three weeks, become the 13th most popular NZ website of the week - a jump of more than 457 places in Hitwise's rankings. What's more, Hitwise's Click Stream data (which shows traffic flow between sites) has shown that, not only is Kachingo! drawing customers to its own site, but also to the sites of its retail partners. In the last week of October, many visitors to the site left and went straight to partner KFC's and also to BP NZ's sites, putting both of them among the top 20 downstream sites for Kachingo!.

What is Kachingo!?

How does it work? How has it caught the public's attention so effectively? Kachingo! has in fact been piloted since December 2000 in partnership with NZ drinks chain Super Liquor. Last month, it was launched with three other major partners: BP, KFC (Restaurant Brands), and supermarket chain Woolworths NZ, which includes 100 Woolworths, Big Fresh and Price Chopper supermarkets and Woolworths at Gull minimarkets nationwide.

Like a lottery Basically, it's a loyalty programme in which the reward for the desired behaviour is free entry into a lottery. Individual partners have set purchase thresholds that customers have to meet. For example, the qualifying amount for one line of Kachingo! at KFC is NZ$10, at Super Liquor and BP it's NZ$25, and at Woolworths it's NZ$30 (but NZ$10 at the Woolworths located in Gull). In addition, extra lines can be given as promotional incentives (say, an extra line for buying a specific item).

Each line of Kachingo! consists of six numbers plus an extra "power" number. These are printed on special tickets separate to the cash register receipts. There are three types of draw: daily, for a single prize of NZ$1,000 (the winning line being selected from those issued that day); weekly, for a single prize of NZ$10,000 (also from lines issued) and monthly. The monthly draw awards thousands of NZ$20 prizes, hundreds of NZ$100 prizes, and a single prize (in a random draw on live TV) of at least NZ$250,000, but up to NZ$1 million. Winners can find out whether they have won either by visiting a partner store or the Katchingo! website, by calling, by Teletext or from newspapers.

Big investment Kachingo! is the brainchild of New Zealand company Global Online Promotions Ltd (GO). GO has invested four years and about NZ$10 million developing the unique software and designing the server for it. GO has protected its intellectual property with patents internationally and has offices in Auckland, Sydney and San Francisco.

GO was formed to bring the Kachingo! invention of Christchurch-born entrepreneur Chris Berryman to market. The business model has been developed by a group of entrepreneurial New Zealand investors. In 1999 Berryman met GO chief executive officer Chris Aiken and in January 2000, Eric Watson and his company Cullen Investments and Strathmore Group became involved, providing the funding to get Kachingo! to market. Further investment has followed from Wellington-based Morrison & Co. The investors are committed to taking Kachingo! world-wide.

The rest of the world too And that might not be a bad idea. The rewards or customer loyalty industry in the US is worth approximately US$175 billion a year. A competitor business in the United States has a market capitalisation of US$2.5 billion. And in terms of loyalty programmes, the Japanese market is potentially worth about the same amount as the US. Kachingo! has already opened offices in San Francisco and Sydney and has plans for expansion in Asia and the UK.

This is certainly not a fly-by-night, impulsive operation. It has involved what is believed to be one of the biggest IT point of sale roll outs ever in New Zealand. More than 1,700 computer terminals and printers have been installed at some 500 different locations, countrywide. According to Kachingo! project manager, Gary Cooper, "We had to install and test one of the biggest private computer networks since travel agents went online."

Technology driven Katchingo! is a technology driven product. In-store PCs scan each shopper's transaction, looking for specific products, specified levels of spending and a wide range of consumer behaviour. The rewards are allocated by the central Kachingo! computer.

"There are a lot of transactions - we're predicting three million every week. We're also reading the entire transaction - every loaf of bread, every bottle of Coke, every litre of petrol - so you can see there's a huge amount of data we're handling," says Cooper. While Woolworths' Big Fresh, Price Chopper and Woolworths supermarkets, BP and Super Liquor are connected over the Telecom network, Walker Wireless has been used to access the KFC stores.

Different According to Cooper, Kachingo! provides some major points of difference from its competitors. "We've set ourselves up for two-way online communication so our objective is to have a real-time network - we're certainly offer real-time rewards. We've done the research and it tells us that many Kiwi shoppers prefer cash rewards and they want the rewards now - they'd rather not have another card, statement and membership. It's also a great way for suppliers to sample their products."

Kachingo! has been very active with its patent protection, securing core protection around both the consumer offers and how they are delivered.  According to Cooper, it's the "knowledge wave" in practice. He says the business has employed more than 40 "knowledge" workers in the past 18 months.

Exponential growth Most of the software development has been undertaken by Kachingo! associate company GOTech in Wellington. Cooper says that rigorous testing and nine months experience with Super Liquor has seen Kachingo!'s Linux platform host computer perform very well. "With the addition of 400 new outlets we have had to test quite vigorously," he says. "For example, the data we've been carrying from 10 BP test sites is about the same volume we have been getting from 103 Super Liquor outlets. So the jump in scale is significant. The processing capability of the host computer has been a key issue and we've had to plan for growth because we need to know that, as sales increase through our network, we can handle it."

"The exponential growth illustrated by going from Super Liquor to BP is indicative also of what we'll get when other New Zealand retailers come aboard or when we go to the other markets such as the US and Australia. We've got to have a solution that we can just bolt on; you don't want to pay for capacity until you need it."

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