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The Incredible Lightness Of Loyalty

Today’s consumers do not pledge lifelong loyalty to a brand – they want suppliers to compete for their business. Tamara Oberholster unpacks loyalty marketing.
Image: ©iStock Image: ©iStock

According to Peter G Wray, founder and chairman of, a UK-based independent loyalty-marketing consultancy, there are three core reasons why loyalty marketing matters.

First, in the era of globalisation, brands are no longer competing within regional or national boundaries. “Consumers’ buying habits are now international, and this is particularly true of millennials,” says Wray. “The old habits of buying from a particular department store or grocery group, while they are not broken, are subject to a lot more competitive pressure.”

For example, a person in Johannesburg wanting a new smartphone may not just canvas local technology stores, but search for the best deal online, which might be from a national or even international supplier.

Furthermore, notes Wray, the economic shocks of the last decade and increased financial pressure consumers face mean people are seeking value for their money, and purchase decisions are far more considered.

Context also counts: “It’s not sufficient to look at how a particular programme works –  for example, Loyalty Partner’s PAYBACK programme in Germany – and decide that’s how you’re going to run a programme,” he cautions. “You have to manage your programme in the context of your marketplace.”

In South Africa, loyalty marketers need to contend with challenges such as income inequality, inflation and connectivity issues. Wray notes that these factors, along with consumer behaviours and mind-sets, need to be taken into account when developing programmes. He adds that historically South Africa’s retailers have had great success with membership clubs, and this strategy has influenced what many “older” consumers believe loyalty marketing is. The challenge is to develop programmes that engage millennials too, which means embracing digital platforms alongside traditional card-based options.

“Omni-channel marketing is easy to talk about, but not easy to do,” Wray says. It’s tricky to accommodate shoppers across all platforms – in store, online, mobile, and so on. Furthermore, consumers are no longer grateful to companies for merely supplying them with products – they are looking to brands to deliver increased value. This is where loyalty marketing comes in.

Wray explains that this term doesn’t necessarily mean developing loyalty or rewards programmes, but rather integrating principles of loyalty marketing into the business as a whole. If it’s seen as a box to tick, an extra expense or something that the marketing department needs to handle, it’s unlikely to enjoy long-term success. And, he says, kicking off a loyalty programme and then ditching it because it hasn’t worked is not only expensive, but also damaging to customer relationships and brand credibility.

Designing a win-win programme

André Larisma, chief executive at Sanlam Reality, says that over the past 20 years rewards programmes have taken centre stage in financial services, and are now a serious part of the industry’s competitive dynamics.

“It started with industry players seeking to differentiate themselves and offer value to clients outside of the more mature core-product space, but its growth has been widely supported by customer demand,” he says. “Loyalty programmes can set up a win-win relationship between clients and their product provider. By engaging each other through a rewards programme, product providers and clients can create more value than they would otherwise be able to, and much of this is given back to the client through discounts, better service, and so on.”

Fayelizabeth Foster, head of loyalty and rewards at Standard Bank, says the bank’s rewards programme UCount, launched in June 2013,  serves multiple purposes. It’s primarily a platform to thank Standard Bank customers, reward them, engage with them, and encourage them to use the bank’s products and services. It’s also a means for the bank to collect valuable customer-data insights, which allows for better tailoring of products, customer-relevant offerings, and improved customer relationships.

“We really want to entrench our customers with us, so they don’t just use us occasionally, but also take up other products and engage with us regularly,” says Foster. “We want to connect with our customers as this provides the basis of a  long-term relationship.”

Since launching, UCount has already paid out more than R1.3-billion in rewards to its 680 000 members.

The programme is points-based, with five tiers. Customers are promoted to higher tiers (with greater rewards potential) the more they interact with the bank. Foster believes part of the programme’s success is the fact that customers are rewarded for day-to-day activities such as doing their grocery shopping and filling up with fuel, rather than for occasional events, like going on an overseas trip.

“Standard Bank did a lot of research upfront to establish what customers wanted to be rewarded for, and this was what emerged,” says Foster. “Everybody has to eat and many people need fuel, so we linked up with supermarket chains and a fuel retailer.”

UCount members can get up to 20% of their spend back in rewards points at nine different grocery retailers. With the increase in food and fuel prices, Foster says, these rewards really address customers’ pain points. UCount also offers opportunities to earn points at other major retailers, such as Makro, Clicks and KFC.

Foster says Standard Bank was the last to enter the rewards market of South Africa’s main banks, and this allowed the bank to learn from other programmes before launching UCount.  She believes that increasing personalisation through the effective use of data is key to differentiating UCount.

Customer data – digging deeper

Luke Turnbull, head of customer and lead analytics at Cape Town-based data-analytics company Principa, believes that harnessing customer data has become central to the success of loyalty and rewards programmes.

“Customer data tells us who our customers are, how they behave, what motivates them, their needs and attitudes,” he says. “This allows businesses to segment their customer base by behaviour or lifestyle, and offer a personalised experience, appealing to their customers’ needs, motivators and attitudes. It also allows businesses to start using data to anticipate customers’ needs and therefore tailor offers that deepen the customer relationship.”

Turnbull notes that a data-driven approach to rewards and loyalty programmes benefits both customers and businesses. “Customers benefit from a personalised experience,” he says. “For example, by personalising the product offering, customers are immediately presented with the most suitable offer, saving them from having to spend time researching all the product options themselves.

“By knowing the customer, a brand is able to narrow down a wide offering to a select few it knows will be relevant and appealing to the customer. In the short term, this saves time for the customer and makes doing business with a brand more convenient. In the long term, it creates a feeling for the customer that no competing brand  is able to provide such an easy, relevant and appealing experience.”

5 reasons programmes fail

According to Harry Welby-Cooke,  business coach and co-master franchiser for ActionCOACH in Southern Africa, a rewards or loyalty programme can fail for these reasons:

1. It doesn’t influence client retention or acquisition. As a result, it doesn’t work for either the client or the company, and thus fades away or gets shelved.

2. It’s too complicated for customers. Programmes should be easy to use. If it’s too difficult to understand or gain points or rewards, customers won’t actively use the programme.

3. It’s expensive, with not enough return on investment. Unless the company is making more money in the long run, its programme becomes an expensive nice-to-have component. Programmes must drive increased profitability, customer loyalty, repeat business and reduced marketing costs.

4. It has no real perceived benefit for the customer.  A good example of this is airline loyalty programmes. There isn’t really significant value unless you travel frequently on a dedicated carrier.

5. It’s not embedded in the company’s workforce. For example, cashiers are told to ask customers if they have a rewards or loyalty card, but if the customer replies no, they often don’t follow up with, “Would you like one?”

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