Research has shown middle-income South Africans are members of at least nine loyalty plans, while membership is set to grow as smartphones penetrate more of the market. JUSTIN BROWN finds out more about what makes a rewards programme successful, and where opportunities lie.
Over 24 million South Africans are members of rewards and loyalty programmes, of which there are more than 100 in existence.
The most popular schemes are those offered by grocery, health and beauty retailers.
Steve Burnstone, CEO of Eighty20, a Cape Town-based consultancy, says his company’s research found that middle-income South Africans were members of, on average, nine loyalty plans.
Burnstone believes rewards plan memberships will rise significantly as smartphone penetration increases in South Africa.
A key consideration in South Africa is how to provide loyalty offerings to low-income consumers, he says. If a customer does not spend much, then it is hard to reward them, but Burnstone believes it is possible to reward all types of customers.
But rewards programmes are crucial, no matter what the economic circumstances.
“In good times they help grow the business beyond what would normally be possible; in more difficult economic times they should help to defend existing profitability,” he says.
One of the key benefits of any loyalty plan is data analysis and the segmentation opportunities that arise.
For a grocery retailer, a rewards member will swipe their card more than 80% of the time when they shop, giving a detailed view of how that customer is spending their money, Burnstone explains.
A loyalty scheme can provide a lot more information about customers (e.g. birthday, lifestyle preferences, life stage, etc.), he adds.
eBucks Rewards CEO, Johan Moolman, explains eBucks’ segmented rewards plan in which different sub-segments have been developed using specific criteria.
It is worth noting that eBucks, the loyalty programme for First National Bank (FNB) and Rand Merchant Bank (RMB) Private Bank, started almost 20 years ago in the year 2000.
“There are 6.5 million customers that have got eBucks accounts of which between 2.7 million and 2.8 million members are active,” he says.
eBucks pays out close to R2.5 billion in rewards each year, and since its inception, has paid R13 billion to its members, Moolman says.
Yumna Frizlar-Wyngaard, Kauai marketing manager, outlines how the company’s loyalty plan allows for segmentation by geographical region, by demographics and by behaviour. Kauai, which has 162 stores, has over 100 000 people signed up to its scheme.
Rachel Wrigglesworth, Clicks chief commercial officer, says the data gathered from the Clicks ClubCard members allows the company to enhance its customer experience. To put ClubCard in perspective, Wrigglesworth says that at the end of August last year, the offering had eight million active members.
Clicks introduced ClubCard to the Western Cape in 1995, and in 1996 it was launched nationally.
A rewards programme can generate extra revenue, through advertising for example, but eBucks and Kauai haven’t gone this route.
Moolman says: “eBucks is there to gain new customers, entrench customers and cross-sell [for FNB and RMB]. eBucks is not there to make money.”
Given the insights that loyalty plans provide, there is an opportunity for a company to cut costs or hike revenue by bringing about change to clients’ behaviour, he explains.
“There are massive cost savings to be had by getting a customer to take up a product digitally rather than going into a branch,” he says.
A big plus for the retailer offering a rewards scheme is the ability to move stock or products quickly by special offers aimed at loyal customers. Burnstone agrees that this is a benefit but warns that these offers need to be relevant, otherwise customers will feel spammed and will disengage.
Kauai rewards programme offers its loyal customers specific promotions, says Frizlar-Wyngaard. The power of a loyalty plan is that it enables the owner of the plan to communicate swiftly with members. Kauai has the ability to reach its customers through its app, via texts and e-mail. “This allows us to be agile and keep customers informed,” she adds.
The personalisation touch
Another opportunity offered by a rewards plan is personalisation for each member, a key trend in the rewards industry. Mobile convenience is another important trend, says Wrigglesworth.
“Loyalty programmes must be accessible on mobile. This requirement will become increasingly important, especially with the advent of mobile payment,” she adds.
It is vital that rewards and incentives are individualised and relevant to the consumer. A report by US market research company Forrester, released in January this year, says that personalisation implemented by rewards schemes are usually too obsessed with the purchases that members make.
Loyalty schemes must ensure that marketing personalisation delivers relevance, builds resonance, and shows resilience to get the attention of customers, according to Forrester.
The best place to improve personalisation is with a rewards schemes’ best customers, the report adds.
Burnstone says he has seen an increase in attempts at personalisation by loyalty plans.
“App-based programmes have an advantage here as they can be used by businesses to set targets or challenges for customers with a range of relevant rewards available,” he says.
Frizlar-Wyngaard says that Kauai includes personalisation in its loyalty scheme. These campaigns include compensating customers when they move up to the next loyalty tier and rewarding them on their birthday. “Customers are seeking personalised messages more than ever,” she adds.
The bottom line
Rewards schemes build loyalty within a company’s customer base, and this has a positive impact on a company’s bottom line.
Burnstone says that his company’s research showed that members of rewards plans acknowledged that specific programmes helped changed their behaviour.
For effective schemes there was often as much as five to 10% increase in turnover from members while some plans see around 10% uplift, he adds.
“We believe this then makes an incredibly compelling case for loyalty programmes,” Burnstone says.
Wrigglesworth believes a benefit of loyalty is that Clicks ClubCard customers shop more frequently and will spend on average more on each trip to the shop than an ordinary Clicks customer.
What had proved successful for loyalty programmes was the fact that they deliver transparent financial rewards, she says.
Turning to what has been successful, Moolman says digital enablement of rewards had worked well for eBucks.
POPIA and privacy
Part of running a loyalty programme is complying with the Protection of Personal Information Act (POPIA).
Burnstone says that he has found that South African corporates tend to be very eager to comply.
In addition, most of Eighty20’s clients look to the European Union’s General Data Protection Regulation as a guideline about how to treat customer information.
Moolman says that eBucks takes all laws seriously. “The security of that data is of the utmost importance to us.”
Kauai consulted with a POPIA specialist when setting up its app, and ensured that the terms and conditions clearly state how the company will use customers’ data, Frizlar-Wyngaard says.
Kauai does not sell customer data or share it with third parties, while Clicks ClubCard continues to follow stringent guidelines relating to customer data.
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