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The ins and outs of successful rewards and loyalty programmes

3 - Loyalty Marketing-01

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.

 

Extra revenue

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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How 4IR will change the way we work

How 4IR will change the way we work

Technology, the big disruptor, is itself constantly disrupting, and the challenges this brings demand a shift in our attitudes and perceptions, too. LUCINDA JORDAAN talks to Shavani Naidoo and Deborah Schepers.

Whether you’re a farmer or urbanite, student or CEO, there’s no escaping the disruption of 4IR on all aspects of life – and none more so than the world of work.

According to a McKinsey Global Institute foresights report on the future of work, up to 375 million workers may need to change their occupational category by 2030, and digital work could contribute $2.7 trillion to global GDP by 2025.

We’re living through shifts in all industries – media particularly – and have already seen the creation of job titles that didn’t exist 10 years ago. Technology, the big disruptor, is itself constantly disrupting, and the challenges this brings demand a shift in our attitudes and perceptions, too.

Primedia Group’s data science expert Shavani Naidoo and Deborah Schepers, Group Head of Analytics and Insights, gave a combined presentation that succinctly brought home the current reality of 4IR by outlining the rate at which civilisations and societies have transformed, and how this has sped up over the past century alone.

Their presentation illustrated how the hunter-gatherer era lasted for aeons, phasing over centuries into agriculture and settlements, before the first industrial revolution took hold with the invention of the steam engine. This spurred a shift in production, “from muscle to mechanical”, as Naidoo noted, with mass production and rapid tech development leading to the second and third industrial revolutions – the latter being the digital Information Age, which began in the ‘70s and which we’ve transcended in just a few decades.

The duo pointed out that one of the first really big markers of 4IR was a “shift in the balance of power between retailers and consumers”. “We are becoming wiser,” noted Schepers, “with consumers looking to one another to understand how they interact with brands”. Amazon, she pointed out, has created the review culture that sees consumers ‘working’ before and after the shopping process by researching product recommendations and reviews.

Call out culture, too, adds to the power shift, with manufacturers and brands now called on to account for flaws and discrepancies in their products. Castle Free’s ad claims of comprising zero alcohol is a case in point, noted Schepers, explaining how a consumer tested the claim, found the product to contain 0.39% alcohol and forcing the withdrawal of the ad.

In essence, noted Schepers: “What the brand says is cool, but users’ recommendations, more so.” A growing trend, she adds, is that of “everyone’s an expert” – which, advantageously, will see a shift towards higher standards, because “personalisation puts the consumer in control”.

“Personalised ads boost engagement, and we have become active – not passive – consumers of media,” she added.

Q&A with Deborah Schepers and Shavani Naidoo

What are the most telling differences between 4IR and previous industrial revolutions?

4IR will fundamentally change the way in which we work, live and relate to each other in comparison to previous industrial revolutions. We now live in a deeply interconnected world that is evolving at an exponential pace. This revolution will transform humankind itself – we are already seeing augmentation

in our ability as our phones have become an extension of us; allowing us access to unprecedented computing power and shared knowledge within seconds at the click of a button.

Where are we seeing the biggest impact in 4IR – and what can we expect within the next 5, 10 or 20 years?

Every aspect of marketing and media is being affected by the 4IR. There’s already been a switch in power between brands and consumers due to the hyper-availability of information and the connectedness of platforms and information sources.

Where seductive ads used to be enough, marketers now need to deliver on value throughout the brand experience. Consumers know everything – and they’re willing to work before, during and after the purchase process to share this, because it makes them feel empowered. Euromonitor calls this trend ‘Everyone’s an Expert’.

The implications of this trend are that marketers need to begin building a great end-to-end experience. As Jeff Bezos says: “In the old world, you devoted 30% of your time to building a great service and 70% of your time to shouting about it. In the new world, that inverts’’.

The next big changes will be in the area of personalised, curated media streams – accessed naturally via voice as our interface with machines and the world becomes more seamless.

What are the key drivers of this revolution – and its impact?

There are many key drivers of this revolution but the most interesting ones which come to mind are the Internet of things, connectivity, 3D printing, autonomous vehicles, artificial intelligence and Virtual reality.

3D printing and virtual reality are having significant impacts on healthcare. This year South Africa pioneered the first successful middle ear transplant using 3D printed middle ear bones. Further away in California, neurologists are able to see the brain of a patient in 3D using virtual reality before entering the operating room.

The hope is that this will enable hospitals to train surgeons faster and better where their skill could mean the difference between life and death. Artificial intelligence is having a significant impact in ambient computing: Apps such as Amazon’s Alexa and Apple’s Siri provide a glimpse into the power of artificial intelligence which is advancing at a rapid pace. Today, voice recognition and AI are progressing so quickly that talking to computers will soon become the norm. Our devices will become a natural extension of us, anticipating our needs and helping us when required.

How will this change the way consumers navigate the world – and what does it mean for marketers?

The long-term future sees the weak AI platforms of personal digital assistants become stronger and being able to edit our worlds based on our preferences, appetite for experimentation, and price elasticity. This raises interesting questions for marketers, who will need to bid for the attention of these digital assistants.

‘Putting the Me in Media’: Personalisation and data analytics go hand in hand in effecting consumer control – but what are the pros and cons of personalisation?

Personalisation has been found to lead to business growth, with research by Boston Consulting Group suggesting that brands which offer individualised products, services or experiences, are growing revenues by 6-to-10%, 2-to-3 times faster than brands that do not.

A study by Adlucent showed that audiences exposed to personalised ads are almost twice as likely to click through for an ad featuring an unknown brand if the ad was tailored to their preferences.

What is the reality and impact of a shift from an ‘attention economy’ to actual money?

Attention economics treats human attention as a scarce commodity. Put simply: Attention is a resource: a person has only so much of it. We have seen a proliferation of content and choice, especially in the video space, and the reality is that there are only so many waking hours in which to consume content.

This means that ad revenue models can’t continue to grow, and that publishers will start looking to subscription models. In this case, money becomes the scarce resource again, and content providers need to start producing content that delivers long-term value, not short-term attention.

What determines success or failure is the entertainment value of the content.

Premium content will always attract the masses. Game of Thrones is an excellent example of this: the series finale ended with a staggering 19.3 million viewers. What’s more, consumers are willing to pay for premium content. For publishers, this means that a lot more focus should be placed on delivering premium content – and for marketers, it means we need to seek out premium content to partner with, as well as find ways to deliver advertising creativity and entertainment value that competes with premium content. 

How marketers can counter this revolution: Shavani Naidoo and Deborah Schepers share top tips

  • Marketing needs to shift focus from shouting about products to building a great end-to-end experience
  • Deliver on personalisation while maintaining a mass effect
  • Make sure that your brand has a sonic identity
  • Look to integrate and associate with premium content
  • Prepare for a future in which we may need to market to new entities