LEADING EDGE | Westcon
SA loyalty programmes missing a trick
With 26% of economically active South Africans using customer loyalty programmes more than they were a year ago, our burgeoning appetite is clearly still on the rise. But are SA brands adequately differentiating their loyalty programmes to stand out in a highly competitive marketplace?
While it’s estimated SA has more than 100 programmes on offer, the majority of these still lack focus in execution, communication and differentiation – leading to non-engagement.
33% of consumers don’t use loyalty
These undeniable gaps in current offerings present massive opportunities for brands wanting to take their loyalty programmes to the next level. This is according to the 2016 Truth Loyalty Whitepaper, a comprehensive snapshot of the current state of loyalty in SA.
Perhaps not surprisingly then, one-third of the economically active respondents surveyed do not use loyalty programmes at all. This represents a considerable, untapped pool of consumers that brands should be eyeing with interest.
Data is gold – mine it properly
Loyalty programmes enable brands to gather immense insights about customer behaviours, attitudes and preferences and brands that properly analyse customer data to understand how customer insights can drive their business strategy will undoubtedly have the upper hand.
But launching a programme for the sake of doing so, or without a long-term strategic investment with the customer at the centre of your business strategy is a waste of time and money. Therefore, a loyalty programme alone does not create customer loyalty. However, when used to gather customer data, combined with powerful data analysis and innovative engagement strategies, it can become the key differentiating factor.
Brands need to explore customer wants and needs and understand the many factors that influence loyalty programme usage. Only then will they capture their customers’ attention and build a long-lasting relationship with them beyond a once-off marketing campaign.
“Business owners need to take into account how factors such as age, income and gender influence how they should be building their loyalty strategies. There are still countless exciting opportunities in the loyalty space and if harnessed correctly, can enable key differentiation in a competitive marketplace,” says Amanda Cromhout, CEO of Truth.
Income critical to loyalty programme usage
According to a US study conducted in 2014 by Blackhawk Engagement Solutions Inc., income is the biggest influencer of customer loyalty – even more than age, gender or geography. This trend is mirrored in South Africa.
The highest users of programmes are customers who earn between R50,000 and R100,000 per month at 78%, indicating they use loyalty programmes the same or more compared to the previous year. Interestingly however, the Truth Whitepaper reveals that as the salary increases the loyalty “non-usage” goes up from 14% (in the R50,000 – R100,000 bracket) to 21% (in the R100,000 + bracket) and reversely for the lower income groups, “non-usage” increases from 24% (in the R20,000 – R50,000 bracket) to 39% (in the under R20,000 bracket).
Cromhout explains, “The research shows that as salaries increase to over R100,000 per month, customers potentially don’t see any more value from loyalty programmes. Reversely, the lower income groups may not see enough benefit in participating in programmes as most of those offered in SA are based on a “spend and get” principle. With retail rewards as little as 1% of spend, your lower income customers simply won’t see any material benefits quickly enough.”
This kind of data is vital to tailoring programmes that count. For top-earners, brands have an ideal opportunity to create “money-can’t-buy” experiential rewards; meanwhile for lower income earners, brands should be looking for ways to enable faster points accumulation through activity that rewards customer activity beyond just transactional behaviour.
It’s not just about spend
South Africa appears to be slow in adopting strategies that reward non-transactional behaviour within loyalty programmes and Cromhout believes this may be due to a misconception that the process is too resource-intensive. With a desperate need for differentiation within many SA programmes, rewarding for activities other than spend could be the answer for brands looking to innovate and potentially engage new customers.
“SA brands need to give customers the chance to earn points in different ways by going beyond just earning for transactional behaviour. Globally, this has taken off but SA is still behind the curve. By rewarding customers for social media engagement, for updating their details, referring a friend or making bond repayments on time – brands have a great opportunity to get innovative and add some fun to their loyalty programme,” says Cromhout.