Loyalty for sale
The economic downturn has consumers counting coins and abandoning loyalty in favour of savings and return on investments.
Every expense counts and brands are producing bundles of reward programmes to gain the attention and spend.
Consumers pay attention to what’s on offer and use their points or reward systems to save money and eke out as much value as possible.
The Newspaper Advertising Bureau’s (NAB) Roots 2013 survey revealed that there is an increasing array of loyalty programmes on offer, as retailers work hard to keep existing customers and capture the attention of new ones.
There is more to that, of course. The data captured by these reward programmes gives the retailer a rich and detailed information resource that can be used to tailor rewards to specific customer demographics to foster even more loyalty.
However, not all reward programmes are created equal, so do they really bring the customers back over and over again?
For eBucks, the answer is a definitive: “Yes, we see that our reward programme fosters greater loyalty at FNB and we also get this feedback from our retail partners,” says Jolandé Duvenage, chief executive of eBucks rewards. “Anecdotally, we also hear that eBucks rewards is a consideration when people change banks to FNB.”
According to the FNB* Brand Performance Index (BPI) survey, there’s a strong correlation between customers mentioning benefits and rewards, and the likelihood of them staying with FNB and using more products as well as services offered by the bank.
And FNB is not alone in this benefit either. The Momentum Multiply research has shown that members remain clients of Momentum Health for longer than those who are not and that they, on average, purchase more Momentum products.
Their analysis has shown that the number of products per client gradually increases as members move through the various Multiply statuses.
Peter Twine from Woolworths marketing, says: “Our loyalty programme has definitely had a positive effect. WRewards and MySchool, MyVillage, MyPlanet accounts for a large percentage of our sales.
"The programme has converted many supporters into brand ambassadors who challenge their friends and family to make every swipe count too.”
A spokesperson from Edcon says, “Since launching the Thank U Programme for Edgars in February 2012, more than ten million customers now have Thank U cards and we see these customers engage in our numerous instore Thank U promotions.
"For our valued customers, this is essentially free money that provides them with meaningful discounts.”
On the flip side, however, according to Gill Randall, joint managing director of the NAB, the Roots survey showed that people are loyal to loyalty cards.
In other words, they don’t increase loyalty, it confirms that consumers are not loyal to one store or brand, they cross-shop, they shop locally and they pre-plan their shopping.
“It’s a fact that discerning consumers are less inclined to be loyal to a particular brand for loyalty’s sake,” says Jaco Oosthuizen, chief executive of Momentum Multiply. “When it comes to reward programmes, consumers will seek out service providers that offer real rewards value.”
Twine says: “The needs of our customers are our highest priority and WRewards allows us to strengthen our relationship with them.
"We can reward loyal customers with instant lower prices on selected items through the store and WRewards members save almost R2-million every week through these special offers.”
The WRewards programme has allowed Woolworths to track almost 70% of their South African revenue, which has increased from R9.2-billion to R20.6-billion in the past three years, and responds more effectively to their customer’s needs.
Their loyalty scheme gives them valuable insight into how, when, where and what their customers buy.
It is critical information used to inform business decisions and tailor customer communications.
Edcon’s results are no less impressive with cash sales growing by 12.1% during the first quarter, and this largely attributed to their loyalty programme that now has more than 10-million cardholders.
“Rewards programmes in developed countries typically have a 70% spend-to-earn ratio, eBucks Rewards’ ratio is consistently well over 80%,” says Duvenage. “Members have earned over R3.2-billion and spent more than R2.7-billion in eBucks since inception in 2000.”
It seems that with these loyalty programmes there is a link to increased customer loyalty and expenditure.
Both eBucks and Momentum Multiply have seen members change buying behaviours to earn more rewards.
However, has this resulted in consumers who want more, demand more, from their retailers and have a growing sense of entitlement?
“Rather than seeing customer entitlement, we notice a strong passion among our members towards their eBucks,” says Duvenage. “Our eBucks Reward members are not necessarily becoming more difficult to please, but they do want to know that they are rewarded fairly. "They are also notably active online, from sharing what they have just bought to sharing some pretty clever tactics for getting the most out of earning and spending eBucks.”
Oosthuizen says: "Entitlement occurs when members of a programme feel that they are not getting the value that they expect from it, or when the benefits that they are used to are changed or removed.
"Client’s expectations need to be managed over time so that the perception of value is sustained. We forge new partnerships and create new ways for members to earn points so that they can enjoy new, relevant ways to engage with our programme.”
The value perception is key to the success of any rewards scheme and can play a fundamental role in how customers perceive the brand.
The price of loyalty
Some loyalty plans are so complex and riddled with rules that people don’t get any value from participating and, as a result, shift their attention to brands that meet their needs instead.
A glimpse at Hello Peter, South Africa’s most popular customer service complaints website, shows how things can go horribly wrong.
Simple mistakes such as poor customer service or no real reward for too much effort can cost the business in lost customers and loyalty.
“The customer will always look for the best value for money, be it from a loyalty programme or product or service,” says Twine. “If the delivery and expectations are not aligned, it results in customers demanding resolution.
"Efficient resolution of customer complaints completes the loyalty circle.”
Edcon has not found that their loyalty customers are becoming increasingly difficult to please, “Our programme is fairly new and we have not encountered this.
"Customers certainly value their rewards. About 70% of all Edcon sales are now earning Thank U points and we see customers saving their points and spending them on a variety of purchases. Whatever they use their points for; there is always a sense of mutual gratitude.”
It seems that customer loyalty does have a price point, although it is not as easily found or managed as brands might think.
There is a need to ensure that the customer walks away with a sense of having achieved something tangible, after all it is a time investment on their part and this is an increasingly rare commodity.
“A good product value proposition, the service experience and then the value of the eBucks Rewards programme all contribute to customers changing their behaviour to earn more rewards,” says Duvenage.
“We know that if the programme were terminated today, the outcry from public would be enormous as it adds tangible value like putting food on tables, airtime on mobile phones and fuel in cars.”
Although this article has been made possible by the Mail & Guardian's advertisers, content and photographs were sourced independently by the M&G supplements editorial team. It forms part of a larger supplement