The quick answer is by buying yourself a loyal customer base by taking a knock and offering your "special" customers your products at a reduced price. I say "special" because, let's face it, companies hand out loyalty cards to anybody, regardless of their previous purchase behaviour.
Generally pretty expensive
It's worth noting that an effective loyalty campaign is generally pretty expensive. Never mind the fact that with every reward issued to a customer you're essentially hacking away at your profit margin, there are also the setup costs and administrative fees to take into consideration.
So, in order for a loyalty campaign to be worthwhile, you need to capitalise on the value provided.
What is this value you ask? What do I get in exchange for giving my products away at a discount? One little word: data.
Customer demographics, consumer-spending habits and the contact details of your clientele are all incredibly valuable to a business. Whether you're a small mom 'n pop shop or a massive national concern, you can never know too much about your customers.
Make the most of the data
Marketers recognise the value of loyalty campaigns but struggle to make the most of the data that they receive as a result. Companies spend all this money to better understand their customers on an individual level and yet still insist on sending them unfocused, non-specific marketing fluff.
Consumers aren't stupid. They know they're effectively prostituting their personal details in exchange for the discount they receive.
But, if you're collecting all my contact information to send me marketing material, at least make it personally relevant. As a 29-year-old male, I have no desire to be notified of a cosmetics sale. However, if you're cutting prices on power tools, by all means send me a promotional email.
And while we're on the topic, an email a week is already bordering on spam; companies would be much better off remembering that golden rule: quality rather than quantity.
Company currencies
Another thing that does nothing but irritate consumers is when companies create their own currency. Between eBucks, Vitality Miles, Smart Shopper Points etc, it's becoming increasingly harder to keep track of the different denominations and their respective values. If all these different currencies can be redeemed in lieu of South African Rand, why not just skip out the middle man altogether? Remember, cash is king.
So, do loyalty programs work in South Africa? Sure they do, provided, of course, you as a marketer make the most of the resultant data: Talk to your customers, not at them.
