Customer loyalty on the cards and up for grabs

In an era when competition among businesses for a share of consumer spending has never been fiercer, the battle for customer loyalty has taken on a new urgency. It is a high-stakes game in which global research firm Gartner puts the cost of attracting a new customer at five times more than keeping an existing one satisfied.

Value+nettwork research shows growth in registered members has been even faster, soaring from 47.2 million people in 2011 to 82.8 million in 2014, leaving the average South African household with membership of eight programmes. Growth was largely on the back of retailer programmes, which lifted membership from 34.1 million people to 64 million across 47 programmes.

According to the Strategic Marketing special feature on Customer Loyalty Programmes, with consumers facing a barrage of such loyalty schemes, the challenge is differentiation. A notable trend in this direction is towards programmes offering instant gratification. "It is a very powerful way to incentivise customers," says Aki Kalliatakis of customer management consultancy, The Leadership LaunchPad, said in an interview.

Instant gratification was the route Woolworths chose when it launched its loyalty programme in 2010 under the WRewards banner. "Our research showed customers want rewards now and to be meaningful," said Hannah Ross, Woolworths' customer relationship head.

According to her, discounts of up to 20% are consistently offered across 500 food items and discounts of up to 10% on a similar number of clothing and general merchandise items. Incentivising customers to spend more, the programme has three tiers, with the top VIP tier requiring a high level of minimum annual spend.

Woolworths' customers have bought into the programme, claimed Ross. "WRewards attracts 72% of spending, compared with the previous World of Difference programme's 38%. Members are worth a lot more to us than non-members."

While acknowledging Woolworths' success, Olivier said he believed instant gratification was not necessarily the holy grail of loyalty programmes. "Discounts are here today and gone tomorrow, but accumulating points keeps customers coming back to shop and can be used to channel long-term behaviour," he told the magazine. Clicks, which in 1996 launched only the second loyalty programme in the country, the Clicks ClubCard seems to add credence to his point.

"Our loyal customer base has helped carry us through tough times," said David Hazell, Customer Marketing Executive at the retailer. Clicks' programme is extensive, with 4.7-million active users accounting for 75% of sales. On a key measure of a points programme's effectiveness, the conversion of points into actual rewards, the company says it is a big success. "We have a 75% conversion ratio."

Beyond securing customer loyalty, ClubCard plays another invaluable role. "Data mining is the programme's biggest benefit," Hazell told Strategic Marketing. "It enables us to pinpoint marketing to customers and test new marketing campaigns."

But one retailer unlikely to be seen in the mainstream loyalty arena is supermarket giant Shoprite, whose CEO Whitey Basson shuns loyalty schemes as not worth the high cost. Basson's approach is a low-cost one driven by a voucher programme running on mobile technology firm WiGroup's platform since January 2013.

Shoprite's strategy is the complete opposite of arch-rival Pick n Pay, which in March 2011 went all-out with the launch of its Smart Shopper programme. Measured by sheer numbers, 9 million active members, Smart Shopper is a success. The number continues to grow at 25,000 a week and will hit 10-million this year, said Smart Shopper GM, Steve Hoban.