There are plenty of loyalty programmes in South Africa. Most big retailers have them, as do health and insurance providers, and a growing number of restaurants and food chains. But here’s the thing: around a third of South Africans don’t actually use loyalty programmes, and those that do often don’t use them to their full potential.
Those are some of the key findings from the 2016 Truth Loyalty Whitepaper, compiled as a collaboration between Truth, a South African loyalty and CRM consultancy and WhyFive, an online research company.
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According to the whitepaper, 26% of economically active South Africans are using customer loyalty programmes more than they were a year ago, but with more than 100 programmes on offer, the majority of these still lack focus in execution, communication and differentiation — leading to non-engagement.
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In order to get more out of their programmes, the research suggests, companies should focus on data, understanding the relationship between income and loyalty programmes, and finding alternative ways to reward programme members.
All in the data
Loyalty programmes enable brands to gather immense insights about customer behaviours, attitudes and preferences. It’s one of the reasons they’re so popular. 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.
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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.
The income factor
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).
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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.
Rewarding social engagement
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.
