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Four successful Loyalty Programs And Why They Work

August 20, 2015 at 10:25 AM

Virtually every retailer or restaurant chain has some type of customer loyalty program these days. In South Africa, there are over 100 local loyalty programs with an estimated 50 million memberships across them. With this said, the challenge lies in building programs that appeal to each individual customer segment that result in increased spending on products and services while boosting loyalty to your brand - a big task in these competitive times. However, what is considered “value” by one customer isn’t necessarily perceived in the same way by the next.

This is why companies embarking on loyalty programs need to gain an acute understanding of who their customers are, what makes them tick and how to inject the “wow factor” into their loyalty offerings. This blog takes a look at a few companies who have cracked the loyalty nut with some innovative thinking that focuses on the most important element to any business: the customer.

Discovery Vitality Program

Promoting customers’ well-being by rewarding healthy activities, purchases and diets through partnerships with companies such as Sportsman’s Warehouse, Dis-Chem, Clicks and Virgin Active, Vitality has managed to churn at a rate of 4% annually as compared to the 14% experienced by competitors. Incentivising daily purchases and activities from partner outlets creates considerable value in the mind of the individual who doesn’t interact with the Vitality brand on a regular basis, thus building brand awareness - and loyalty - in the process. Positioning the Vitality scheme as a wellness program, as opposed to a loyalty program, resulted in considerable buy-in from customers. Discovery also focuses on communicating in a contextual manner by distributing the right message to the right customers thanks to detailed market segmentation.

Pick n Pay’s Smart Shopper Program

Modern customers won’t put up with convoluted rewards systems. Keeping it simple and rewarding is key. Pick n Pay understands that limiting and complicating incentives are a major turn-off for value-seeking shoppers, and in terms of value-add and accessibility, the chain store checks both boxes. By offering rewards on any in-store item and personalising rewards according to customers’ individual purchase behaviour, consumers realise the value of membership each time they swipe their loyalty cards. Smart Shopper claims to have over 9 million members, which equates to roughly 10% of the South African population. With a downloadable app, customers can check reward balances, transfer credits for airtime purchases, donate to charity or even pay utility bills. Its flexibility and simplicity are what make the program so attractive and such a resounding success.

The Woolworths WRewards Scheme

The WRewards program’s three million members have driven the retailer to become a consistent top performer with a 2013/14 turnover growth of 14%. Its reliance on data analytics to gauge and act upon customer sentiment about the brand and its products and services has given Woolworths the edge over competitors. Applying the lessons learnt through rigorous analysis of curated customer metrics, Woolworths crafted a loyalty program that speaks to what the target customers really want. This allowed them to design a tiered scheme that upgrades the status of high-spending, loyal customers and creates incentives for new members to upgrade their status. Also, by tying in a socially conscious message into the program, customers feel good about themselves - and the brand they support - each time they swipe their loyalty cards.

Starbucks’ My Starbucks Rewards

Coming to South Africa soon with the most successful loyalty program in the US, Starbucks has re-imagined their scheme with considerable success. Customers can load credit onto their personalised loyalty cards and swipe them to buy anything in store and earn rewards. This creates the sense of not doling out cash every time you buy a cup of coffee. Also employing the tiered loyalty concept, Starbucks has seen a massive upswing in revenue and credits their program with a 34% increase in profits and are seeing gains of about 80 000 new memberships each week. Starbucks also reports that loyalty customers are returning to their outlets more frequently and indulging in other products besides their famous coffee. Employees were given extensive training on the program to upsell to customers and to make the process of joining and claiming rewards seamless.  Also, the Starbucks app made the brand more accessible and allowed customers to check rewards, make mobile payments and gain access to early promotions.

So what’s the common thread in these successful loyalty programs?

The programs mentioned above have achieved remarkable success thanks to taking a fresh approach to how they engage customers. This can be attributed to the time invested in understanding their markets in a more factual context through the lens of data analytics. By curating transactional, demographic and financial information through various touch points, companies are able to build more detailed profiles of consumers within their various segments and communicate with their markets with greater content.

By understanding your customer, you’re able to speak to their needs and preferences more acutely and build a meaningful – and profitable – relationship in the process. As the Internet and mobile technology continue to permeate everyday life, opportunities to curate valuable data around customers will increase. The question is whether companies will seize the opportunities resident in data to make a real impact in the lives of their customers.

using data analytics for customer engagement

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Julian Diaz
Julian Diaz
Julian Diaz was Head of Marketing for Principa until 2017, after which he became Head of Marketing for Honeybee CRM. American born and raised, Julian has worked in the IT industry for over 20 years. Having begun his career at a major software company in Germany, Julian made the move to South Africa in 1998 when he joined Dimension Data and later MWEB (leading South African ISP). Since then, Julian has helped launch various South African technology brands into international markets, including Principa.

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