consumer loyalty behaviour in south africa · pg 1 | consumer loyalty behaviour in south africa the...

THE TRUTH LOYALTY WHITEPAPER SECOND EDITION OCTOBER 2016

Consumer Loyalty Behaviour

in South Africa

Pg 1 | CONSUMER LOYALTY BEHAVIOUR IN SOUTH AFRICA

The second edition of the 2016 Truth Loyalty Whitepaper explores changing consumer attitudes towards loyalty programmes and the factors influencing loyalty programme usage in the South African market place. Furthermore, it unpacks how insights derived from these consumers’ attitudes influence how companies or brands should re-think their approach to developing customer loyalty programmes.

The Truth Loyalty Whitepaper is born out of the collaboration between Truth, South Africa’s renowned loyalty and CRM consultancy and WhyFive, one of South Africa’s leading data-driven consumer insight companies, ensuring both a scientific and holistic approach to loyalty.

For this specific whitepaper, results from WhyFive’s BrandMapp 2016 survey, together with Truth’s loyalty experience, were used to derive insights about the current state of loyalty in South Africa. BrandMapp is an annual data set created by 27 446 respondents answering 250 questions relating to perceptions, media consumption, product usage, needs, attitudes and spend behaviour in a comprehensive online survey, across almost 1 000 brands and category filters.

The result is a unique landscape study of ‘consumers’ defined in this whitepaper as ‘economically active’ South African adults, (i.e. those living in households with a monthly gross income in excess of R10 000) whom are in a position to be influenced by loyalty programmes in one way or another.

ABOUT THE 2016 LOYALTY WHITEPAPER

CONSUMER LOYALTY BEHAVIOUR IN SOUTH AFRICA | Pg 1

THE TRUTH LOYALTY WHITEPAPER 2ND EDITION OCTOBER 2016


In this second edition of the Truth Loyalty Whitepaper, the expansion of loyalty programmes both internationally and locally continues to make the loyalty playground a very cluttered and competitive one. Customers have reacted by joining more programmes and brands continue to compete for share of wallet.

We have seen the demand for loyalty grow year-on-year and as the demand grows, we realise the need for companies to differentiate their loyalty offering. Loyalty usage in South Africa has grown by 6% year-on-year. This whitepaper seeks to further understand customers’ perceptions and attitudes towards loyalty programmes and which factors influence their decision to join and actively participate in your programme.

We compare the results of last year’s BrandMapp survey explored in our first whitepaper with the results of the BrandMapp 2016 survey released in March this year, to get a snapshot of how the industry is changing.

It has become apparent that businesses need to shift beyond the traditional loyalty programme structures of points and discounts. Whilst these incentives still play a big role in the uptake of loyalty programmes, they do not equal long-term customer loyalty to your brand. New data from the BrandMapp 2016 survey is used to unpack how brands should best move beyond the traditional reward structures and start rewarding customers for positive engagement with your brand that goes way beyond transactions. Think social media engagement, customer surveys and product reviews, to name just a few.

We have also combined the research findings with global loyalty trends and feature first-hand insights from industry leaders in South Africa. These thought-leaders were asked their opinions on all things loyalty and their answers have been used to put a real-world perspective on the story being told by the data. This holistic overview of the loyalty industry created by combining data, with thought-leader insights and Truth’s industry experience is invaluable for brands operating a loyalty programme or looking to embark on creating a loyalty programme.

Our first whitepaper (The Current State of Loyalty in South Africa) discussed the strategic rationale for loyalty and the power of customer data and can be found on our website www.truth.co.za.

EXECUTIVE SUMMARY


http://www.truth.co.za

01SNAP SHOT OF LOYALTY USAGE IN SOUTH AFRICA 2015 vs. 2016

In the first edition of the Truth Whitepaper, released in January 2016, we took a deep look into the importance of understanding how demographic factors such as age, income and gender may influence your loyalty programme and impact your loyalty strategy.

The results showed a direct correlation between these factors and how they impact the way in which customers perceive and engage with loyalty programmes.

One year later, these principles still remain key factors influencing loyalty programme usage and are backed by the latest research provided to us by our research partner, WhyFive and their comprehensive BrandMapp 2016 survey.

To better understand how the loyalty industry has changed in the last 2-3 years, we compared notes with our industry thought leaders, who shared their views and experiences with us about loyalty trends in South Africa. This is what they had to say:

HAS THE SOUTH AFRICAN LOYALTY LANDSCAPE CHANGED?

Loyalty has not necessarily changed but the customer perception of how they should be rewarded has. Customers are becoming

more and more selective of where they spend their money and rewarding them for choosing your brand should become a

significant part of a business strategy. In the past, Sorbet rewards were often a surprise or bonus when you got to the till; now we are making our guests more aware of the benefits hoping that they will start working towards their rewards and tracking their

spend until they reach their next one.

Jade Kirkel(Marketing Manager at The Sorbet Group)



Loyalty is no longer a differentiator; customers expect you to have a loyalty programme. Personalisation & customisation are

becoming even more important than before.

Alex Emmerich(Head of Loyalty & CRM at TFG (The Foschini Group))

Loyalty is moving from a behind-the-scenes points accumulation mechanism to a transparent and consumer-friendly engagement strategy. Consumers are now able to see how their purchasing behaviour is instantly rewarded via their App or receive instant

digital coupons or vouchers via SMS/USSD.

Nicholas Bednall(Commercial Head of Africa at wiGroup)

In the next section, we compare year-on-year changes in loyalty from 2015 to 2016. We unpack key insights with respect to the changing loyalty environment in South Africa. We seek to understand if loyalty programme usage has increased or decreased, if males and females are still exhibiting very different loyalty behaviours and much more.



“Long gone are the days when brands only compete

on price. Brands have turned their attention to delivering

value, great customer experience through the the

astute use of their customer data, allowing them to

personalise and target their customer communication.”

- ROS NETTO - CRM AND LOYALTY CONSULTANT - TRUTH

LOYALTY USAGE GROWS BY 6%

The first major insight, which becomes apparent when comparing 2015 to 2016, is that overall loyalty programme usage is increasing. This indicates a positive outlook for brands looking to launch a loyalty programme and for programme owners alike.

When asked: “Are you using loyalty programmes more, less or the same as a year ago?” the results show a 6% growth in customers who say they use loyalty programmes more than they did in 2015.

We are not surprised by this increase due to the rapid growth of loyalty programmes available to customers across almost every industry sector. Year-on-year, we see the demand for brands to improve their offering to their loyal customers in one way or another to actively compete and stay relevant in the market place.

According to Bond Loyalty, 73% of loyalty programme members in the U.S. will recommend a brand that has what they consider a good loyalty programme. It is no surprise, therefore, that brands feel so motivated to keep improving their loyalty offering.

The results from the 2016 Brandmapp survey

have revealed that loyalty programme usage has

increased by 6% from 2015.LOYALTY

LOYALTY

6

26%more

same36%

don’t use29%

less9%

n = 27 446 (shown in percentages)

Figure 1: LOYALTY USAGE:Are you using loyalty more, the same or less than a year ago?

[BrandMapp Survey 2016]



Not only is current customer satisfaction on the line but also the chance to turn current customers into brand ambassadors.

When taking a deeper look at the data presented by WhyFive’s BrandMapp survey, we can begin to assign loyalty programme growth across the board to specific brands that are making great strides in loyalty.

SOUTH AFRICA’S MOST USED LOYALTY PROGRAMMES IN 2016In 2016, we once again sought to find out which of the many loyalty programmes on offer were most used by South African consumers. The results echo 2015 but with a few key shifts.

Overall grocery and clothing retail programmes still dominate the market, with financial services and banking loyalty programmes following closely behind. Other notable industries with loyalty programmes include hospitality, airlines, telecoms and health care.

Figure 2: LOYALTY USAGE:The top most used loyalty programmes in South Africa


n = 19 376 (shown in percentages)

10 20 30 40 50 60 70Percentage 80 90 100

Pick n Pay Smart Shopper 71%

Clicks ClubCard 62%

Woolworths WRewards 50%

Edgars Thank U 46%

Dis-Chem Benefits 42%

FNB eBucks 41%

Spur Family Card 33%

Discovery Vitality 32%

ABSA Rewards 16%

SAA Voyager 15%

Exclusive Books Fanatics 15%

Avios 14%

Standard Bank UCount 14%

Jet Thank U 11%

MTN 1-4-1 11%

10%Nedbank Greenbacks

10%TFG Rewards & More



The results of the 2016 survey show that Pick n Pay’s Smart Shopper programme remains as the number 1 most used programme in South Africa, with 71% of respondents belonging to that programme.

This is in line with the latest membership figures that show that Smart Shopper currently has 10.7 million members, making it one of the largest in South Africa. Last year, research showed that the 2nd most used programme was shared by Clicks ClubCard and Edgars Thank U, and it is here that we see the most dramatic shift in 2016. Clicks ClubCard has surpassed Edgars Thank U rising to 62% from 59%, while Edgars Thank U has dropped by 13% points to only 46% of this year’s respondents stating that they use the Edgars Thank U programme. According to the Clicks Annual Financial Report released in February this year, the Clicks ClubCard membership increased by almost one million following the successful re-launch of their loyalty programme last year, bringing total membership to 5.7 million active customers. It is interesting to note that the recent Sunday Times Top Brands survey also saw consumers rank Pick n Pay and Clicks as the top 2 loyalty programmes respectively.

Clicks ClubCard states that their members contribute to 77% of overall sales. These growth figures come in light of a recent change made to the ClubCard value proposition, which favours cash back rewards to the previous mechanism of voucher-based rewards. In our opinion, 77% of total sales is above the retail industry average.

Woolworths WRewards claims 3rd place, with an increase of 5% points to 50% in 2016.

Interestingly, we see Dis-Chem Benefits programme surpass other big loyalty players in the market, such as FNB eBucks, to claim 5th place, with 41% of respondents belonging to the Dis-Chem Benefits programme.

What is important to note about these figures is how they compare to the respective membership size of each programme. This is illustrated in how grocery and clothing retailers dominate the loyalty market as the majority of consumers purchase both of these items with a higher frequency. Contrast this with health insurance and/or retail banking where interaction is less frequent, less appealing and cross shopping is much less likely. Another important factor to consider is what potential barriers to entry might inhibit programme sign-up. A clear example of this is monetary. For example, it is free to sign-up to Pick n Pay’s Smart Shopper, yet one needs to be paying for loyalty programmes with insurance providers like Discovery Vitality or Momentum Multiply.

In the financial services sector, there are four major banks in South Africa with loyalty programmes, yet 41% of respondents said they belonged to FNB eBucks. Contrarily, we mentioned earlier how clothing is a higher purchased category for most of the economically active consumers, yet The Foschini Group (TFG Rewards and More) fell short of the top 10 with only 10% of respondents saying they belonged to the TFG programme.



Considering the size of The Foschini Group and its loyalty programme, it might come across as surprising that so few people indicated that they belonged to Rewards and More. However, we propose that the answer to this lies in the brand positioning of TFG Rewards. Do consumers know “TFG” as a standalone brand? Somewhere there is a disconnect between the consumers’ brand affinity. American Swiss, @home, Sportscene, Totalsports and more all fall under the TFG banner and consumers might join the Rewards and More programme at Sportscene without feeling a connection to The Foschini Group as a brand.

Spur’s Family Card, with 1.9 million active members, has risen one place from 8th to 7th and remains the only restaurant chain to make it onto the top 10 list with an impressive 33% (as opposed to 28% in 2015) of respondents being a member of this programme.

Having a loyalty programme has helped identify our loyal customers and provided us with exceptional business information. It has also fuelled restaurant turnover and encouraged additional

patronage on a more regular basis.

Dominique Bolus and Earle Cloete (Marketing at The Spur Group)

MORE MEN ARE USING LOYALTY PROGRAMMES IN 2016

The largest change in loyalty programme usage is witnessed in the male market, where we see a 5% points increase from 64% of male respondents using loyalty programmes in 2015 to 69% of male respondents using loyalty programmes in 2016. Females also increased their loyalty programme usage from 70% to 73%.



We see a 5% point increase of male respondants using

loyalty programmes from 2015 to 2016

64%69%

20152016

Both men and women have also increased the average number of loyalty programmes that they belong to by 7% each. Men increased from belonging to an average of 4.3 loyalty programmes in 2015 to 4.6 in 2016. Women increased from 5.7 loyalty programmes in 2015 to 6.1 in 2016.

From this it is clear that men are showing higher growth in their usage of loyalty programmes, as well as increased adoption of new programmes.

2015

2016

2015

2016

When looking at the results from 2015, we saw that 33% of all respondents said they did not belong to any loyalty programmes. As previously mentioned this percentage has decreased; informing us that loyalty programme usage has risen by 6% in 2016.

Clearly visible from the 2015 figures was the opportunity for programmes to offer a better value proposition to younger consumers. This was seen in the fact that 47% of respondents under the age of 25 do not use loyalty programmes at all.

LOYALTY IS APPEALING MORE TO THE YOUNGER MARKET THAN BEFORE

5



Loyalty programmes need to innovate to capture the attention of the younger market. It is all about technology and offering a programme that is agile enough to meet the demands of the well-informed, multi-tasking younger generation.

How important is mobile in the South African loyalty market?

In 2016, we have seen a positive shift towards overall loyalty programme usage and this shift was by far the largest in the youngest segment. Loyalty programme usage for respondents under the age of 25 has shown growth of 13%.

This indicates that loyalty programme usage in the younger segment is growing at double the average growth across all ages. In 2016, 60% of all consumers under the age of 25 use loyalty programmes.

In 2016, 60% of all consumers under the age of 25 use loyalty programmes.

Loyalty programmes will become more digital in nature and will be linked into mobile payments. Getting the consumer journey and

experience right will be key to any programme.


We have seen an exciting rise in mobile adoption particularity in the loyalty space and believe that as this adoption of mobile and omni-channel innovation grows, the interest of the younger segments will grow too.

13



HOW IMPORTANT ARE LOYALTY PROGRAMMES TO CUSTOMERS?

When looking at how important loyalty programmes are to South African consumers, the overall results from the BrandMapp 2015 survey indicated that 61% of the respondents said that they felt loyalty was quite or very important to them. Moving to 2016, and we witness a 4% points climb to 65% of 2016’s respondents saying they felt loyalty programmes were quite or very important to them.

Nic Bednall (Commercial Head of Africa at wiGroup)

Mobile should be the primary interface and transactional platform for South African corporates given its omnipotence. Loyalty within

mobile can be customised for all target market segments from smartphone Apps to USSD so no customer cannot be reached and everyone can accumulate and redeem loyalty value in South Africa.

Figure 3: LOYALTY IMPORTANCEQ. How important are loyalty programmes to you?


3%32%

42%23%

Not at allNot very

QuiteVery



When it comes to loyalty programmes, men respond differently to women. Based on the new insights derived from the BrandMapp 2016 survey, we have witnessed a 6% points growth in how important loyalty programmes are perceived by women when compared with 2015.

When comparing men with women we also notice that 71% of women find loyalty programmes quite or very important whereas only 59% of men find loyalty programmes quite or very important. This significant difference of 12% points clearly highlights how men and women interact differently with loyalty programmes and require more specific value propositions.

Women are finding loyalty programmes more important than before

Results from the BrandMapp 2016 survey have shown a massive increase in how important loyalty is to some respondents in lower income brackets. Last year, 63% of respondents with a household income of R20 000 or less found loyalty programmes quite or very important.

This year, this figure has grown by 6% points in 2016, showing us that 69% of respondents with a household income of less than R20 000 now find loyalty quite or very important.

This correlates with the volatile economic climate being faced by South Africans. The year began with a weak performing rand and political instability continues to hinder any positive economic upturn. South African consumers are therefore feeling the pinch in their wallets and loyalty programmes serve as a valuable tool for getting exposure to discounts and member-only related savings, as well as to earn points, which can be spent on future purchases.

Lower income segments are finding loyalty more important



Motivating men in loyalty

The 59% percent of men who find loyalty quite or very important in 2016 shows no year-on-year growth from 2015.

This contrasts interestingly with earlier statistics, which showed that men are increasing their usage of loyalty programmes, with 5% points growth for men and 3% points growth for women. As their usage of loyalty is growing, we also witness an increase in the amount of loyalty programmes men and women belong to.

Insights from our previous whitepaper indicate that men are more interested in loyalty programmes that offer “status” (high level tiers, or gamified rewards, etc.), but only if it is clearly visible to others. Women, on the other hand, are more private when it comes to “showing off” their tier status and prefer a personalised experience.

Benefits and rewards appreciated by women, may be less appreciated by men and therefore it would be naïve, to say the least, if you weren’t using these insights to communicate to your customers differently and offer more relevance in your rewards offering.



THE TRUTH LOYALTY WHITEPAPER 2ND EDITION SEPTEMBER 2016


02WHAT CUSTOMERS WANT Coffee vs. First class upgrades?

One of the main reasons customers join loyalty programmes is the value added benefits provided by brands to “thank” customers for their patronage.

In our quest to better understand the different preferences customers may have when it comes to loyalty programmes and what influences their usage behaviour, we wanted to understand exactly what kind of benefits they enjoy the most.

Whilst some results were more ‘obvious’ than others, there were a few interesting nuggets of information that we found rather surprising.

WHAT DO YOUR CUSTOMERS REALLY WANT?

Jade Kirkel (Marketing Manager at The Sorbet Group)

Ferdi Maritz (Strategic Consultant at P:Cubed)

Loyalty has evolved from a conceptual proposition and a marketing ploy to a commoditised product. The mysticism around it has started to evaporate and it’s becoming more

technical and calculated, both from a consumer perspective, as well as a provider. Consumers are savvier on how they earn,

and how they should earn. They understand that they need to do x to get y rewards.

Our programme is cardless, easy to join, free, instant and flexible. Due to this we have very few complaints about our programme

and guests tend to enjoy the rewards and ease of use of it.



PREFERRED TYPES OF REWARDS

Cash back incentives are the most enjoyed benefits from a loyalty programme, according to the results published by the BrandMapp 2016 survey, with 63% of respondents saying they enjoy cash back incentives the most. We see this trend across gender, age, and income.

Figure 4: TYPES OF REWARDSQ. What benefits do you enjoy most from a loyalty programme?


Points that add up

Discounts

Redeemable vouchers

Free gifts

Competition entries

Cellphone or data airtime

VIP treatment

Exclusive invitations to events

Better service

NONE OF THESE

62%

54%

52%

21%

19%

12%

12%

9%

7%

2%

63%Cash back incentives

One size does not fit all when it comes to loyalty benefits, unless

you’re offering cash back!

$



Women love cash back incentives the most

Cash back has proven to be very popular due to its transparency in terms of value and the fact that it drives engagement.

Sonja Fourie (Head of Absa Rewards and VAS)

From a gender perspective women are much more likely to enjoy most of the benefits offered by loyalty programmes, especially those that are cash or discount related offering some kind of perceived “saving”.

70% of female respondents said they preferred cash back rewards, a full 14% points more than men,

with only 56% of male respondents indicating the same.

When looking at the overall results, benefits that include some sort of monetary benefits such as

discounts, coupons, voucher or savings are deemed more valuable than exclusivity such as VIP treatment

or exclusive invitations to events.



In 2014/2015, all things ‘VIP’ and exclusivity came out tops as the most desired or most valuable benefits a loyalty programme could offer. Loyalty programme managers have tried to extend their value proposition to reward beyond hard monetary benefits by offering programme status as opposed to the regular cash back incentives.

This is largely due to the fact that implementing a cash back programme has a hard cost associated to it, with limited breakage in redemption.

However, the benefit of a cash back programme comes with increased redemption and greater engagement. This decreases the liability associated with a loyalty programme and ensures your loyalty programme doesn’t weigh heavily on your balance sheet. In our experience an unconditional cash back voucher (i.e. receive R10 off immediately or off your next purchase) can achieve higher redemption levels as compared to a campaign-led conditional voucher (i.e. R50 off of R250 spend), where redemption rates can be as low as 2-5%.

Strategies, such as tiered loyalty programmes, offering status (based on a particular behaviour) and more personalised services or exclusive, VIP treatment have been introduced to offer additional recognition and rewards to loyalty members without actually needing to offer direct cash back rewards. This creates a heightened perceived value of a programme, without it being too costly.

However, in the South African loyalty market place, we’ve noticed that most people just want cash back or a free cup of coffee.

The more generic the value type of the reward, the more desirable it is to the customer (i.e. the more similar it is to cash).

Kobus Ehlers(Co-founder of SnapScan)

Coffee vs. first class upgrades



Consumers prefer more frequent, smaller rewards as opposed to larger rewards that take longer to accumulate. Customers also like rewards and programmes with choice & flexibility. Too many t’s and c’s and

redemption hurdles turn them off.


“Some people just want a free cup of coffee”

Although experiential rewards such as a fully inclusive overseas trip or hot air balloon experience may still be aspirational and attractive to your members, loyalty marketers will need to combine these with smaller, more frequent rewards and engagement campaigns. This enables you to engage your customers more often, helping you stay top of mind with smaller, more frequent rewards.

According to a 2015 global Discovery case study, highlighting the importance of frequency in terms of both engagement and rewards, Discovery Vitality Active Rewards saw an 88% increase in member engagement after introducing the frequent reward element.

Locally, the same programme has been launched, whereby Discovery Vitality Active Rewards members get rewarded on a weekly basis for meeting their fitness goals. These rewards are small and not grandiose: a cup of coffee or a smoothie. However, statistics show that these smaller yet more frequent rewards can have a great affect on changing behaviour.



03ACTIONS BEYOND TRANSACTIONS Rewarding behaviours

Traditional loyalty programmes reward members for transacting with your brand. However, over the years we have seen brands take loyalty to the next level by incentivising members for taking other specific actions.

In our previous whitepaper, we spoke about the overarching theory about why brands would embark on this way of incentivising and how loyalty programmes that offer the opportunity for members to earn rewards for non-transactional actions can drive certain behaviours that are imperative to your business.

Focusing on transactions alone means you are only capitalising on one of many touch points a customer has with your brand. Think of all the interactions customers have with you pre, during and post their visit to your store or website. How do you begin to reward for interactions during the customer lifecycle that will in turn positively impact your business objectives and help customers feel truly valued?

These activities include updating their details in order to increase contactability and to reduce your email bounce rate. Not only do these actions enhance your overall customer value offering but they also allow you to drive greater consumer engagement.

As mentioned previously, programmes such as Discovery Vitality Active Rewards are a prime example of how non-transactional, fitness related goals increased engagement.

However, reflecting on our previous whitepaper, we wanted to know if the notion of non-transactional behaviours were appealing to South African consumers or not. In the latest BrandMapp survey, respondents were asked to rate which non-transactional activities they would do in exchange for loyalty benefits.

They were asked to pick from the following list:

Taking an online survey

Updating details online

Social media activity

Referring a friend to a programme

The most appealing non-transactional reward for consumers was taking an online survey, with 54% of respondents saying they would do this for loyalty benefits.

ACTIONS BEYOND TRANSACTIONS



Updating one’s details on a website, another online activity, was second favourite, with 34% of respondents saying they would complete this action for additional benefits.

The two most popular non-transactional rewards, therefore, indicate a strong opportunity for brands to gather data from their loyalty members. Both online surveys and updating details online can provide invaluable information for brands about their customers and as such, the opportunity to better tailor their value proposition.

By far the least popular non-transactional interaction for consumers is referring friends to a programme. This is particularly interesting as we’ve seen many brands offer a refer-a-friend campaign (linked to loyalty or not) and yet, the data shows that customers don’t see the value. This fact implies that consumers are reluctant to potentially spam their friends or put their reputation on the line by sharing non-relevant content in exchange for a reward. This indicates that brands should find other ways to drive word-of-mouth than directly asking existing members. One particular example could be social media.

Figure 5: NON-TRANSACTIONAL ACITVITIESQ. Which non-transactional activities would you do in exchange for loyalty benefits?


Referring friends to a programme

20%

Takingonline research

surveys

54%

Updating your details

on a website

34%

Social media activity

(liking, sharing, commenting, checking in)

27%

None of these

27%



“A loyalty programme is a mechanic. A

loyalty programme alone, doesn’t create

customer loyalty.”- AMANDA CROMHOUT -

FOUNDER & CEO - TRUTH


This reflects a general trend of younger respondents to be more open to online interaction as a means to earn loyalty benefits. Respondents aged 16 – 34 were up to 10% points more likely than respondents aged 34+ to take an online survey to gain loyalty benefits.

Are South African brands capitalising customer interactions?

Younger respondents are more willing to engage on social media

Respondents aged 16-24 are: 5% points more likely to interact with a brand

on social media than ages 25-34 14% points more likely than respondents aged 35-49 27% points more likely than respondents aged 50+

Globally, we’ve seen this trend emerge and gain traction over the past 2 years. More and more brands are realising that incentivising solely on a transactional basis is a one-way ticket to saying goodbye to real engagement.

When conducting research on all the major loyalty programmes in South Africa across retail, financial services & travel, we were surprised at how few of them offer incentivised or accelerated earn opportunities for ‘non-transactional’ behaviours.

As mentioned earlier, Discovery Vitality members earn additional Vitality points for being active. However, when looking at retail and retail banking, they are few and far between.

The Edcon Thank U programme however, offers all their Thank U account holders a once off, double points offer if you register for e-statements. We’ve seen this globally as a way to not only reduce their carbon footprint, but also dramatically reduce cost of printing and postage of account statements.



Both Vitality Active Rewards and Edcon Thank U have their own loyalty currency making it easier to reward customers with additional points for their interactions, thus reducing a hard cost of pure incentives.

On the other hand, in financial services, brands are using indirect-transactional activities as an entry requirement or qualifying criteria to participate in their loyalty programmes. Thus, at the same time, ensuring specific business requirements are met. For example, FNB eBucks insist that members transact via specific channels such as online banking, cellphone banking (using USSD) banking or via the banking App at least once a month to qualify for eBucks at all.

Although these activities require a transaction to take place, whether it be making a payment to a recipient or simply buying airtime or electricity, they are creating the requirement to engage via their online channels and be exposed to FNB related content in order to gain on-going access to their loyalty programme benefits.

When looking at companies in South Africa such as FNB and Discovery, it is clear that they understand the importance of relevance and convenience to drive long-term engagement beyond the traditional transactional loyalty programme proposition.

Leveraging data gathered through each non-transactional touch point

Offering the opportunity for customers to earn loyalty points in exchange for completing certain actions not only helps companies meet certain business requirements but also creates an additional funnel of interaction data.

Transaction data is just the buying of the product or service which is a very small moment in time to build customer relationships. It is the

interaction, tied into those transaction data points which can create an entire customer profile that leads to true customer intimacy.

AIMIARewarding Interactions


These non-transactional interactions are the puzzle pieces completing the entire customer loyalty lifecycle, which loyalty marketers will thrive off to better understand the entire customer profile. Imagine the possibilities of marrying all these unique unstructured data sets together with all of what you already know about your customers. The possibilities for true, long-term relationships with your customers are endless.


Brands need to focus on technology and software that enable the ability to churn through large volumes of data, perform statistical

analysis quickly and render inferences in a usable format for executives and marketing agents to make key strategic decisions that are quick to enable and to measure performance. Timing is

key. The quicker you, as a provider, are able to respond to observed trends will differentiate you from your competitors.

Ferdi Maritz(Strategic Consultant at P:Cubed)


04TRENDS IN

LOYALTY What lies ahead

for the future of loyalty?


WHAT LIES AHEAD FOR LOYALTY? There’s no doubt that the face of loyalty is changing. Companies have started to veer away from the traditional points based loyalty model as the key indicator of a loyalty programme’s value. The observed shift is towards personalisation. Personalisation is no longer just a by-product of loyalty programme data, but has become the core value offering at the heart of loyalty.

Sonja Fourie(Head of Absa Rewards and VAS)

Loyalty in South Africa is following the global trend of moving away from pure rewards, earn-and-burn programmes to personal and personalised interactions that stretch further than just name personalisation in emails, towards big-data

analysis of individual consumer behaviours and needs and the subsequent addressing of those needs

It has long been known that the customer data obtained from running a successful loyalty programme could be used to target consumers on a more individual level, ensuring increased brand relevance and minimising the risk of generalised campaigns based on limited data and guess work. A leading South African retailer stated that the insights gained from having a loyalty programme have encouraged them to move to more personalised rewards and to use more relevant partners. Personalisation is not a “nice to have” but rather a necessity. According to Bond Brand Loyalty, 78% of consumers who are satisfied with the level of personalisation offered by the programme are very satisfied with the programme as a whole.

Loyalty programmes are going to come under pressure in terms of the value they create for customers vs. for the organization.



At Truth, we advise clients to place the majority of their focus on the covert elements of their programme. Covert elements refer to the behind-the-scenes, data-fuelled marketing efforts that offer cat lovers discounts on cat food and offer the cash-strapped student money off two-minute noodles. Covert elements of loyalty programme marketing are contrasted to overt elements such as the 5% back everyone gets in points or the R50 birthday voucher we all receive, which are advertised as benefits in the programme’s marketing collateral.

We, at Truth, refer to this concept as ’The Iceberg Effect’ that is discussed in detail in Truth’s first Loyalty Whitepaper. The difference between overt and covert is best understood in ‘The Iceberg Effect’. All the overt elements are above the waterline for all to see; however, your real value lies below the waterline where customer specific data should be used to change customer behaviours and drive increased long term loyalty.

Red Lion Hotels is a good example of a brand that has all but done away with the overt elements of loyalty marketing. Their “Hello Rewards” programme has done away with points and tiering and instead positioned itself as a guest recognition programme, seeking to treat every guest in a personalised and appreciated way. Instead of earning points, guests earn recognition and staff are encouraged to treat every guest personally. Hello Rewards is based on a surprise and delight strategy, offering guests recommendations and discounts based on their individual interests. Certain overt benefits also apply to Hello Rewards members, such as a free night for every seven nights booked, express check-in / check-out, room upgrades when available and late checkout.

We expect location based rewards, much greater integration with social media and more coalitions as the future of loyalty. Customers will be

consolidating their loyalty engagement to a handful of key programmes that they feel give them the greatest return (and a possible slowdown in

the willingness to sign up for new programmes).

Alex Emmerich(Head of Loyalty & CRM at TFG (The Foschini Group))

One does not need to do away with points entirely to have a customer-data led loyalty strategy. While the Red Lion example illustrates an international brand getting it right, it’s worth noting that the overt benefits (i.e. free night stay) would have served to attract consumers to the programme initially.

In conclusion, points, cash back and other overt benefits still serve a place in attracting consumers to your loyalty programme and brand. However, covert leveraging of customer data for personalised offers and experiences should form a core part of your value proposition.



http://truth.co.za/articles/whitepapers/

CONCLUSION05

It is more apparent than ever that businesses need to shift beyond the traditional loyalty programme structures of points and discounts to remain relevant and top-of mind. When it comes to what customers really want with regards to loyalty benefits and rewards, research has shown us that cash still remains king as the number one benefit customers enjoy, together with similar monetary rewards.

Not only do we understand the type of rewards they prefer, we also better understand that the accumulation of a loyalty currency towards an incentive over a long period of time or an unrealistic tiering structure is no longer deemed valuable to customers. Customers want rewards more frequently, even if they are smaller and come in the shape of a coffee cup. The fact that customers are being interacted with on a more regular basis, reminds them of the value that the loyalty programme and brand is providing. It is crucial for brands to understand this shift and that rewards do not have to necessarily be something that money can’t buy.

The adoption of covert strategies and using customer data to drive more effective surprise and delight strategies is one of the areas we are most excited about. It’s about time that brands which are gathering data start to utilise it in much more effective way to better service their customers. The face of loyalty has changed. Is your programme keeping up?

The latest studies from the Truth Loyalty Whitepaper have shown that the South African loyalty landscape continues to grow. This growth can be seen across males and females and the greatest growth was observed in the younger market.

As loyalty programme membership numbers increase and the demand by customers for loyalty programmes to differentiate themselves also increases, loyalty programme owners have no choice but to diversify their programme by offering more compelling value propositions. These new benefits include being able to earn rewards for activities beyond just purchasing a product or service. Customers are willing to complete activities such as online surveys or updating their personal details. These activities create a strong opportunity for brands to gather invaluable data from their loyalty members.

CONCLUSION

Those retailers that succeed will be the ones that deliver excellent product and service to the consumer AND exceptional value through the loyalty programme.





AMANDA CROMHOUT [email protected]

Amanda is the founder & CEO of Truth. Amanda’s extensive experience in the field of loyalty & CRM has put Truth at the forefront of loyalty in South Africa. She spent many years at British Airways leading sales & marketing teams across UK, Africa, Middle East & Asia.

She has also spearheaded the customer loyalty and CRM division at Woolworths, where she led the department encompassing customer insights, research, customer strategy, loyalty/MySchool, direct marketing and financial services marketing.

ROS NETTO [email protected]

Ros, Truth’s Loyalty & CRM Consultant and Marketing Manager, joined the company from Woolworths in 2010. She has successfully developed and implemented loyalty solutions for many of Truth’s clients and heads up Truth’s Loyalty Lite product, a loyalty solution for small – medium sized businesses.

Ros also runs Truth’s training and development product, Customer Academy focusing on delivering loyalty & CRM workshops and online courses.

MILES HAMILTON [email protected]

Miles Hamilton is the Research & Marketing Assistant at Truth. He manages all Truth’s client research, which includes global/local loyalty and CRM trends, insights & analysis.

Together with Ros, Miles runs Loyalty Lite, Truth’s loyalty solution for SMEs. Miles also delivers Truth’s marketing plan including marketing for Truth’s customer centric products, Loyalty Lite & Loyalty Boutique.

AUTHORS – ABOUT THE TEAM



CONTRIBUTORS

Truth is proud to be associated with WhyFive, together bringing great insights about customer loyalty trends in South Africa.

WhyFive is an innovative consumer insights and marketing consultancy underpinned by a unique data set called BrandMapp. WhyFive’s BrandMapp is used by many leading South African companies including: Edcon, MassMart, Takealot, Momentum, Telkom, Sanlam, Yuppiechef, Liberty, Old Mutual, FNB and a number of leading media owners and agencies.

For this specific whitepaper, results from WhyFive’s BrandMapp 2015 and 2016 surveys were used to drive insights about the current state of loyalty in South Africa.

Thanks to our thought-leading contributors

@WhyFiveSA // www.whyfive.co.za



REFERENCES

AIMIA, (2014). Rewarding Interactions. Montreal, p.6.

Bond Brand Loyalty, (2016). The 2016 Bond Brand Loyalty Report. Mississauga.

COLLOQUY. (2016). Loyalty Program to Watch. [online] Available at: https://www.colloquy.com/colloquy-recognizes/red-lion-hotels-2015/ [Accessed 5 Jul. 2016].

COLLOQUY. (2016). Taking Loyalty to the Curb: What Coke, Red Lion and Others Would Spring Clean Out of Loyalty. [online] Available at: https://www.colloquy.com/loyalty- strategies/taking-loyalty-to-the-curb-what-coke-red-lion-and-others-would-spring-clean- out-of-loyalty [Accessed 1 Jul. 2016].

Discovery Vitality, (2015). Active Rewards White Paper.

Spur Corporation, (2015). Spur Corp. Integrated Report. Cape Town: Spur Corporation, p.3.

Sunday Times, (2016). Sunday Times Top Brands Survey. Johannesburg.

Truth Loyalty and CRM, (2016). The Current State of Loyalty in South Africa. Truth Whitepaper Series. Cape Town.


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