Tag: loyalty points

South Africans love loyalty programmes

By Stephen Cranston for Financial Mail

According to research firm AC Nielsen, SA has the highest penetration of loyalty programmes anywhere, with almost two-thirds of the population belonging to more than one programme.

There are two broad categories of reward programmes in financial services. One is rewards for doing business, which would apply to all the bank programmes.

FNB’s eBucks has been the most successful of these (the eBuck itself was an online currency long before anyone had thought of bitcoin). The other bank programmes — Nedbank’s Greenbacks, Absa’s Rewards and Standard Bank’s UCount — have similar methodologies to eBucks.

Then there are the wellness programmes, which were pioneered in SA. Discovery Vitality is dominant in this sector, with Momentum Multiply in a respectable second place. They both encourage fitness, particularly through discounted gym membership.

Johan Moolman, head of eBucks, says the programme has paid out more than R10bn in its 18-year history.

Customers can spend these rewards on regular purchases such as groceries, fuel and airtime, or they can save them for Christmas gifts or travel,

To stay competitive the number of points needed to move to a higher level has reduced. The ability to accrue eBucks at level 5 is quite substantial, with a 3% accrual on credit card payments, 0.25% on cheque cards, and 15% discounts at Shoprite/Checkers, Gautrain and Uber, the airtime provider FNB Connect and even on FNB Life Cover.

Absa Rewards differs from eBucks in that it pays cash rather than a phantom currency. Head of Absa Rewards Sonja Fourie says Absa’s experience shows that it drives engagement. “Many loyalty programmes are engineered with an overriding goal to drive deals with partners. We need a shift so that programmes are engineered to drive value for the customer and provide the customer with a choice of where to use the rewards.”

Fayelizabeth Foster, the executive head of loyalty and rewards at Standard Bank, disagrees. She was one of the founders of Absa Rewards, but when she was hired to start Standard’s UCount programme five years ago she took a different approach.

“Just giving cash which then gets swallowed up by the monthly bills isn’t the best way to build up loyalty. It is better when a rewards programme gives you something specific that is important to you.”

This could mean a bucket-list holiday, or for example the opportunity to participate in crowd-funding for students.

Nedbank Greenbacks has been successful at encouraging its clients to use their points to buy unit trusts.

It enhances the value of Greenbacks by more than 20% for those who choose to buy unit trusts instead of goods.

The bank programmes do not have the paternalistic approach of Vitality which, for example, only gives discounts at Woolworths and Pick n Pay when it comes to paying for healthy foods.

Foster says UCount is more concerned about helping its clients through the month and pays back up to 20% of the shopping baskets at Pick n Pay and Woolworths. It includes nonfood items such as shampoo and washing powder.

It even has KFC as a partner as it believes that a monthly family treat is valuable for many of its clients.

Unlike its main competitors, UCount points expire after five years. Foster believes this boosts engagement as it forces customers to make an active choice about what to do with their rewards, as they don’t accumulate indefinitely.

Setting up these programmes is complex, time-consuming and expensive and it does not work for everyone.

In March 2017 Liberty cancelled its Own Your Life rewards programme. It was no longer considered to be aligned to Liberty’s strategic direction, with its focus on nice-to-haves such as car hire, accommodation and flight bookings.

Old Mutual has been conspicuous by its absence from rewards programmes, but Jean Minnaar, GM for customer solutions, says the new Old Mutual Rewards programme is being rolled out to staff. It is designed to encourage good financial habits: taking control of finances and working towards financial goals. It will be available even to people who do not own an Old Mutual product though, of course, the group plans to build up enough goodwill to win them over.

In contrast, its rival, Sanlam Reality, encourages people to take out as many products as possible from the life office and its strategic partners, such as Santam and Bonitas medical aid. Ultimately, these programmes would not be worthwhile if they did not add new business.

Pick n Pay slashes Smart Shopper rewards

Pick n Pay has overhauled its Smart Shopper loyalty programme, halving the value of the cash rewards but saying it is making the rewards more personal and easier to access.

Early indications on social media are that the changes to the most popular customer loyalty programme in the country have not been well received.

Smart Shopper, which was launched amid much fanfare in 2011 and which was considered to be one of the more generous retail loyalty programmes, played a critical role in Pick n Pay’s turnaround by helping to lift top-line performance almost immediately. But it was less helpful to the bottom line.

From the start, management dismissed suggestions the programme was too generous to be affordable on a sustainable basis.

Sasfin Securities’ analyst Alec Abraham questioned the perception that the programme was overly generous. From the company’s perspective it not only drew in more customers, but provided critical stock-management information, he said. “The number of members was well above what management expected, but the rewards was a small price to pay for all the information the programme generated,” he said. The information was particularly important to Pick n Pay as it was in the process of switching to centralised distribution.

The overhaul — implemented last week with no fanfare — comes just weeks after the company said it was making R500m in price cuts on 1,300 items. Analysts say retailers are caught between offering discounts in tough economic conditions and protecting margins.

David North, group GM of strategy and corporate affairs, said on Monday that the group’s recent initiatives demonstrated the group’s commitment to giving customers more value.” When looking at the changes to Smart Shopper, customers can be assured that every rand and more is being given back to them through lower prices and more and better discounts.”

From March 30, Smart Shoppers need to spend R200 to get back R1. The previous rate was R1 back for every R100 spent, cutting the cash-back rate to 0.5% from 1%.

Management said a key feature of the overhaul would be weekly personalised discounts tailored specifically to individual Smart Shopper based on shopping habits. “With the new Smart Shopper, Pick n Pay will be offering 30-million personal discounts every week or three discounts per customer every Thursday for 10-million customers,” the company said.

The aim is to give customers more than R500 in personal discounts over the year.

Smart Shopper points already awarded are unaffected.

While shoppers are likely to be unconvinced by the touted benefits, investors appear happier. After closing weaker on Thursday and Friday, in line with the market, the share price closed firmer on Monday.

By Ann Crotty for www.businesslive.co.za

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