Trends in consumer use of loyalty programmes | Fin24
 
In partnership with
Loading...

Trends in consumer use of loyalty programmes

Nov 11 2016 15:44

Cape Town - It is estimated that SA’s big four retail banks could currently be sitting with more than R2bn in unspent loyalty points, according to Amanda Cromhout, CEO of Truth, a consultancy specialising in customer relationship management (CRM) and loyalty programme development.
 
Speaking at a business breakfast hosted by wiGroup and Truth in Cape Town recently, Cromhout said sitting on all these unspent loyalty points - traditionally referred to as "breakage" - not only creates liabilities on the banks’ balance sheet, but increases the risk of customer attrition.

“In the past, companies considered this breakage as a positive, lowering the cost of loyalty campaigns. But they’ve realised now that this ‘breakage’ points to a lack of customer engagement, which is itself a precursor to them abandoning the loyalty programme for a competing one,” explained Cromhout.

A recent survey by whyfive BrandMapp on the use of loyalty programmes by South African consumers found that customers who don’t redeem are 230% more likely to move to a different loyalty programme than those who are actively redeeming. About 26% of consumers surveyed indicated that they are using loyalty programmes more than they did a year ago.

That is why Cromhout believes it is critical that financial services companies find ways to make the customer journey as simple and compelling as possible.

The survey also found that, overall loyalty usage in SA is up by 6% over 2015. About 65% of consumers surveyed said loyalty is an important consideration for them. Women are more likely to engage with loyalty programmes and seek personalisation. Men are slightly less likely to belong to loyalty programmes, but those that do value the status such programmes bring.

In 2015, 47% of customers under the age of 25 said they don’t belong to a loyalty programme. In 2016 that figure improved to 40%.

“One of the main reasons for the improved usage among this younger consumer market is brands’ more sophisticated and user-friendly use of mobile, which appeals to this market and shows brands’ willingness to engage on their terms,” said Cromhout.

Mia Sevenster, head of consumer solutions at mobile loyalty technology provider wiGroup agreed.

“Over the past three years, we’ve processed more than R130m's worth of loyalty points for financial services companies. This year, we saw a dramatic increase in loyalty point redemption via mobile phones. Brands that keep the customer journey simple and make it easy for customers to redeem their points have shown a significant advantage over less sophisticated peers,” said Sevenster.

She said brands that allow customers to earn and spend loyalty value in a variety of ways have the best-performing redemption rates.

"Brands that embrace mobile and emphasise convenience achieve the best loyalty value redemption rates. Mobile also enables loyalty providers to track customer behaviour that extends beyond just their purchases, creating new opportunities for brands to capitalise on customer interactions," she said.

Read Fin24's top stories trending on Twitter:

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest. 24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

banking  |  financial services  |  marketing
NEXT ON FIN24X

 
 
 
 

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Would you switch to a bank that rewarded you for 'good' financial behaviour?

Previous results · Suggest a vote

Loading...