The concept of customer loyalty programmes is well established in
the travel, retail, credit card and hospitality industries. Indeed many
companies in these industries regularly co-operate in order to offer
customers more attractive and valuable benefits to differentiate
themselves from their competitors.
The logic behind loyalty schemes is simple and supported by extensive
research - it is far more cost effective to retain customers then to win
new ones.
PriceWaterhouse Coopers has reported that it costs up to seven times as
much to attract new customers as it does to keep existing ones.
With the new, fast-expanding digital economy, it is inevitable that the
concept of customer loyalty schemes would be embraced by
Internet-related industries in Asia.
The challenge online companies face is how best to integrate customer
loyalty programmes with their overall marketing strategies and how to
select the most suitable online loyalty programme to meet their
objectives.
Online companies face an increasingly competitive and costly Internet
world. Ecommerce players quickly realise that they must shift resources
towards creating not customers who transact once, but a core group of
loyal customers.
Thus, it is important for ecommerce players to evaluate programme
options carefully to ensure alignment with marketing objectives while
keeping an eye on new programme introductions.
According to international Internet research agency eMarketer, the
global B2B and B2C markets are forecast to grow from revenues of
US$28.1 billion and US$9.5 billion in 1998 respectively,
to US$1,082.3 billion and US$161.7 billion in 2003.
More importantly, eMarketer also predicts that the proportion of
ecommerce revenue will gradually shift outside of the US, from 82 per
cent in 1998, to less than 50 per cent in 2003.
This view is echoed by International Data Corporation (IDC), which says
that ecommerce in non-Japan Asia will surpass the US and be among the
fastest-growing regions in the world, with revenue growing from
US$0.7 billion in 1998 to US$27.5 billion in 2003.
This represents a five-year compound annual growth rate of 109 per cent
- far exceeding the growth for the US and the rest of the world.
Some of the best loyalty programme business models are designed to bring
together three key groups - online companies, traditional 'bricks and
mortar' businesses and Internet users.
This approach combines the best of all worlds so that programme members
are incentivised to visit online sites with the lure of tangible rewards
from recognised retailers, airlines, hotels or other traditional
businesses.
One of the main advantages for e-merchants is the flexibility to use the
scheme in a variety of ways, including market research, special
promotions for new products or simply to build brand awareness.
By inviting members to receive permission-based direct marketing
material electronically, programme providers can offer online companies
valuable database resources.
Traditional businesses benefit because they provide the incentives by
offering goods or services in exchange for rewards points, which gives
them exposure to a rapidly-expanding online market.
Meanwhile, Internet users hardly need to change their online habits, and
can earn genuine rewards by being loyal visitors to partner sites,
creating a rare win-win scenario.
The business model is relatively simple, but requires advanced
technology to manage it effectively. In essence, Internet users who
register as members of a loyalty programme earn reward points every time
they visit the company's partner websites.
The more frequently they visit or purchase from partner sites, the more
rewards points they earn.
Additional points are available to members who participate in online
surveys, which provide valuable market research information to partners,
or those who make purchases online.
Once sufficient points are earned, members can redeem gifts or coupons
to make purchases at shops or online.
To maximise the effectiveness of online loyalty programmes, many
emerchants and traditional businesses combine them with online
advertising campaigns.
Technological advances now enable online advertisers to be much more
targeted in their reach.
By integrating banner ads with loyalty programmes, advertisers are able
to increase click through rates and learn more about their visitors
while acknowledging their support with rewards points.
Another important feature to look for is loyalty programme providers
that are geared up for WAP-enabled services.
Although still in its infancy, the introduction of third generation
mobile communications in the coming months will see a significant
increase in WAP-based services.
Whether using online loyalty programmes as a stand-alone exercise or to
complement online advertising, the most important objective is to
develop one-to-one relationships between emerchants and Internet
users.
Never before have emerchants been able to track and understand the
behaviour of their target groups on such a large scale with such great
accuracy and in real-time.
It presents tremendous opportunities for companies wanting to find new
ways of achieving a competitive edge.
