CReATION: Integrating loyalty programmes into online marketing strategies

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.

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