Brand loyalty isn’t bought with benefits, it’s earned through quality

The time has come to refine what is expected of benefits programmes, especially in consumer-savvy Singapore

By Philip Steggals, Managing Director, Kadence International

 

Earlier this year author Alena Dillon wrote a piece in the Huffington Post in which she jokingly described the suffering she felt upon losing her gold card status at Starbucks. When her gold card work colleagues celebrated a text message from Starbucks offering them a discount on a new menu item, she went along with them, too embarrassed to reveal she no longer bought enough venti-half-caf-double-frapps; crest-fallen to not be considered “one of them”. Around the same time, in the Guardian newspaper, Daisy Buchanan wrote an article detailing her obsession with booking holiday flights based solely on how many air miles she could earn and how far they could get her on her next holiday. And back in 2012 in a commentary in the Singapore Business Review Chris Reed noted that benefit programmes in Singapore had become so driven by discounts and rebates that Singaporeans were becoming highly adept at getting discounts on their discounts. These three entertaining pieces of journalism serve to highlight that loyalty programmes continue to grow in influence, tapping into consumers’ innate entrepreneurial spirit.

 

How did these programmes begin?

 

The modern template for these programmes was formed in the 1980s when the US deregulated its airline industry and giant airlines, who had hitherto experienced little or no competition on their routes, panicked at the fear of losing their previously loyal customers. American Airlines moved first, launching the eponymous, frequent flyer programme. Everyone else fell into the slipstream. However, some of the earliest known formal loyalty programmes go back to the 1800s when companies selling flour and oats would put a stamp on their boxes which could be accumulated and posted back to the company to receive a complimentary pot or bowl. An enduring practice, currently being used by Cold Storage and Fair Price and their stamps for cook ware programmes.

 

Today we have reached the point where it is difficult to think of a major consumer category where there isn’t some sort of benefits programme available. The Kadence team recently carried out proprietary research looking at benefits programmes in Singapore – one of the most saturated and competitive consumer markets in the world. We learned that in each of the mobile service provider, auto, insurance, airline, bank, credit card and café sectors more than 50% of Singaporeans state that it is important that a company offers some sort of benefit programme in order to even be considered for their business. And for a whopping 91% of Singaporeans, some attention is paid to benefit programmes when selecting product or service providers. Our research also informed us that 6 in 10 Singaporeans have moved their business from one company to another purely to take advantage of a benefits programme. So, if you don’t have a programme in place, maybe you should, no matter how simple, simply in order to compete.

 

Customer retention through loyalty programmes

 

We have established that these programmes are integral to retail business acquisition, but what about their role in generating loyalty within existing customers? Here, the academic community is not fully aligned on the long term retention benefits of such programmes. The only area of agreement in academic circles is that tier or threshold based programmes are proven to deliver an increase in purchase frequency. There is a salad restaurant in Raffles Place where I become a regular fixture when I approach 7th or 8th stamp, and I am sure their owners would agree with the academics! Of course we can’t discuss benefits of programmes in Singapore without talking about credit cards. For years the tag line “a card for every occasion” has been the hook of the greeting card industry, but it is safe to say it can now be applied to how Singaporeans view credit cards. Depending on what study you look at, your average Singaporean has between 7-10 different credit cards. We enjoy the various privileges of a dining card, travel card, shopping card, grocery card, petrol card, everyday card, buying red shoes on a rainy Tuesday card and so on…

 

What do Singaporean consumers want and expect?

 

Our research revealed that for Singaporeans across all consumer sectors the feature they most desire is a benefit programme in rebates, and by an overwhelming extent – 77% of us in fact are seeking rebates. It is difficult to know for sure if they are what Singaporeans have always prioritised or if the rebates phenomenon has spread from the credit card sector to all others. However, a very clear conclusion that we can draw is that benefits programmes are now an acquisition tool with little thought to retention. Best practice in customer retention remains unchanged; you must deliver good value, quality and service. Brands are moving into dangerous territory if they become fixated on acquisition to the detriment of the obvious job of keeping existing customers happy – and not just happy, but happy enough to become your advocates. A few years ago a business book called Raving Fans (Blanchard & Bowles) made a simple but important point: satisfied customers aren’t good enough, you need your customers to be raving fans in order to make money.

 

Our recent research drove this point home powerfully – and highlighted that it’s simply not correct to assume that all Singaporeans are habitually brand promiscuous. We asked “if you were impressed by the quality and value of a brand or company’s product or service what would you do?” 1 in 5 said that they would use social media to “sing their praises” and more than half said they would positively mention the company to their family, friends and colleagues.

 

Our research also showed that not all Singaporeans are cynical about rebates and rewards, only 12% of respondents felt that in some form or another they end up paying for the perks they receive. However it is possible to imagine a day in the not too distant future where every purchase we make comes with a discount and it is at this point where consumers will start to question where the true value in their purchases rests. True emotional loyalty and advocacy can be achieved amongst Singaporean consumers – it means brands reprioritising their efforts on committed, long-term relationships, rather than passionate but shallow dalliances. 

 


 

About the Author:

Philip is the Managing Director of Kadence International. For more information visit www.kadence.com/singapore

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