Keith Wiser takes a critical view of some South African customer loyalty schemes.

Did I mention that in 2008 I was voted South Africa’s Direct Marketer of the Year? I must be honest, when I received the award I felt a bit like UK musician Phil Collins . . . ‘an overnight success after 30 years’. The following year I was inducted into the DMA Hall of Fame. This felt a bit more appropriate. After nearly 30 years in the business were they putting me out to grass? 

I mention both these awards to indicate that by now I ought to be getting the hang of this direct marketing stuff.

I often say to people that just as I think I am starting to get a handle on direct marketing, somebody invents something new. There was a time, in fact for quite a long time, that I felt I could be an expert on just about all facets of DM. Over the last few years I have had to, reluctantly, admit that this is no longer the case. Direct now requires processes demanding inter-connected disciplines. But that is not what this article is about. In fact, it’s about what is happening totally at the other end of the spectrum.

I live in a suburb called Sandton. According to one of the websites I just checked, it is described as ‘Africa’s richest square mile’. If you travel two kilometres west from Sandton, you encounter the highway that will take you due north to Pretoria. If you continue to travel due west for a further two kilometres you will enter what used to be called a township, Alexandra. It was proclaimed ‘a native township’ in 1912 and, I hate to tell you this, since that time not much has changed. The people living two kilometres on the other side of the highway are actually living a million miles away from where I live. And I am not just talking about the physical surroundings.

I could get into a diatribe about the inequality that still exists in this country, but that is not the point I want to make. This is, after all, a direct marketing publication and not The New Statesman.

Retail space

Over the last few months, more and more of my work has been focused in the retail space and particularly around what we call clubs; started in South Africa about 20 years ago. Some genius worked out that if you had a base of, say, two million customers and you could get half of them to sign up at R20 a month, you could generate an income stream of R240 million a year. Throw in a monthly magazine and a few benefits that suppliers pay for and you are still left with a very healthy profit. And I do mean very healthy. All of this happened long before we had even started to talk about database marketing, never mind CRM and customer loyalty. 

Of course, it was only a matter of time before another genius entered the fray with the thought that these clubs ought to be the very basis upon which one could start to build customer loyalty. But that’s easier said than done and hence the work I have been doing this year.

So what’s the problem, I hear you ask? Well, for starters, it’s not just one problem.

• First of all, there’s normally the guy at the top who’s asking why you are trying to genetically modify the goose. In fact, his normal contribution to the dialogue is to ask why we are not getting the other one or two million account holders to join the club. He is just seeing another 200 or 300 million income.
• Then there’s the merchandising team. They say, Yipee! Look at all those opportunities for free advertising in the club magazine the customer is paying for. For ‘magazine’ please read ‘glorified catalogue’.
• Finally, there’s the poor hardworking club manager, who’s job it is to handle the club members’ complaints and get the catalogue . . . sorry, I mean magazine . . . out every month.

And, of course, no-one is seeing the bigger picture!

The last person to see the bigger picture is the poor customer. Here, of course, I am sharing my experiences with you about South Africa. Our research has revealed some interesting insights:

• Most members can’t actually recall why they joined a club in the first place.
• If they can recall they almost without exception mention either the funeral insurance or the monthly competitions to win education bursaries.

This came as something of a surprise to a number of our clients who offer a bucketload of what they (somewhat humorously) call benefits. Coming back to our township called Alex . . . I do hope a couple of you caught that passing literary reference . . . it’s not hard to see why I am so jaundiced about what has been happening with these clubs for years.

Benefits? How many people living in shacks are really likely to benefit from a ten per cent discount at Mangwanani Spa, South Afica’s leading health resort? How many people travelling to work each day by bus, train or taxi are likely to benefit from ten per cent off their next tyre purchase at Tiger Wheel & Tyres? 

Sheer genius

We have another well-respected and established client who sells insurance via a very cleverly constructed multi-level marketing programme. The basic premise was sheer genius. Turn policy holders into sales people. Today, they have more than 500,000 single policy holders paying them an additional R30 a month for the privilege of being unpaid salespeople. Just run those numbers through your head;  that’s an income of R180 million a year. Don’t worry about the fact that 80 per cent of them are inactive when you have such an income stream.

But here are another couple of interesting insights. The client doesn’t have a clue why the 80 per cent inactives are still happy to part with the R30 each month and, if truth were told, the customer probably doesn’t either.

In April, we carried out some consumer research for one of our motor car clients as part of the development of a customer loyalty programme – another form of club, if you will. 

Guess what the customers told us? They weren’t really interested in competitions, events and special offers. 

They wanted:

• Decent service
• Someone to complain to when things go wrong
• Offers relating to the core purchase (such as vehicles, parts and service).

I suppose I should take the fact that we are now, all of a sudden, it seems, being pulled in to work in this space as a positive sign. 

Those of you who operate in more sophisticated markets may be asking what I am banging on about. Well, on the one hand I thought it might be of some interest to learn a little more about a country that, in spite of its ability to host the World Cup, is in many ways still third world.

 But maybe there are just a couple of other lessons that we can all unpack from this:

• In so many environments customers have the potential to be so much more than they currently are. How many companies right now are busy indentifying new closed communities that they can market to when they are sitting on the ultimate closed community, their own customer base. 
• In spite of our best efforts to abuse them most customers are still remarkably forgiving.
• If we want to give customers what they want it’s probably not a bad idea to deliver what they want and not what you think they want. 
  

Keith Wiser is founder/CEO of 5th Dimension, based in South Africa. Email: KeithW@5thDimension.co.za