Interview with Berlinda Lim, Country Manager ICLP, China. With responsibility for the Beijing and Shanghai offices, Berlinda specialises in CRM consulting and loyalty strategy in the retail, FMCG, financial and hospitality industries. With over 15 years' experience in loyalty marketing, she regularly speaks at industry conferences, most recently the 2013 China CRM Summit. Bringing a strong technical background to her CRM consultation practice at ICLP, Berlinda helps clients determine and deliver the right loyalty solution to meet their business objectives.
Q1. What is the state of the loyalty market in China?
Over the last few years the Chinese loyalty industry has undergone a period of steep growth. The landscape continues to expand and increase in complexity due to multiple factors driving change simultaneously; more competition from international brands, new technology, emerging channels of interaction and shifting consumer expectations.
Whilst China is still referred to as an emerging market, the significant loyalty programme proliferation in recent years means that Chinese consumer interest and intrigue is still increasing in what loyalty programme membership can offer them in enriching their shopping experience. Whereas consumers in more mature markets are demonstrating fatigue with programmes, having been active members of loyalty programmes for over a decade and becoming ubiquitous in their daily lives, from grocery to petrol, from credit cards to air travel.
There are a multitude of brands competing for the share of wallet of Chinese consumers and they are experimenting with new technology and social channels to capture their attention. Chinese consumers are spoilt with choice and have become more discerning and sophisticated. They now seek differentiated treatment in communications, benefits and recognition; they expect to be communicated with content that is relevant, offered rewards and benefits that are customised and be recognised individually by a brand.
Q2. How do brands differentiate themselves?
It’s key for a brand to employ a marketing approach that differentiates their brand in a sustainable and strategic manner for the long term and a well-designed and optimised loyalty strategy can help achieve this.
With many brands in China using a loyalty programme as a core element of their loyalty strategy, standing out from the ‘me-too’ crowd can be challenging in achieving core differentiation.
A loyalty programme planned with clear commercial goals in mind and a well-designed financial model allows the programme to give a reasonable payback to members for their spending whilst still managing to keep the programme costs under control and in line with objectives. It’s important that members have a sufficient level of gratification in receiving a reasonable return for their effort in point collection. It is also essential that the technology to support the redemption experience allows members to redeem their points conveniently and in the most appropriate way; in retail the ability to redeem at point of sale is crucial, while in industries without direct customer touch-points (such as airlines and credit card) need to look at the importance of emerging channels like mobile capability.
China Merchant Bank (CMB) is a good example of a brand differentiating themselves by focusing on growing their mobile strategy, which has been an important step forward for their business. Their target is the affluent PMEB segment (professionals, managers, executives and businessmen) who tend to be more tech savvy and always on the move thus are sticky to mobile as a channel. CMB is the first credit card in China to offer a mobile platform, with comprehensive capability:
- Account management - balance transfers, foreign exchange, payments, air travel booking
- Lifestyle assistance – a shopping portal for fashion, movie tickets, air travel booking, mobile top-ups
- Finance assistance – financial updates, CMB finance product information, promotions, branch locator, and customer service
- Conceptually, the CMB mobile platform consists of banking feature complete with a shopping platform to drive credit card billing.
One last important point for brands in China is to focus on their loyalty strategy as an integral part of their wider marketing strategy – not as an add-on. Too often a loyalty programme is disconnected and managed separately from the brand, which doesn’t work. A loyalty programme should be branded, communicated and managed as a core product of the brand. We have witnessed Asia Miles, our client for more than 10 years employing rigorous discipline in investing in communicating their programme, making it one of the leading programmes globally.
Q3. What do you think the biggest opportunities are for brands in China?
The greatest opportunity we see is for brands to more effectively adopt a data driven loyalty marketing approach to better understand their customers and drive engagement through more relevant and targeted communications. To achieve this, data needs to be firmly at the centre of any CRM/loyalty strategy to help improve:
- Acquisition – in acquiring members, brands can plan for how they obtain key member data to support their unique identification and to enable a personalised and individual communication approach
- Usage – combining the analysis of qualitative data (demographics, lifestyle, communication interactions, survey responses etc.) and quantitative data (purchase behaviour, spend amount, items purchased etc.) creates a richer individual member profile including their behaviour and association with defined member segments. More relevant communications can then be further tailored to specific segments and their lifestyle
- Interaction - keeping pace with the evolving needs of customers and tracking their interaction behaviour at certain channels to increase engagement and build their share of mind
- Customise – with rich data insights of the member base, each member can be targeted with relevant offers and content customised to their needs to inform and drive specific consumer behaviour and ultimately long term loyalty.
Q4. How important are the emerging channels of mobile and social for China?
The penetration of mobile and social in China has been undeniable, with 78.5% of internet users going online via a mobile device and 460 million mobile phone internet users in June 2013*. As China has a limited presence of global social media platforms, local social platforms have been developed (such as Sina Weibo – similar to Twitter and Renren – similar to Facebook) supporting the growth in consumers’ social needs.
WeChat, is a mobile, text and voice messaging communication platform (similar to WhatsApp) which started as a simple IM mobile application and has grown rapidly into a mobile social media platform, with an easy-to-use user interface and voice recording capability. In just two years since launch, WeChat has overtaken Weibo as the leading social platform in China with over 400 million registered users, showing the success of a social network platform on the move.
Following this success, WeChat has been aggressive in introducing new features on the platform, such as built-in QR scanner, ability to check bank balance, transfer of bank funds etc. They have also heavily commercialised the platform expanding capability beyond just IM – allowing for blogging and individual brand pages. A brand can broadcast updates and promotions as well as integrating their existing mobile capabilities for checking point balances, account balances and fund transfers.
The success of WeChat demonstrates the rapid growth and importance of mobile and social for Chinese consumers. Both local and international brands have been eager to engage with consumers in China across these social platforms and understand their commercial potential
Maybelline, the global cosmetics brand worked to understand which local networks were most successful for their brand, discovering that whilst engagement was equal across Renren and Sina Weibo, there was a higher propensity for purchases within their Renren community. This gave Maybelline the opportunity to use customised content and communication strategies on both platforms, to achieve the best results.
Whilst mobile and social penetration continues to grow, the traditional channels of engagement are by no means forgotten. In a Forrester global research study commissioned by ICLP in 2012, SMS communication as a channel of loyal engagement proved to still be very relevant for consumers, with on average 36% of all Chinese consumers responding to an SMS from a brand in the last 6 months. In addition, our experience in working with brands in China has shown that MMS communication can also be very successful and at times, has been more effective in driving engagement than email communication.
The research did support the trend that digital channels have overtaken the more traditional methods of brand engagement, with visiting a website being the most popular channel. On average 71% of Chinese consumers have visited a website of a brand they are loyal to in the last 6 months, 58% have gone into a store and 54% have interacted via email. Appreciating that physical accessibility to a store can be a challenge, the shift to online interaction and transactions has been complemented by brands enhancing the proposition and experience in this channel through preferential pricing and superior logistic network.
Whilst brands must adopt a multi-channel engagement strategy, they need to understand the channel preferences of their customers and prioritise their focus and investment in the areas which will drive the most business impact and loyalty.
Q5. What is the future for loyalty/CRM in China?
The rate of adoption of customer relationship strategies will only continue increase for brands in China as they emerge from their phase of accelerated growth. In the last few years, their business priorities have been customer acquisition, brand building and expansion out from Tier 1 cities. Brands will find that their existing marketing levers of promotions and price discounting results diminish as consumers become more discerning and are spoilt with even more choice. Brands will slowly come to the realisation that a loyalty strategy offers a more sustainable long term approach to increasing more commitment and advocacy from their customers.
Brands with existing loyalty programmes should also re-evaluate their customer value propositions to ensure they continue to meet consumer needs for reward and recognition and continue to meet their business objectives. Furthermore, with many similar initiatives, there is a significant opportunity for brands in China to differentiate themselves by optimising the design of their CRM programme. The brands who will be most successful will be those that leverage global loyalty and CRM best practice and successfully implement those insights in an appropriate way to meet the needs of the local consumer.
* The 32nd Survey Report by CNNIC (China Internet Network Information Center)