Spotlight on Latin America

29 December 2011

Latin America's growth as a region is a relatively new phenomenon  . Until now the majority of Latin American economies have displayed resilience in the face of the global downturn, and they have seen average GDP growth in excess of 7% per annum. However the world economic crisis has finally started to catch up with the region, and although the growth will continue, it will do so at a slower pace. So with these important economic points in mind, what is the impact for brands striving to gain greater market share and increase customer retention and loyalty?

State of the nation

The Latin America region has over 500 million people living in twenty countries, with a regional economy of over USD5 trillion. Brazil is the most populous country in the region, with 32% of its population and 40% of its GDP, followed by Mexico with 18% of the region's population and 18% of its GDP.

Since the 1990s, South America has experienced great economic development, with Venezuela, Colombia, Argentina, Uruguay and Peru growing their economies by over 8% per annum. Fiscal policies have been heralded the key driver of the region's overall economic performance. The growth in Brazil in particular has also been boosted by the hosting of 2014 World Cup and the 2016 Olympic Games in Rio de Janeiro, although its economy is expected to grow at a slower pace over the next few years1.  

Until very recently, brands had to develop country-specific strategies in order to pursue increased business within individual countries, but did not consider the potential synergies and growth that could come from viewing these countries as a region.

Customer acquisition versus retention

In the past five years 60 million consumers jumped from poverty into a consumer class, and half of those are from Brazil. This emerging social class is causing a tremendous positive impact in the economy, especially in housing, automotive, food, travel, cosmetic, telecoms and of course retail. This in turn has meant that brands from these industries have had to keep pace with a rapidly changing consumer, adapting their marketing strategies from acquisition to retention in a short space of time.

In this scenario of increasing investment and promising growth, competition has become even more intense and as a consequence, companies in Latin America are, rightly, giving more focus and attention to the relationship with their customers. Companies are paying more attention to retention, seeing the value of data analysis to better understand customer behaviour, to promote data-driven communications and naturally to increase spend and frequency of purchase.

Although Latin America is still an immature market for loyalty services when compared to North America and Europe, companies have been recently demanding CRM and loyalty program services as a way to get closer to their customers and start a long term relationship with them increasing retention.

Of course effective competing in and winning the fragmented trade market can have a tremendous impact on the performance of consumer goods companies in Latin America. The sooner companies embark on this journey, the greater and more sustainable the benefits will be2.

So, how do brands focus on acquiring those customers likely to repurchase? Well, essentially, they need be provided with experience and added value, and all loyalty applications fall into one, the other, or both of these headings. Overall, customers stick with businesses that give them these two things.

Indeed, from our experience the approach based around recognition (or added value) seems to be more enticing to Latin America consumers as an engagement strategy. For example consumers are more interested in leisure and entertainment reward experiences (music concerts, movie premiers or trade fairs) than North American and European customers, who are strongly driven by points.  

Loyalty in action

One good example of a brand has realised significant success from a recognition loyalty programme in Latin America is InterContinental Hotels Group. Their IHG Diamond Club programme has approached loyalty in a different way, by targeting executive assistants and incentivising them to book their hotels for senior company executive's travel on business. Their approach focused on recognition rather than points, and the results speak for themselves - it now has over 9,000 members and revenues increased by 320% since inception. They also recently won a Colloquy award for loyalty innovation.

The Latin American mobile and broadband market also has many instances of loyalty programmes. Telmex Mexico, for example, developed a programme called Fila Cero,focusing on teenagers and young adults. Fila Cero was originally designed to offer these users access to entertainment features like music concerts, movie premiers or trade fairs.

Also, Telefónica de Argentina designed multiple loyalty programmes for their broadband users. One of them is an e-learning programme specially designed for school children. The Centro Virtual de Capacitación (Virtual Training Centre) is a comprehensive educational value added service (VAS) that allows Telefónica to generate a positive brand image among two main audiences: children (potential future customers) and fathers (present-day customers).

In Brazil, the coalition programme Multiplus has become quite popular, after a significant investment in TV advertisement campaigns, and companies that never thought about rewarding their customers started to think about it. This trend now continues, however many brands are now starting to consider the options available to them to support their loyalty needs and help their businesses generate greater revenue, and more profitable customers - from the benefits of taking a customised loyalty approach  to joining a coalition programme .

Even though there has been a growing interest in loyalty services, companies in Latin America are still learning the steps they need to pursue to build a relationship or loyalty programme. In doing this they will be in a much better position to grow and to effectively in an increasingly competitive market.  


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