Michael Norris, China Consumer and Tech Trend Researcher in Curio and AgencyChina, researches and consults how China’s economic, societal and technological changes affect business and consumer strategy.
It has been a little over two years since Jack Ma first proposed ‘New Retail’, the seamless integration of offline and online retail. It’s been an eventful period of both continuity and change.
China’s size and speed is constant. This year, China is expected to post retail sales of $5.6 trillion and overtake the US to become the world’s largest retail market.
However, change is afoot. China’s e-commerce market continues to post impressive year-on-year growth, but patchy penetration across different product categories and increasingly expensive user acquisition have prompted some businesses to re-examine their physical retail presence and how they form a ‘single customer view’ across online and offline channels.
As a firm dedicated to connected loyalty marketing on and offline delivering revenue and profit across every channel, Splio is keeping a watching brief on the changes New Retail is bringing to customer relationship management and loyalty programs. With a tip of the hat to Jack Ma, we have dubbed this New Loyalty.
New Loyalty entails a number of different concepts. One of these is Everyone’s a Member.
If we think about traditional customer loyalty programs, rewards program membership is opt-in during or after purchase. In this model, the loyalty program’s purpose was to identify and understand customers and their buying patterns. Loyalty incentives like merchandise, coupons, points or advance purchases were given in exchange for data relating to purchase information.
However, in China’s New Retail, we’re seeing membership as a precondition to purchase. ‘Soft’ and ‘hard’ gateways to payment – like downloading an app or facilitating payment through a WeChat Mini-Program – are being used to identify and understand customers’ purchase behaviors from the outset.
Carrefour and Walmart, for instance, offer self-check-out in their supermarkets for customers who use a WeChat Mini-Program. The catch? You have to bind your WeChat profile and hand over your phone number. That’s enough information for them to marry up your previous purchase history across multiple channels. In this case, convenience exchanged for data.
Other companies offer typical loyalty incentives upfront. Luckin Coffee gives a free coffee when you download their app. Tim Horton, another coffee chain, doesn’t do freebies, but it gives you a generous discount on your first purchase when you sign up for their rewards program in-store.
The membership-first, purchase-later approach means all customers are members. That turns traditional loyalty programs, where only a fraction of customers are members, on its head.
The Everyone’s A Member approach invests traditional funnel stages and results in a significant improvement of the bottom of the funnel.
This New Loyalty approach has clear advantages. For starters, penetration in customer loyalty programs is a lot higher. In some cases, like Hema and Luckin Coffee, it sits at over 90%. With more customers as part of your loyalty program, there’s a significant scope to craft or re-craft loyalty programs. They can be made more effective and more engaging with the additional customer intelligence brought. That means better segmentation, more effective rewards for each value segment, and an increased contribution of members to top-line revenue growth.
As important for companies operating in the China context is using phone numbers to obtain a single view of the customer in-store, on e-commerce and on social media. That gives an indication of how social engagement and customer purchase intent and behavior stack up.
Systematic identification of your customers solves the missing link between all your channels in China and allows to build and enrich a complete singular view of your customer (SCV).
Everyone’s A Member is a New Loyalty concept that makes a big difference. To find out more about this concept, and what it means for your customer relationship management in China, download Splio’s latest deck on New Loyalty in the New Retail context.
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