Loyalty Marketing: what should international brands learn from the Chinese retail market?

Acquiring a new customer costs a brand 5 to 25 times more than a loyalt customer, however, a loyalt customer spends 67% more than a new customer according to the research done by Frederick Reichheld of Bain & Company. China, with $5.6 trillion retail sales, is rapidly overtaking the United States to become the world’s largest retail market, but it is also a difficult market for brands looking for loyal customers that Chinese customers are always looking for better options out of enormous brands.

To set up a well-performing loyalty program for the Chinese market, foreign and local retailers should learn from each other and discover new practical loyalty marketing tactics. Paid loyalty is one of the most inspiring schemes that was first introduced in China by the American retailer Sam’s Club. From 2015 on, Chinese retail giants gradually launch their paid memberships programs such as 88VIP (Alibaba), INTIME365 (Intime Retail), RED CARD (Little Red Book), SUPER (Sunning.com), etc., to be  at the forefront of the New Retail and New Loyalty in China.

Q: What should international brands learn from retailers in China in terms of loyalty marketing?

1. Membership first, purchase later. 

As little as the convenient stores in most neighborhoods to the giant luxurious shopping malls, Chinese consumer’s obsession with memberships is undeniable. By making every potential customer a member, this program alters the traditional funnel, so that the business can build a comprehensive database, make further personalization, significantly increase the funnel volume, as well as identifying higher value market segments.

Just as the funnel evolves, so must the relationship between the marketing and sales department. Leveraging members to sell and market on your behalf creates a paradigm shift in how a business operates. This allows a company to scale accordingly and rebuild trust with their customers.

2. KOL is being replaced by KOC.

In China, loyalty programs can produce powerful and inexpensive user-generated content, and Key Opinion Leaders (KOL) can present the positioning of a brand and bring a wide range of traffic. However, KOLs can be costly with diminishing returns, so a new community Key Opinion Consumers (KOC) is gradually replacing them. 

Consumers are starting to realize that referral messages by a friend/family or a review from a real consumer/fan are more trustworthy and crucial than an influencer’s pitch in China. They are also more than happy to share their own user experiences, great offers, and brands’ services that align with their ethics and identity. That is why most brands are focusing on WeChat to launch their loyalty programs to benefit from WeChat’s existing user base and the entire ecosystem.

3. Distinct & Seamless Experience.

It is challenging to distinguish your loyalty program when all the other businesses are trying to do the same thing. People already have a short attention span. You need to make sure to enrich the rewarding program with meaningful activities. Different marketing tactics can be deployed to earn credits, attend offline workshops, invite friends to join the program, or participate in polls. Data plays an essential role when identifying consumer needs while developing a loyalty program that aligns with your business goals. 

Joy City is one of China’s most famous chain shopping malls with distinct and seamless customer experience. The XaaS (anything as a service) is so intuitive that its members can use the native app to check real-time loyalty points, track parking spots, bind the license plates to the membership, pay the parking fees with credit, etc. Collecting data from physical stores has traditionally been a very strenuous task for companies. The design of Joy City’s loyalty program not only understood the consumers’ needs then solved their pain points but also efficiently collected consumer data to guide tenants on their store operational strategy and structure. This resulted in 3 million members accounting for 88% of their total sales.

4. Build up a Digital Ecosystem.

After a foreign brand enters China and tries to evolve in a rapidly changing environment, they quickly realize that building a localized digital ecosystem is essential. Starbucks China, as the company’s fastest-growing market, is its current strategic focus. Customers in China have completely different purchasing habits, payment methods and expectations when compared to the counterpart market in the US. To capture the Chinese market, Starbucks’ specifically designed its own Chinese digital ecosystem, including rewards, personalization, payment, and even ordering via their various mediums. Its digital ecosystem connects stores, gift cards and mobile app, enabling payment, entertainment, distribution, etc.

Considering different customer’s habits and complexity of usage, it also designed a WeChat mini program named « Say it with Starbucks 用星说 » to supplement their native app. Within this WeChat Mini Program, members can design gift cards with personalized messages and graphics, pay via WeChat Pay with a rewarded coupon, generate a digital gift card and send it to a friend. Your friend can then use it to redeem the amount in a physical store nationwide.

Conclusion.

To scale in this ever-changing market, Western brands might have to start to have a membership funnel to explore more potential loyal customers, with a particular focus on the power of user-generated content, customize their loyalty programs with unique and seamless experiences and localize a complete digital ecosystem. 

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