A new study by customer relations development firm Collinson Group shows that successful loyalty programs are still critical for brand engagement with affluent middle-class consumers in mainland China despite a global decline in memberships.
Out of a survey of 1,524 respondents in the top 10 to 15 percent of earners split equally across China, Hong Kong, and Singapore, 72 percent of mainland Chinese consumers “regard themselves as engaged members of loyalty programs.” This positive reaction is in stark contrast to a negative global trend for loyalty programs, showing the importance of localizing strategies for the China market.
Collinson Group's report, which was conducted in January by SSI Research and included responses from 6,125 participants around the globe, found that membership to loyalty programs from 2014 to 2015 fell 20 percent. These included programs for supermarkets, airlines, retailers, hotels, media companies, cafes, and credit card providers.
The findings suggest that loyalty programs are key in the overall success of a brand in Greater China—89 percent of mainland Chinese respondents and 87 percent from Hong Kong agreed that a loyalty program makes them want to spend more. But only 45 percent of respondents in Hong Kong feel engaged in loyalty programs, and while 34 percent of mainland Chinese consumers “feel loyalty programs have increased in value over the past year,” 25 percent in Hong Kong feel the same. Collinson Group's director Chris Rogers called Hong Kong's survey response an example of what can happen if companies “become complacent.”
“China, Hong Kong and Singapore are vital markets for brands, and we’re seeing a much higher demand for personalized, relevant, and digital customer engagement initiatives than before,” Rogers said in the report. “Given the importance of affluent middle-class consumers on the fortunes of companies, brands must lift their game and focus on how they recognize, engage and reward customers.”
For mainland China, creating a digital platform for interacting with fans of the brand is important for keeping them interested, as 27 percent of mainland Chinese “can't do without” an app for their loyalty program of choice. More than 50 percent of those in the survey said they use loyalty program apps. There is certainly room for brands to grow on this front—for example, as of the end of last year, only 12 percent of luxury brands had loyalty programs on their WeChat account.
The report also revealed that Hong Kong and mainland Chinese consumers both want something different out of a loyalty program. For mainland consumers, it was most important to be able to “identify with a brand,” which resonated with 76 percent of respondents, while a “seamless customer experience” and “ease and efficiency” followed closely at 75 percent and 73 percent, respectively.
These issues were all less important to Hong Kong consumers, who mainly want to “be treated as an individual” (66 percent), while “access to a range of awards and benefits” is almost equally important at 65 percent. “Ease and efficiency” is important to 49 percent of Hong Kong respondents. Rogers said that brands need to realize that Hong Kong consumers have different financial goals than those on the mainland and thus wouldn't find satisfaction in the same loyalty program system.
“The affluent middle class here values spending time with, and providing for, their families, as well as saving for the future,” Rogers said. “These rank far higher than driving a good car or going on a luxury holiday. Brands should seek to tap into what motivates their customers, instead of reaching for only discounts or material goods as rewards.”
To do this, the report suggested that brands find ways other than monetary rewards to engage their customers. This includes creating rewards that are “experiential, lifestyle, and life-goal oriented.”