Loyalty programmes helping South Africans make it to the end of the month

Loyalty programmes can help cash-strapped consumers make it through the month as they continue to feel the pressure of rising interest rates and skyrocketing food costs. Add to that the increase in the fuel price on Wednesday as well as the need to find alternative power sources and it becomes clear why loyalty programmes have become such a life saver.

According to the Eighty20 XDS Credit Stress Report the double impact of rampant inflation and the 4.25 percentage point increase in the prime lending rate over the past 18 months have eaten into disposable income, while Statistics South Africa announced that food and beverage price inflation has now increased to 14%, the highest reading in 14 years.

Recent Capitec data echoes the Eighty20 findings that average instalments on home loans increased by 26% in a year and 15% for car financing. Eighty20 data also shows that credit card balances ballooned by 23% since last year for the nearly 9 million people in the mass credit market.

South Africans reliant on credit cards and debt

South Africans are increasingly relying on credit cards and unsecured debt, not to buy assets such as a car, but to pay for the basic necessities of food, education, transport and electricity. This is a worrying trend, because if it continues, it can send consumers spiralling into a debt cycle.

FinScope conducted a nationally representative survey of more than 5 000 people to find out why people borrow money. Steve Burnstone, CEO at Eighty20, says people are notoriously vague when answering questions around borrowing and responses should be taken with a grain of salt.

However, in the 2022 survey, 23% of South Africans in households earning less than R10 000 per month said food was the main reason for borrowing money. That means that nearly 6.5 million adult South Africans claim to borrow to feed their families. For households earning more than R10 000 per month, clothes were main reason at 17%, with food not far behind at 10%.

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Loyalty programmes to the rescue

Burnstone says along with creating secondary sources of income such as side hustles, other strategies consumers employ to make it to the end of the month include looking out for discounts and buying down, away from higher priced items.

“Here loyalty programmes help consumers by not only offering cash back on purchases, but in changing behaviour by switching them to often cheaper house brands. Clicks, for example, reported a 15.1% increase in private label sales in its half-year results to end February.”

He says it is therefore no surprise that the top six most used loyalty programmes in South Africa are either grocery or health and beauty retailers. According to the 2022 Truth & BrandMapp Loyalty Whitepaper, loyalty memberships are also growing with the average number of active memberships per customer increasing to just over nine.

According to BrandMapp’s research the top benefit enjoyed by loyalty members is redeeming for cash. In addition, 84% of customers say loyalty programmes influence where they shop, while 56% say it influences the products they buy.

Burnstone says given the proliferation of programmes, it is not surprising that there is a significant level of customer overlap across retailers. The BrandMapp research represents the top-earning 30% of the country (12.8-million adults), living in households that earn more than R10 000 per month.

“Using this study, it is interesting to see how the country’s top loyalty programmes appear to all share the majority of economically active consumers.”

Clicks ClubCard, the largest programme in SA, shares 70% of its members with Dis-Chem, its primary competitor, while 86% of DisChem members are also Clicks ClubCard members.

While 73% of Pick n Pay Smart Shoppers also have a Checkers Xtra Savings card, 85% of Checkers loyalty members are also Smart Shoppers. All of the top six programmes share more than 70% of their members with each of the other programmes, with the exception of Woolworths and Spar.

“High levels of cross-membership are relatively unchanged by income segment and it seems that saving money or buying on discount is appealing, irrespective of how much money you have. Although customers may have preferred retailers, it is clear that they tend to shop at most of the main retailers.”

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Many subscribe to more than one loyalty programme

Burnstone says customers are generally not as loyal to a particular retail brand as retailers would like to believe. “In fact, customers are typically more loyal to a brand of tomato sauce than the store they buy it from. Eighty20 also sees this behaviour using its Terain system, which observes anonymised customer movement from app location data.”

He uses Constantia Village in the southern suburbs of Cape Town as an example. The centre has a Woolworths and a Pick n Pay no more than 50 metres apart. “Over the past three months, 38% of shoppers visiting the Pick n Pay also visited the Woolworths and 52% vice versa. In fact, almost a quarter of all shopping trips to Constantia Village involved customers visiting both stores.”

With most customers already members of all the main retail loyalty programmes and looking to save money wherever they can, Burnstone says programmes need to focus less on how their programmes can acquire new members but rather how they can use them as a tool to drive increased engagement through the smart use of cash-back, discounts, personalised offers and gamification.

“Customers do not mind jumping through a few hoops if there is a real chance that they can receive a meaningful benefit, especially if in these trying times if it helps avoid dipping more into credit. All that is required is to deliver on a compelling proposition that encourages shoppers to step into your store first, before visiting your competitors.”