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Marketing Strategy: A billion rand industry revealed

by Bruce Conradie

South African consumers pay almost a billion Rand a year to belong to customer clubs: a “hidden” industry revealed for the first time in a new report.

“Customer Clubs in South Africa 2004”, a survey conducted by Razor’s Edge Business Intelligence and World Wide Worx, reveals that South African consumers hold 4,4 million club memberships with commercial organisations, most of which charge fees for the privilege. The monthly club membership revenue of the 28 clubs surveyed is an estimated R69,5 million, and the top four clubs command 80% of the combined total revenue.

Surveyed clubs include those offered by clothing retailers (for example, Edgars Club), furniture retailers (Morkels Club), and medical aids (Discovery Vitality).
Customer clubs are often confused with loyalty programmes. The research shows that the clubs provide a set of benefits in exchange for a fee, whereas a rewards programme allows the customer to accumulate loyalty points and redeem these for a reward. The one is a profit centre, the other a cost centre or marketing cost.

The clubs typically exist as an extension to the company’s product range, rather than to market the products. They generally offer benefits that have little or no connection with the core product, such as movie tickets, which have no direct connection to clothing or health, yet discounts on movie tickets are offered by customer clubs run by clothing and health companies.

It may surprise some to discover that, for many South African operators, the chief benefit of a customer club is not customer loyalty, but profit. Clubs make money. Any gain in customer loyalty that might accrue is a bonus.

Only two clubs assessed in the survey were regarded as growing passion for the core product. These were the Harley Owners’ Group (HOG) and the Kaizer Chiefs Supporters Club (KCSC).

All but one of the customer clubs surveyed required their members to pay a membership fee. The fee varies from R30 a year for the entry-level tier of the Kaizer Chiefs Supports Club to R1 200 a year for the Backbeat music club. These numbers add up to close to a billion rand a year.
Customer Clubs are distinct from loyalty programmes in that members pay a membership fee, do not accumulate points for their activity, and enjoy a fixed set of benefits. Yet, despite the greater profit they bring to club owners, they have little profile when compared to loyalty programmes.

Bruce Conradie is director of Razor’s Edge Business Intelligence and principal researcher for “Customer Clubs in South Africa 2004”. Contact him on bruce@razorsedge.co.za, or by telephone on +27 11 792-4140 or mobile +27834614130

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Posted in the category: Strategy

IT Strategy: Tapping the business value of the Intranet

by Deidre Dawson

Intranets have come a long way since the early 1990s. Originally the preserve of the IT department, and used as a loosely controlled domain for technology wizards, an effective Intranet today is an integral part of an organisation’s internal communication and workflow processes.

Historically driven by the IT department, the Intranet used to be a fairly informal arrangement with which the technology buffs would tinker. From this perspective, it’s hardly surprising that when organisations started taking an interest in the Intranet as a business tool, it was a dismal failure. But the Intranet hasn’t been left to languish in the Book of Failed Projects.

Subsequent developments, and a better understanding of which business department should own the Intranet, has resulted in the technology’s potential being harnessed to play a vital role within organisations.
Subsequent developments, and a better understanding of which business department should own the Intranet, has resulted in the technology’s potential being harnessed to play a vital role within organisations.An Intranet should be pivotal in intra-company communications, and as such, it should be controlled and regulated by those responsible for the flow of information through a company – the marketing and communications department. The costs associated with establishing an effective Intranet have also come down dramatically – any project should be tackled in incremental steps, which makes it more affordable as well as demonstrating value at each step.

Larger companies that have dispersed operations can benefit significantly from an Intranet controlled by the marketing and communications department. Consistent company documents can be accessed and created, allowing more employees to engage in the critical process of content creation and submission.
Larger companies that have dispersed operations can benefit significantly from an Intranet controlled by the marketing and communications department. Consistent company documents can be accessed and created, allowing more employees to engage in the critical process of content creation and submission.The human resources department of any company can reap great benefits from an effective Intranet solution. Managing large numbers of employees is a challenging task. As a largely forms-driven activity, the Intranet provides a document repository for procedures and associated forms, and allows for the implementation of work flows to expedite the process of HR management.

Through the Intranet, managers can see who is scheduled for leave during any given time, empowering them to make more informed decisions and better manage their departments through improved visibility. Payslips can be pulled from the payroll system by each employee, providing comprehensive yet confidential access to their critical information, while employees can maintain their own personal details through the Intranet, reducing the hassle factor for HR.

Although available in the HR systems, the information is not accessible to everyone in the organisation. The intranet becomes the window to certain HR information. The Intranet brings intelligence to the HR process – managers can drill down into each employee’s leave status to assess abuse, or trends, while each employee can view their own leave status and schedules, helping them keep track of what they have and what they’ve used up to date.

The Intranet should empower knowledge experts, rather than IT professionals, to manage and publish content, dramatically improving the process and providing a single easy-to-access repository. The Intranet can also be used as a Web meeting centre, providing a forum for employees to interact and even conduct internal discussions and meetings.
The Intranet should empower knowledge experts, rather than IT professionals, to manage and publish content, dramatically improving the process and providing a single easy-to-access repository. The Intranet can also be used as a Web meeting centre, providing a forum for employees to interact and even conduct internal discussions and meetings. Other functionality can include collaboration to bring together company employees and connect them to business partners, suppliers and customers, to streamline efficiencies and workflow automation as well as.

With the acceptance of email as a preferred communication mechanism, the need for accurate and consistent information throughout the enterprise has increased greatly. Companies need to impart sensitive information in a controlled manner – the Intranet is an ideal platform to enable this.
With the acceptance of email as a preferred communication mechanism, the need for accurate and consistent information throughout the enterprise has increased greatly. Companies need to impart sensitive information in a controlled manner – the Intranet is an ideal platform to enable this.

However, an Intranet must attract users in order to be successful. If employees don’t use the facility, it will be a failure, no matter how much functionality and business value it may add on paper. Therefore, to ensure success, the creation of an Intranet has to be an inclusive process, providing employees with the tools, documents and information they need to do their jobs better. With this approach, an Intranet can deliver significant improvements in business processes and employee productivity.

Deidre Dawson is a director of Technology Concepts, a provider of practical and cost-effective business solutions. She can be contacted on (011) 803 2169.

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Posted in the category: Strategy

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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