Outsourcing Loyalty Schemes -----------------------------------------------------------------------------------------------------

Sept 04, 2004 - The Star


MANY organisations, sooner or later, realise that an effective way to retain customers and keep their loyalty is to offer them some form of incentive which, more often than not, takes the form of loyalty programmes.

The most common and visible varieties seen in the market these days are those that give customers membership within a store or a chain of stores, often with an accompanying card, that entitles the customer to amass reward points for purchases. The amassed points can then be exchanged for gifts that are often listed in a catalogue.

This is the most common variety found in Malaysia, especially with regard to retail organisations with the two most well-known loyalty programmes in Malaysia – BonusLink and RealRewards – although there are many others, such as those offered by banks or credit companies, as well as those that can be found at most petrol stations.

Until recently, such programmes were generally run either exclusively or partly by the organisations themselves, or at least by an internal department,” Ooi Hooi Cheng, general manager of Customer Loyalty Solutions Sdn Bhd (CLS), tells BizWeek during an interview. She says that today, such programmes can actually be outsourced to companies like CLS.

CLS, says Ooi, was established to provide loyalty-marketing solutions to companies that want to build, maintain and nurture long-term and lasting relationships with their customers, especially through loyalty programmes but lack the requisite expertise, experience, resources as well as the necessary organisational capabilities, which can be substantial in certain cases.

Quite obviously proud of CLS, which she feels can be turned into a successful model of an integrated, loyalty solutions provider in Malaysia, Ooi, who possesses more than 20 years' experience in the industry (having begun her career with stalwarts like BonusLink and RealRewards), notes that with the ever-growing demand from customers for greater value and an increasingly challenging marketplace, customer loyalty matters more than ever and a loyalty programme is actually a strategic imperative.

“However, to initiate and manage a successful and effective loyalty programme, a company would need to spend a lot of money, or rather, invest a substantial up-front outlay in terms of technology infrastructure and resources,” she says.

Another important point, she adds, is that many organisations that already run such programmes do not have the resources or knowhow to turn the masses of information they collect into interactive and actionable data and loyalty marketing solutions.

Thus, Ooi says, what CLS has done is to design a loyalty solutions business model that is flexible enough to meet most clients' needs, and combined with CLS' expertise and experience, can be used to customise a loyalty programme or simply enhance an existing loyalty programme.

The business model Ooi refers to is not simply one that can be used to install a loyalty programme as and when one likes. Rather, it is one that can be used for loyalty programmes both for B2B (business-to-business) and B2C (business-to-customer) like the ones used by a multi-merchant coalition (e.g. the BonusLink programme).

Designed with five core components, the CLS model contains the elements necessary to run a successful loyalty programme without high start-up costs since it, in effect, provides the necessary infrastructure used to run such programmes. Ooi says that it is because these elements are in place that costs can be saved.

The components include a multi-channel data management tool, a fully equipped call-centre, a central hub to take care of the sourcing, warehousing and distribution of the goods, marketing support services and a proprietary, sophisticated IT system developed by CLS' holding company, Advance Information Marketing Sdn Bhd (AIM).

In addition to the business model offered by CLS, the company also has a team that specialises in marketing process, customer analytics, campaign management, backend procurement and IT infrastructure support, Ooi says, adding: “Therefore we can propose, conceptualise and strategise marketing loyalty programmes that belong to the client.”

Ooi says one area with potential is that of B2B programmes, different from the usual programmes like BonusLink that usually deal with fast moving consumer goods (FMCG), as B2B programmes can benefit businesses according to their different business models, help profile their business partners and also enhance their business relationships.

Already one year in the market, Ooi says, CLS is presently managing loyalty programmes for a number of multinationals like L'Oreal Malaysia Sdn Bhd, American Home Assurance Co Malaysia and Kao (M) Sdn Bhd, while providing technology and procurement support to various financial institutions.

“We are expanding our infrastructure and resources to enable us to manage new business growth as we hope to add more international and local brands to our portfolio within the next six months,” Ooi says, adding that she expects revenue to increase to RM7mil by the end of 2004.