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Wise Research An extract from 'The Loyalty Guide 2004' from Wise Research Ltd. 3.3.12 SmartClub (China) SmartClub (www.smartclub.com.cn), launched early in 2003, is a coalition loyalty programme operating in Shanghai. The operating company is a spin-off of interactive marketing agency, Groove Street Ltd, which was founded in 1997. SmartClub bulges with good ideas. It uses consumers' existing cards as identification: either their bank cards or their Shanghai Public Transportation Cards (SPTC), of which some six million are in circulation. Practically every white-collar worker and student in the city uses one of these cards every day to travel on buses, the subway and in taxis. To date, the cards that SmartClub uses mainly are: the SPTC, debit and credit bank cards, and retailer cards. Customers supply full personal data (age, sex, residential neighbourhood, office neighbourhood and profession and email address) on registration via SmartClub's web site (a clever move - computer access pre-qualifies many of the members). They are encouraged to do this by offering them six months free accident insurance (provided by one of the programme's partners, Allianz Dazhong) if they do so fully and correctly. The email address is checked for validity on registration. They can also earn additional SmartPoints by providing details of monthly income, marital status, leisure activities and purchase intentions. Partners include McDonald's, Allianz Insurance, Coca-Cola, Lianhua Retail Group, People's Liberation Daily, the South China Morning Post, eLong, Sport100, and Warner Brothers Cinemas. SmartClub signs a long-term contract with one major company in each sector, which then agrees to use SmartClub as its loyalty programme. The partner buys SmartPoints from SmartClub (at the time of writing, each 100 points costs 2 RMB, worth approximately US$0.24) and awards them at its own discretion. A supermarket with a low profit margin may award points worth just 1% of each transition while an up-market restaurant may award points worth 20% of the bill. Partners can use the points to promote individual produce or high profit lines, or even to encourage business in normally quiet times of the day or week. SmartClub then funds the rewards. Details of all purchases on which SmartPoints are issued are recorded on SmartClub's database. The operators of SmartClub are focusing on the market research capabilities of the programme. Not only can they deliver targeted emails or SMS messages to partners' customers, based on their registration information, but they can actually follow up (using the customers' purchasing records) whether the contact actually generated extra business or changed the customers' behaviour. Partners can ask SmartClub to survey, for a fee, any particular segment of its customers. Based on members' registration data, SmartClub identifies those members who qualify (for example, women aged 30-40 who eat at McDonald's) and e-mails them, offering them 100 SmartPoints for answering a series of multiple choice questions. In a recent survey, 40% of recipients completed their surveys within 72 hours. The results, together with a detailed profile of the respondents, can be presented within a week. Partners can also ask SmartPoints to send messages to members, provided that the messages contain special points offers. The e-mails, because of their very high response rates and trackability, are charged to the partner at rates much higher than normal e-mail promotion rates. SmartClub can even guarantee an increase in sales, by promising to send more e-mails free until the sales generated are more than the original cost. One client asked SmartClub to recruit consumers in a certain age group to a special promotional web site. E-mails were sent to 9,000 members fitting the criteria; some 1,600 joined the promotion. The client also sent 300,000 e-mails via a major internet portal, out of which fewer than 1,500 registered. SmartClub worked with Magnsoft, to launch a user-friendly data mining tool set. The first SmartClub client to use the new system was McDonald's. The system uses a completely visual design that allows clients to click on charts instead of using complicated menus. Because SmartClub's initial partners are mainly in the high frequency/low cost category, a large number of members have only a few points. Rather than keep them waiting until more higher-priced retailers sign up, SmartRewards have been developed. It is not feasible to provide and deliver a physical reward worth only 2 RMB. SmartRewards is a series of services offered by SmartPoints or its partners that allow members to spend low amounts of points for something that they value. Examples are an online dating agency (members post their details free, but pay with Standpoints for introductions), an English "Word of the Day" service via SMS, and employment listings. In January 2004, SmartClub announced that it is to award Shanghai-resident members with SmartPoints each time they take subway, bus, or taxi transportation. SmartPoints earned in this way can then be combined with points earned through SmartClub partner retailers. There are six million Shanghai Public Transportation cards in active use, and the Shanghai Public Transportation Card Company announced that 17 cities around Shanghai will also be using the same system for their municipal transportation, meaning that over 100 million consumers will have the option of earning SmartPoints for their public transport usage each day. According to Henry Winter, SmartClub's CEO, the key to a successful coalition retail loyalty programme is to have an 'unavoidable retailer' so that consumers cannot avoid earning points regularly. That brings them into the programme initially, and reminds them of the programme on a regular basis. In most major loyalty programmes in Europe, the U.S., and Australia, those 'unavoidable retailers' would be supermarkets or fuel filling stations. SmartClub's 'unavoidable' retailer is Shanghai's entire public transportation system. McDonald's also signed a five-year contract with SmartClub following a successful trial programme in summer 2003. In addition to managing the coalition loyalty points programme, SmartClub also provides direct marketing and market research services. The Chinese online travel agency, eLong, is the latest retail partner to join the programme, using SmartClub's data mining and customer predictor capabilities to cultivate and extract further value from its 1 million+ members. In 2004, SmartClub is to increase its marketing activities to recruit more consumers. The company is in detailed talks to expand the programme from Greater Shanghai to other major cities in China. What about the future?
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