These days, whenever we go shopping for groceries, clothes, shoes… staff at the check-out counters always asks if we have a membership card for earning incentive points, and then we’d dutifully take it out and let the staff to clock new points on to it. Bonus points, when accumulated to a certain amount, can be used to redeem gifts, discount coupons, or other offers under the same company group.

The idea of incentive rewards started many years ago with the gas stations (‘green stamps’), the airlines and credit card companies. Now, the idea has caught on as more and more retailers design similar schemes – to keep customers within their belts.

In Hong Kong, loyalty schemes have also been around for quite some time. One of the earlier players is Jusco. Its ‘J Card’ is very popular among housewives who do their shopping daily. This card offers products with discounts, members-only sales days, and newsletters with the latest promotional offers via email or posts.

Octopus card, with its enviable high penetration in the Hong Kong, launched ‘Octopus Rewards’ rebate scheme a while ago. Octopus now partners with different retail outlets to jointly promote loyalty schemes for mutual benefits.

‘MoneyBack’ is another similar scheme launched by Park’n’Shop a year ago. This programme started first with the supermarket chain, but is now extended to other non-supermarket outlets under the Hutchison Whampoa Group – such as Watsons, Fortress, hotels, internet and telephone services… Extending the catchment stores aims to expand the number and range of customers to beyond housewives.

Meanwhile, Jardines has joined hands with HangSeng Bank to launch ‘enJoy Card’ – another reward scheme hoping to share a slice of the already competitive market. Customers can earn reward points at all Jardines’ shops such as IKEA, Mannings, Maxims Catering and more. Although their network of shops is bigger than ‘Octopus Rewards’, their promotion is not as far reaching and therefore, customers still do not know how their reward scheme works.

These bonus point schemes are a type of loyalty programme. From a wider perspective, we call this ‘customer relationship management (CRM)’. There are other CRM methods available of course, such as collecting limited edition items, stamp cards, coupons…. All these have the ultimate aim of customer retention and make them come back for more spending.

The development of CRM is linked to technological advancement. Technology has made possible that a single click will enable marketers to check if we are a regular customer, where we live or work, our spending habits, and our income level. With these kinds of information, companies can customize special offers for their customer periodically.

CRM is a major marketing tool now. Besides offering discounts to customers, CRM also opens the door to new marketing opportunities, such as joint or cross promotions with offer of incentives and discounts and privileges for purchasing across brands. Financial institutions are active exploiters of CRM – their own branded credit cards are tools for capturing customer information for even more promotions.

Further good reads:

CRM Introduction: http://www.exforsys.com/tutorials/crm/crm-introduction.html

CRM data privacy: http://www.theclientsideblog.com/archives/ideas-experiences/the-future-of-crm-data-and-pri/

CRM for smaller business: http://www.youtube.com/watch?v=G0Ln4H_deGU

05 January 2009

Redundancies should be a last resort as businesses review costs in the New Year, the Chartered Institute of Personnel and Development (CIPD) said today.

The CIPD has estimated the real cost of redundancy can reach £16,375 per employee laid off, even before hidden costs like higher labour turnover and a fall in staff productivity are added in.

It is urging employers to plan for recovery by retaining their people, rather than downsizing and risking long-term damage to their business.

CIPD Chief Economist John Philpott said:
“Businesses are under huge pressure right now and restructuring is a fact of economic life that can never be ruled out. But while making people redundant can seem one of the most straightforward ways of cutting costs, redundancy is itself a significant cost to most organisations with a number of direct and indirect or hidden costs. This is particularly true if redundancies are an employer’s first resort in difficult times and have to be quickly reversed by renewed hiring when economic conditions improve.

“While the average direct cost to employers of making redundancies can reach £16,375, on top of this are hidden or indirect costs resulting from the effect of redundancy on survivor employees, such as higher labour turnover and a fall in staff productivity.

“This is likely to be a conservative estimate and provides a hard business case for why redundancies should be a last resort in the downturn. We urge employers to plan for recovery by investing in and growing their people, rather than reducing their workforce.”

The CIPD has created a new formula to help employers realise the genuine cost of redundancy on their business:

Real cost of redundancy = (n ×R) + (x ×H) + (x ×T) + ny(H + T) + Wz(P - n)

Where:
• n = number of people made redundant
• R = redundancy payments
• x = number of people subsequently hired
• H = hiring costs
• T = induction/training cost
• y = percentage quitting post redundancy
• W= average monthly staff salary
• z = percentage reduction in output per worker caused by lower morale
• P = number of people employed prior to redundancies

John Philpott said:
“The formula shows how redundancies can impede quick recovery from the downturn. This doesn’t mean that restructuring can’t take place but it should be with a view to the long term and not short term cost cutting.

“Employers should hold their nerve and focus on retaining talent and investing in the skills of their people. It is these people with their commitment, productivity and ability to add value who will ultimately keep individual businesses and the whole of the UK competitive, and put us in a strong position to recover from the downturn quickly.”

(Source: http://www.cipd.co.uk/pressoffice/_articles/050108Costofredundancy.htm)