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.
“Customer clubs are often confused with loyalty programmes,” says principal researcher Bruce Conradie, director of Razor’s Edge Business Intelligence. “Our 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 project’s consulting researcher, Arthur Goldstuck, managing director of World Wide Worx, points out that the clubs typically exist as an extension to the company’s product range, rather than to market the products.
“Customer clubs generally offer benefits that have little or no connection with the core product. Movie tickets have no direct connection to clothing or health, but discounts on movie tickets are offered by customer clubs run by clothing and health companies.”
Conradie adds: “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).
“The KCSC member is already passionate about the core product, namely Kaizer Chiefs itself,” says Goldstuck. “The supporters’ club gives this passion a name and an identity.”
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.