Luring new customers and maintaining existing customers

Burhanuddin Abe Contributor Jakarta

Even for purchases of basic daily needs like soap and toothpaste, Maya does not mind the longer distance to Matahari department store instead of a nearby mini market.

The main reason is by using her Matahari Club Card (MCC) she is rewarded with points that can be exchanged with free shopping vouchers. "I have always loved discounts," said the 29-year-old mother.

The discount is in fact not very large, as it is only one percent of the purchase value. So, Maya gets Rp 10,000 or US$ 1.05 for a purchase of one million rupiah (US$ 105). But, in addition to the points collected by customers to be later exchanged with shopping vouchers, Matahari lures these regular customers with periodic raffles that include attractive prizes like cellular phones, notebooks, household equipment and even a luxury sedan.

Almost all customers, especially women, are attracted by discounts, vouchers, prizes and the like. The huge number of members currently holding an MCC proves the effectiveness of this particular marketing tool.

To date, PT Matahari Putera Prima Tbk, the holding company of both Matahari Department Store and Matahari Super Market, is serving close to two million customers who have signed up since the launch of its promotion on October 27, 2000.

Many companies agree that this type of program has a high rate of success for both maintaining existing customers as well as acquiring new ones. In today's cutthroat competition, any new strategy, especially one that has been proven a hit in other countries, is welcomed. In the case of major department stores and supermarkets, take Matahari and Rimo department store, for example, both are well aware of consumers' fickleness and low level of loyalty. Hence, next to enormous discounts, enter the membership cards with their points, vouchers, raffle and so forth.

Another advantage of membership cards is that the companies can gather consumer data and compile it into a database for further finetuning and enhancement of their services, which, in turn, are expected to create more sales. One of the marketing managers of Matahari said that the MCC alone had boosted the company's sales quite significantly: close to a 40 percent increase on last year's figures.

The club card also helps reduce customer "turnover", which is probably due to both its tangible and intangible strengths. The overly used phrases, like "free, save money, grand prizes, rock bottom prices" and so forth, in the case of this marketing strategy, strangely, seem to reinforce its strength.

Almost every marketer of major companies agrees on the need to focus on building long-term relationships with customers in order to be competitive in today's business environment that calls for more than astuteness in providing genuine customer satisfaction. Vic Hunter, a marketing guru, in his book Business to business marketing, wrote that the cost of acquiring new customers is about 30 percent higher than retaining existing ones. An increase of five percent of sales from existing customers can mean a profit increase of between 25 and 55 percent for the company, he added.

Membership cards are also issued by giant-sized retailers selling goods at rock-bottom prices. One of the latest issuers is Alfa Hypermarket. Its membership card -- Alfa Family Club -- has attracted more than 100,000 customers in less than two years.

Another hypermarket, Makro, that specializes in wholesale goods, provides an additional benefit for its Makro cards. In conjunction with one of the country's largest banks, the Makro cards can be used for various types of payments and transactions.

Other major retailers or supermarkets and department stores that offer membership cards to their customers are: Hero supermarket with its VIP card (launched in 1997); Rimo Department Store with its VIP card (launched in 1998); Metro department store with the Metro Yours card (2000) and Pasaraya with Pasaraya Passport (2001).

Holders of Rimo's VIP cards get an extra ten percent discount on all items sold in any Rimo's outlet, except some cosmetics products or those on sale. Two family members of a Rimo VIP cardholder are also allowed to use the cards with the same benefits.

Not only retailers, supermarkets or department stores can benefit from membership cards. Other types of businesses have also jumped on the bandwagon. For hotels, these privilege cards have for years been one of the most effective marketing tools in its "arsenal".

Spas have also caught the fever. Taman Sari Royal Heritage Spa with its Privilege Card, for example, is another success story about membership cards.

Within two weeks of its launching last year, 30 percent of its customers signed up. Taman Sari Royal Heritage Spa has two centers, one in Jakarta and another in Yogyakarta that serve more than 30 customers daily. The membership cards are available in three types: Gold card with a Rp 20 million annual fee, Silver card is for Rp 10 million and Corporate card is offered for Rp 2 million.

The exclusive services of Taman Sari right from the start attracted the country's upper class segment including national celebrities like star of television series Diah Permatasari, famous model Donna Harun, film actor Jeremy Thomas etc, foreign ambassadors and their families as well as the country's high- ranking officials and administrators.

A number of benefits are made available for Taman Sari's cardholders. Gold cardholders, for example, are given 90 hours per year of free treatments, including the Royal Heritage Massage, Merapi Mud Masker, Aromatherapy, Body Slimming and various other services. The cardholder is entitled to free use of a number of facilities at Taman Sari, such as fitness, aerobics, swimming pool and sauna. The cardholder's friend is also provided with a limited number of free services. A second friend, however, is given a 25 percent discount.

One of the country's marketing gurus, Rhenald Kasali, said that while membership cards are quite effective in maintaining customer loyalty as well as attracting new customers, some companies issue them without features that are genuine benefits for the privileged clients.

"The concept of customer relationships behind the issuance of membership cards should be holistic. Creative breakthroughs in marketing are indeed the order of the day. A special kind of astuteness is required so that the cards' features and benefits are genuine solutions for customers' needs. Me-too products and services are in abundance, so, differentiation is also vital," he said.