The biggest challenge of winning over the Asia-Pacific demographic as a Western brand lies in understanding differences in customer behavior and loyalty. Big brands with decades of history serving the European or US market often learn the hard way that their tried-and-tested marketing campaigns fail in the Land of the Red Dragon. The same goes for loyalty programs in China: the only way to compete with the loyalty solutions of home-grown brands is to adapt to local customs.
China is much more developed in terms of mobile engagement than Western people than marketers can imagine. Their world is truly mobile-first, showing an example to the rest of the world.
So get ready, because this guide not only shows you the most vital customer retention trends, but also analyses the features of best-in-class loyalty programs in China.
What Does Brand Loyalty Mean in China?
Over the past twenty years, Asia-Pacific countries – China in particular – have seen a sudden increase in opportunities, both in terms of products and services. Chinese customers have more and more access to Western brands thanks to the new travel and eCommerce opportunities. Not to mention that Western heritage brands are actively seeking to establish a presence in the country. This creates a peculiar situation where a country with tremendous shopping potential is only now getting used to having a large variety of products from the US and Europe. Therefore, the concept of brand loyalty towards Western brands is still in an early phase.
We got to talk with Joanne Yulan Jong, founder of Yulan Creative, fashion strategy expert, and author of the book “Fashion Switch”, and asked her about building customer loyalty in China and across Asia.
Fashion expert Joanne Yulan Jong explains iconic customer trends and brand loyalty in China, recounting several examples of Western companies who have won over shoppers in this episode of Customer Loyalty Minutes.
One big takeaway from this video is that most marketing channels that are popular in the US or Europe have a Chinese counterpart. For example, Facebook’s equivalent is WeChat, though it’s more universally used, and has uses beyond networking, including product discovery and online purchases. There are also social media platforms unique to the country, such as the XiaoHongShu (Little Red Book) which is a social eCommerce app that specializes in product reviews. Marketers who wish to foster brand loyalty in China should master these platforms, otherwise they won’t be able to reach a wide audience.
Understanding these platforms is only the beginning – mastering communication on them is what’s really important. It’s not enough to simply translate your Western marketing strategies – it’s a trap Dolce Gabbana already stepped into a few years ago.
“Dolce Gabbana’s cultural debacle clearly shows that a “globalized approach” doesn’t equal “simplified communication”. In the next few years, it’ll be crucial for companies to engage in a meaningful discussion with their Asian customers. The ability to culturally connect with customers in their own reality will be the next important challenge for companies – especially for global ones.”
Cultural Strategist and Course Leader at Sotheby’s Institute of Art
Customer Retention in the Chinese Market
Because of the challenges, the Asian market is still uncharted territory for most Western brands and retailers… but not for long. The window of opportunity to capitalize on the freshness of brand loyalty and establish your presence in China and Asia is rapidly closing. The more players that enter the field, the smaller the metaphorical slice of the pie will be.
However, western competitors might be the least of your worries, since China also has its own brands. Homegrown businesses start with an advantage as they understand the market better than anyone else, making the competition even fiercer.
“Helping Asian companies is far-far easier in some respects because they are fast-moving and reactive. They listen, make changes, spend money and make smart hires as soon as you make them aware of opportunities, especially with long-term customer retention, as consumers increase their spending potential.”
Global Fashion Business Consultant
But don’t forget that we’re talking about a high-risk, high-reward scenario. Italian luxury fashion house Ermenegildo Zegna was the first company of its kind to realize the potential of the Chinese audience back in 1991, and now China is the leading market for Zegna in terms of revenue.
“Asians, whilst they are always on the lookout for a good deal, will spend if the brand has authority. They are happy to use labels to impress peers and they really love the status and security of being part of the trend and ‘tribe’. Their retention would be less on price or value but, instead newness, the ability to access VIP or limited editions and of course impeccable customer service.”
Joanne Yulan Jong
Fashion Strategist, Founder of Yulan Creative, Author of ‘Fashion Switch’
Top 5 Trends to Keep in Mind When Entering the Chinese Market
In order to engage the modern Chinese customer, you should pay attention to the following trends:
- Still on a journey of discovery: Since the audience hasn’t been exposed to western heritage brands for long, companies aren’t able to take brand recognition for granted, and they need to build brand awareness from the ground up. Also, considering China’s development on mobile engagement, it’s highly recommended to partner with a local partner.
- Strong digital mindset: Chinese consumers discover brands via social media interactions or by browsing for deals on the internet. In this sense, having a mobile presence – or even better, omnichannel – is an absolute necessity.
- Hunger for novelty: They have an insatiable appetite for freshness and modernity. If you can offer something new and exciting to your customers each week, they’ll no doubt keep showing up and eventually become loyal buyers.
- Authenticity is everything: Customers are very discerning when it comes to entering the purchase cycle. They are cautious, and companies must earn their trust. To do so, you must show that your products have real value.
- You need a loyalty program: Reward systems and gamified incentives are a staple in China and customers expect them. Making an entrance without a loyalty program of your own puts you at a disadvantage.
“Asian consumers prefer to avoid human contact while buying. They are very sensitive to alternative pricing. And how will the market look like in 5 years? More specialty stores, less monobrand stores in key cities, min 50% of business through eCommerce, and multi-brand stores playing like showrooms.”
Senior Executive in Marketing, Brand Management, Business Development, Sales, Retail
The Difference Between Loyalty Programs in the West and Asia
In China, the foundation for modern loyalty programs was laid by Tencent and Alibaba. Therefore culture and customer expectations regarding loyalty programs in China are vastly different compared to the loyalty solutions in Europe or the US.
One distinct difference is purpose: in the West, loyalty programs are seen as retention tools, while loyalty programs in China are spread across the whole customer journey, including acquisition, purchase, and advocacy. As a result, reward systems are far more sophisticated, with plenty of touchpoints to engage customers.
Gamification is also very prevalent. Chinese customers want to be rewarded frequently, even if the incentive is just a small discount. Most of these systems are tied to WeChat, further strengthening the social aspect.
Speaking of community building, most loyalty features involve social media in one way or another. To give you an example, some loyalty programs offer group projects, where referring people through WeChat means that the points they earn are added together, making it easier to reach a grand prize.
Last but not least, Chinese customers are much more willing to share personal information, making loyalty programs an ideal tool to collect data. In exchange, progress has to be synced across all digital platforms. Whether it’s an offline, online or WeChat purchase, you must have the capability to sync data into a holistic customer profile.
What Makes a Loyalty Program in China Successful?
With the general sentiment towards loyalty programs in China explained, it’s time to take a look at what features and strategies you should use to win hearts among the Chinese audience.
There’s a lot of competition for people’s attention in the loyalty program market. As a direct result, companies invest a lot of money and effort marketing their reward system. If you plan to launch your own program, make sure to enter the market with a bang, and advertise it on every possible channel, especially WeChat.
However, visibility doesn’t end with marketing. Chinese companies put a lot of emphasis on having a clear value proposition. They also strive for easy enrollment, allowing people to join with a few clicks and giving them the option to complete their profile later on. Later on they send regular push notifications, reminding members of the benefits.
As mentioned earlier, tiers are standard at this point in China. One thing to be aware of is that tiered reward structures are treated differently there. Most notably, each tier bracket is designed to cater to a specific customer demographic.
In the West higher levels usually only change the amount of the benefit, with a few juicy rewards reserved for Platinum members. In China, the lowest tiers usually feature gamified rewards, such as lotteries, to hook members. Mid-tier rewards introduce discounts, because at this point members have proven themselves to be worthy of them. While the best, most exclusive benefits, like early access, are kept for high-tier loyalty program members.
When it comes to rewards, Chinese customers have high expectations. To begin with, they expect small incentives from the very first moment they enroll in the program. Most retailers in China, therefore offer little samples of their products as an appetizer. This way people get a taste of the benefits program. Others hand out discounts that are small enough to not put a dent in the profit margin, but still show goodwill towards customers.
The other way Chinese brands show appreciation is by offering special treatment. The Chinese branch of Watson’s loyalty program celebrates every 5th day of the month with a special Member’s Day campaign, during which their points are worth 5 times more.
While in the US very few brands experiment with subscription-based loyalty programs (except for a few notable examples, like Amazon), in China best-in-class reward programs tend to incorporate subscription-based models into their system.
The result is a hybrid-style structure. Take Chinese kidswear retailer Kidswant for example. The company’s loyalty program has a free section with eight tiers, accessible to everyone. But there are two subscription plans (one for mothers-to-be and another for families) which give eligible members bonus discounts and gift boxes.
In Chinese loyalty programs, coupons are based heavily on the customer’s behavior. This is due to company investment in collecting user data. This allows them to personalize their offerings, and push different offers and content based on the member’s purchase history, user reviews and product preferences.
This is especially true for WeChat. Members often receive an entirely different offer feed on their social media page than their friends, based on customer activity. In China, personalization goes to such an extent that by contacting customer service, you’ll be put in touch with store associates based on your location data.
It cannot be stressed enough how important it is to have a presence on WeChat. The platform is more than just the Chinese equivalent of Facebook; you can pay, order a taxi, watch live streamings, all major Chinese brands sell their products directly through WeChat, and members receive personalized product feed based on their purchase history.
Of course, there are other ways to gamify the reward experience. In our look at the customer lifecycle, we analyzed a company that integrated a digital crane game into its program, giving players a definitive arcade-like experience.
Loyalty Programs on WeChat
It cannot be stressed enough how important it is to have a presence on WeChat. The platform is more than just the Chinese equivalent of Facebook; all major Chinese brands sell their products directly through WeChat, and members receive personalized product feed based on their purchase history.
Therefore it goes without saying that you should extend your loyalty program capabilities to WeChat through a mini-app. The Chinese audience is highly familiar with using the platform’s capabilities (such as referring friends, redeeming loyalty program rewards and sharing product pages for benefits), so you can go all out, as members won’t require any hand-holding.
“My best advice for companies planning to launch a loyalty program involving WeChat is to understand the WeChat Ecosystem and to plan the loyalty program on Wechat with specific functionalities included for the company’s CRM development. It’s not enough to just set up the program on WeChat: they need to have a clear objective on how to leverage the WeChat channel to recruit new customers and engage old ones. Last but not least, companies need to have a deeper understanding of data privacy rules in China and see how to plan for data storage & exchange.”
CLMP, Co-founder of AMM Limited
10 Inspiring Loyalty Programs That Are Beloved in China
1. Cathay Pacific: Marco Polo Club
The flag carrier of Hong Kong, Cathay Pacific is the world’s tenth largest airline measured by sales, and fourteenth largest measured by market capitalization. The company’s loyalty program is shared by Cathay Pacific and Cathay Dragon.
- The program has four tiers: Green, silver, gold and diamond. Members earn club points whenever they fly in eligible fare classes with Cathay Pacific or Cathay Dragon.
- Customers pay a one-time fee of USD100 to become a member. Afterwards membership can be renewed on an annual basis using loyalty points.
- Benefits include extra-legroom seats, priority waitlisting, lounge access for friends and family members, and other VIP treatments
2. Hainan Airlines: Fortune Wings Club
Airlines and loyalty programs have gone hand-in-hand since almost the very beginning, so it comes as no surprise that the 4th largest airline in mainland China offers an elite rewards system with tiers and exclusive membership perks.
- There are three tiers in total, based on total customer spend
- Members can earn points by flying with any of the FWC member and partner airlines
- Earn additional points with non-flight related actions, such as making a purchase from partners or participating in promotional events
- Benefits include a priority waiting list, free upgrades, free refunds and VIP lounges
3. Alibaba: ‘88 Membership Club’
Chinese multinational technology company Alibaba specializes in e-commerce, retail, internet, and technology. With 500 million users, Alibaba has played a fundamental role in revolutionizing loyalty programs in China.
- There are three tiers based on collected points: Standard, Super, APASS
- Members are encouraged to earn points and privileges by sharing product pages to social media, posting questions in community forums, and writing product reviews that are useful to other customers
- Dedicated members are eligible for benefits like tickets to private concerts, discounts and additional services at partner companies
- Alibaba also added a special 88 VIP tier. It’s only available for users with at least 1000 points, though they still need to pay an annual fee. In exchange, members are eligible for a permanent 5% discount on all services across all affiliated brands.
4. Starbucks: Starbucks Rewards
Not only did Starbucks completely overhaul its loyalty program structure to meet the expectations of the Chinese audience, it has since become the leading coffee chain in the country.
- The program has three tiers: Welcome level, green level and gold level
- Points are still measured in stars, which can be redeemed for free drinks or food
- Starbucks also introduced a gamified lottery system in which members get the chance to win a beverage or food item every day for a month
5. Luckin Coffee’s loyalty program
Luckin Coffee is a Chinese coffeehouse chain and the biggest competitor of Starbucks. The company takes a different approach to rewarding loyalty, leaning more heavily towards providing free coffee instead of focusing on point collections and milestones.
- Free coffee when you download the app
- Free coffee when you refer a friend
- Free coffee when you buy two
- Five free coffees when you buy five
6. Chow Tai Fook: CTF Club
Hong Kong-based jewelry company Chow Tai Fook has 2,200 stores across 500 cities worldwide, including Hong Kong, mainland China, the US, Singapore, Malaysia and South Korea.
- The loyalty program has four tiers: basic, gold, platinum and diamond
- When members enter a tier, their status is effective for 2 years
- Once members have spent enough to qualify for a higher tier, they are automatically upgraded and presented with a brand new personalized membership card
7. Pinduoduo Card Program
Pinduoduo is a Chinese e-commerce platform, closely following Alibaba. The store’s interface looks more like a Facebook newsfeed than an Amazon-like digital storefront, which goes to show the impact of social media sites on Chinese retail.
- The company has a tiered program: Free Pass Card, Black Brand Card, and the Brand Card
- The program is designed to encourage users to share the product amongst friends, write reviews and to save money using vouchers and special discounts
- Upper-tier members can share their brand cards with friends via WeChat, to encourage their friends to browse and buy branded products from Pinduoduo
8. Joy City: Joy Pay App and WeChat Mini Program
Joy City is a large department store chain in China with over 3 million loyalty program members. One of the most notable features is the added coalition loyalty capabilities that ensure that members can continue reaping the program’s benefits at affiliate brands.
- The main structure revolves around collecting points, which can be done at any of the brands under the Joy City umbrella
- The program awards points for any purchase regardless of the store or brand, and the points can be used toward a variety of services, such as paying parking fees
- The app tracks the point balance in real time, and members of certain venus receive incentives like free doctors’ appointments, medical examinations, and other family health benefits
9. Coach: WeChat loyalty program
Coach is an American company specializing in luxury accessories such as handbags, with 300 stores in mainland China. Demonstrating a perfect understanding of its audience, the brand launched a WeChat-based loyalty program.
- Once a user follows Coach’s main WeChat account, the brand lets them know they can become a member by entering their Chinese mobile number, along with a chance to win a Coach handbag
- Coach has a dedicated area for its members, where they can manage their membership cards and unlock exclusive offers
10. McDonald’s loyalty program integration with Ele.me
Despite having 3,100 McDonald’s in mainland China, the company has augmented its presence by partnering with the on-demand delivery platform Ele.me, which is a subsidiary of Alibaba.
- The program rewards members with points for purchases made in-store or via its app and mini-program
- In exchange for points, users receive vouchers worth up to RMB88.5 ($12.80)
Start Your Journey to the Land of the Red Dragon
Achieving brand loyalty in China is a daunting task, but with the right strategy it’s entirely possible. And if you get it right, you’ll no doubt see a drastic increase in your bottom line. If you are up for the challenge and interested in seeing the capabilities that Antavo offers as a pure-play loyalty provider, feel free to include us in your loyalty program RFP.
In the meantime, we invite you to learn more about building a next-gen loyalty program with our definitive guide or ebook.
Zsuzsa is CCO and Co-founder of Antavo, listed by Forbes as one of Europe’s top 100 female founders in tech. After acting as Antavo’s CMO for nearly a decade, she took over the role to help the company’s clients. She is also a former journalist and has been awarded by the European Commission.