Engagement moves into club class environment

Brands that run exclusive members-only loyalty programmes are well placed to give their most valuable ambassadors the VIP treatment in return for greater consumer engagement.

There’s an exclusive association that many people feel when they become a member of a club. Being part of a private members’ club or an expensive gym is something to boast about. It’s this cachet that brands are attempting to tap into by creating their own clubs.

Coffee brand Nespresso has 7 million club members worldwide, which it calls a “community of coffee connoisseurs”. Its club has grown by more than 50% since 2001 with ambitious plans for a double-digit increase in membership each year for the foreseeable future.

While the idea of coffee and an exclusive, premium club may not seem automatically linked, Nespresso has made this model work. Once a customer buys a Nespresso-enabled coffee machine, they become an instant club member. Customers then have access to an online ordering system and 24-hour telephone information line and ordering system.

The Nestlé-owned brand is able to stay connected to its customers via the phone and internet. Creating a club makes a benefit out of the need to order online or over the phone, as Nespresso has a limited presence on the high street. There are just seven boutique stores in the UK, mainly concessions in department stores, although there are plans to open a flagship store in central London.

Even without much of a physical presence offline, Nespresso’s membership club allows the brand to have conversations and access to its millions of customers. A 35.5% sales growth in the UK alone in the 12 months to December 2009 suggests that the club strategy is working.

“We see our mission as having a relationship with consumers about coffee,” says Brema Drohan, managing director for Nespresso in the UK and Ireland. This relationship starts as soon as a customer registers on the site or over the phone. To help customers on their journey to become fully-fledged club “connoisseurs”, they receive a “nursing call” to talk them through the coffee options and are given advice on how to use their machine.

“If you can help the consumer understand the product, they are going to be a better customer for the business”

Brema Drohan, Nespresso

After six to eight months, customers are contacted again to talk in more detail about different coffee blends. “The relationship with the consumer is established during those early months. If you can help the consumer understand the product, they are going to be a better customer for the business,” Drohan explains.

As with all exclusive clubs, word of mouth is vital for Nespresso’s success. While the brand uses Hollywood heartthrob George Clooney as its global ambassador, it says that club members have become peer-to-peer ambassadors, helping the business to grow. More than 50% of new customers are exposed to the Nestlé-owned brand through existing club members.

Nurturing the relationship with club members is important to maintain loyalty, Drohan adds. There is an annual programme where the brand talks to customers about two limited-edition coffees. This helps Nespresso stay in touch with consumers on a larger scale than simply through practical needs such as orders.

The club system is an integral part of Nespresso’s future strategy. At the moment, it is competing with other coffee capsule brands, but its protected patent for its coffee machines, which are made under licence to brands like Magimix, ends in 2012.

Stuart Evans, managing director at loyalty agency ICLP, says the brand will have to work hard to develop its club if it is to overcome the end of its patent. “It will have to work out what its point of difference is and drive that through its membership scheme,” he says.

The coffee brand has an incentive-based system that encourages long-term members to upgrade their machines. There is also a member-get-member scheme where customers are given incentives for getting new people to join the club.

But while these marketing tactics work, says Drohan, they will never beat the word-of-mouth that comes naturally to its members who in effect become brand ambassadors. It seems that being part of the coffee connoisseur community is something that members want to shout about.

Evans says: “Customers want to touch and research a brand promise, and a relationship programme allows them to do this.”

Jonathan Harman, managing director of loyalty agency Carlson Marketing, agrees: “Loyalty-based membership schemes allow a much deeper level of engagement, and let a brand get closer to its customers.”

Any brand in a sector that is associated with passion should be able to create a successful club, suggests Evans. He says: “With coffee, chocolate and wine, it’s about being able to become experts about these products.”

Becoming an expert in chocolate is what motivates many of Hotel Chocolat’s 100,000 members to commit to its Tasting Club. Members pay for a monthly tasting box, and in exchange they receive special offers as well as giving regular feedback to the retailer. “There’s a real sense of engagement,” says Angus Thirlwell, co-founder of Hotel Chocolat.

The Tasting Club is at the very centre of what the company does, he adds. “But it is a symbiotic relationship. The retailer has to strike a balance between listening to members and leading them on a chocolate journey.”

Hotel Chocolat is looking to expand the club model further and has recruited a head of events to explore options. It recently ran an event for members who had ordered more than 100 tasting boxes and also opened up its chocolate factory for a day. When new stores open, club members in the area are also invited to cut the white ribbon. “It makes our members feel really special,” according to Thirlwell.

Being able to tap into a customer passion is also something HMV is attempting to do with its PureHMV card. Customers pay a small fee to join its loyalty scheme, and special offers are then sent to members depending on their tastes. Backstage passes and access to pop stars are some of the bonuses that members can take advantage of if they build up loyalty points by buying HMV products online or in-store.

Matt Button, head of CRM at HMV, told Marketing Week the club-style loyalty scheme allows the retailer to better connect with consumers. “It enables HMV to engage with customers on a one-to-one basis,” he says.

“There’s got to be real benefits to signing up to a scheme,” argues Evans. PureHMV gives its members access to money-can’t-buy privileges. But he adds that while music, film and theatre are passions of many, a soap powder might find it more of a challenge to create a club.  

Evans says that being part of a club where members pay a subscription fee means that “you’ve got a really worthwhile scheme that gives real benefits to customers”. But brands that bring VIP status to their club are better placed to build a stronger relationship with consumers.

One of the major benefits of these clubs for brands is the access to data on its most committed customers, says Evans. Hotel Chocolat’s Thirlwell is convinced that his club allows the retailer to gather more quantitative and qualitative data than any of the other major chocolate brands like Cadbury and Mars. Meanwhile, PureHMV uses the data it gains from club members to target them with special offers that it believes are relevant and, ultimately, will help drive sales.

Nespresso, however, says it only uses its members’ data to help it start conversations about its products. Club members aren’t asked about their age or anything else about their lifestyle. It is about belonging to something, rather than a pure data marketing tool.

To run a successful club, brands “have to be realistic about what they ask people to do”, says Carlson Marketing’s Harman. “They must offer genuine value for customers if they’re asking them to commit time or money to a scheme,” he adds.

But if any brand can make a customer feel like a VIP club member, it can create a committed following. They might not give customers a secret key to enter unmarked premises, but the best branded versions can rival any private members’ club.

Brand membership clubs

Hotel Chocolat

100,000 members in the UK.

Members pay £17.95 every month for a tasting box.

Hotel Chocolat gets its members to give feedback on its chocolate and collects the data from the responses.

The Tasting Club is being expanded, and may include more events in the future.

Nespresso

Worldwide membership stands at 7 million.

Members are part of a “community of coffee connoisseurs”.

Customers become instant members when they buy a Nespresso-enabled coffee machine.

More than 50% of all new Nespresso members join up because of a recommendation from a current club member, says the company.

Nespresso doesn’t ask its members about personal information, but uses the information it collects on coffee to generate conversations with its customers.

PureHMV

Customer pay £3 to join PureHMV.

Members earn points on purchases, which they can redeem on rewards such as red-carpet premieres.

HMV collects data from customer buying habits and sends members special offers depending on their personal tastes.

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