Loyalty Strategy

China: Alibaba launches umbrella loyalty program

500 million active users – that’s how many customers actively shop Chinese conglomerate Alibaba’s ecommerce platforms. To put that number in perspective, the entire population of the United States is 323 million. China’s population is estimated at 1.379 billion, which means that 36 percent of China’s entire population are active Alibaba customers. With numbers like those, what possible reason could Alibaba have to launch a customer loyalty program? Perhaps because they know that the best time to focus on building long-term relationships with best customers is when times are good – because for even the largest enterprises, cementing customer loyalty is the key to maintaining a market-leading position.

By Rick Ferguson

In a news release on the Alibaba Group web site, the company announced that it has merged separate Tmall (Alibaba’s B2C ecommerce platform) and Taobao Marketplace (Their eBay-like consumer-to-consumer ecommerce platform) loyalty programs into a single new program called the 88 Membership program that rewards customers not only for purchases, but also for engagement. Why the renewed loyalty push?

Money quote from Alibaba executive Jiang Fan:

“‘We used to place a lot of importance on growth, rapid growth every year. Today, we are looking beyond growth to experiences. We care about how consumers feel on the platform. We want to bring them more than just goods, but also a better lifestyle.’ The aim, Alibaba says, is to ratchet up the shopping experience for its 500 million users, while leveraging consumer insights to better connect brands with club members. The new 88 Membership program will offer more members-only brand services, discounts and benefits than the loyalty clubs it replaces. The goal is to deliver a personalized, convenient—and sometimes exclusive—user experience for members, according to Alibaba. ‘We look beyond metrics of pure transaction,” [Jiang] says. ‘It is more than simply rewarding whoever shops the most, but providing better experiences to members who are engaged, credible and consistently active on the website.'”

The program offers a unique method of “scoring” customers to tier the program. Members earn higher scores not only by making purchases online, but also by social media sharing, contributing to community forums, and writing product reviews. Algorithms calculate member scores based on the number of online storefronts visited, type of goods purchased, and other engagement activities, all of which can occur on any Alibaba site including Fliggy, the company’s travel portal, and ticketing site Taopiaopiao. A customer’s aggregate score, called Taoqizhi, determines the tier level and benefits: Standard members, Super Members (a score of 1,000+) and APASS Members (score of 2,500+).

Money quote #2:

“Brands, too, are in talks with Tmall to create rewards for shoppers on top of discounts, such as giving members exclusive offline services, faster access to brands’ latest offerings, limited edition or bespoke products. In turn, they get in-depth insights on shopper preferences and behaviors, making it easier for brands on the platforms to identify target consumers and their demands. Alibaba says it’s critical that members and brands on Alibaba platforms are classified according to these insights, so that users may receive more-convenient services and better benefits.”

Given Alibaba’s obvious role model in Amazon, some observers may wonder why Alibaba didn’t simply launch its own version of Amazon Prime, the most successful ecommerce loyalty program in the world. According to All Tech Asia, paid-fee programs aren’t a good fit for the Chinese market:

“The subscription model is not a good fit for the Chinese market as Chinese users are more likely to prefer free additional services dependent on previously-made purchases. Alibaba has, thus, set up a system to appeal to the needs and habits of its consumer base. By doing this, Alibaba aims to support a growing generation of customers who are aiming to achieve a higher life style.”

With Alibaba recently announcing a joint venture with Marriott to introduce Chinese travelers to Marriott’s own loyalty programs, the company is demonstrating a clear intention to continue to build long-term relationships with its best customers. That the company is focusing on loyalty at the scale of hundreds of millions of Chinese consumers should serve as an object lesson to brands around the world: The best time to launch a customer loyalty strategy is not when you’re chasing the top spot, but rather the moment you get there.

Rick Ferguson is Editor in Chief of the Wise Marketer Group.

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