Its always been true that retail loyalty programs are the price you pay to get the customer data - it's what you do with the data that makes you money. Unfortunately - too many retailers do very little with the data. For some of them in New Zealand this may be because the competitive bar has been set relatively low. For others - the strictures of belonging to one of the two major coalition programs in New Zealand (Fly Buys, AA Rewards) means they can't do as they wish with the data.
The bar has been raised in our region by Myer's relaunch of their Myer One card (and their much discussed move into financial services) and Woolworths Australia's Everyday Rewards and Qantas tie up. Myer's scheme is more sophisticated than your average retail loyalty program and the results are impressive. The Age reported that the 2.6 million members of the Myer One program account for 60% of Myer's sales. In 2006 it was only 43%. These are people it can promote offers to knowing with a high degree of confidence that they are (a) relevant and (b) going to be taken up at good margin. Remember "Death before discounting". For example - one retail loyalty program we operate in is 76% accurate in predicting when a shopper will return and spend again. Priceline in Australia is following Myer's lead and relaunched its program in November last year lifting members (now at 2.7 million). It's still not at Myer's level with only 40% of sales through the program customers and program members having a basket size 30% above ordinary customers.
Are they an imperative? According to Steve Ogden-Barnes of Monash University in Australia, retail loyalty programs are not only an imperative but "the bar's been raised in terms of expectations and industry practice".
But there's also casualties. With the bar having been raised and the retailers of Australia moving to catch up, the reasons for not using the data (the program's the price you pay to get it) need to be addressed. A new battle has begun with Coles looking to exit the FlyBuys program in Australia and replace the program with its own offering in-store discounts and benefits. This is a classic closed loop program as pioneered and perfected by Tesco (Tesco set the bar for retailers globally many years ago and is about to lift it again).
Coles is in a loyalty program race against Woowlorths who have tied up with the leader in the Australian market - Qantas Frequent Flyer points. Qantas have effectively trumped Fly Buys in Australia and even shareholder Coles will stop using Fly Buys. (In New Zealand terms - Coles might be likened to New Zealand's New World currently offering Fly Buys who compete with Progressive Enterprise's supermarkets in Woolworths and Foodtown offering OneCard.).
I wouldn't believe everything you read in the Aussie papers. The Melbourne Age article today predicting the demise of FlyBuys appeared to me to be a bit of a beat-up. First of all it labelled FlyBuys a "frequent flyer" program - it's nothing of the kind; it rewards shoppers, not flyers! Secondly, it seemed to want to paint Coles' preference for gift cards as something running contrary to FlyBuys. In fact, FlyBuys in Oz has offered gift card rewards for years and the article itself reveals that gift card rewards dominate that program. And from what I read the author of The Age article seems to be have drawn a conclusion about Coles and FlyBuys despite what Coles have actually stated to him!
ReplyDeleteI think it highly premature to declare some kind of victory for Qantas/Woolworths particularly in the supermarket stakes, even before the thing launches! Think of the biggest frequent flyer earners - they're typically businessmen who fly a lot and benefit from the likes of Gold Amex cards spurting oodles of extra points from business spending. Now - who makes the supermarket decisions in the household? That would be the wife - the one with a FlyBuys card. See a slight issue there?