Guest Article | Simon Rowles, New Zealand Partner with Ellipsis & Company
Simon and Juanita only recently met IRL in the past few weeks, but have followed each other over the years with interest and shared thoughts on Loyalty in their various roles. On understanding what Simon is now up to, Juanita asked if he would like to share some of his valuable insights on the movings and shakings in NZ to RX community....especially as the retirement of the Onecard (her baby) to be replaced by Everyday Rewards is a little too close to home.
Nothing changed in New Zealand loyalty. Until now.
The loyalty market in New Zealand has been the same since Flybuys launched 27 years ago. What you knew about loyalty and how you might play or not play the game in 1996 still served you well. You didn’t need to upskill. There was only one blip along the way. In 2016 we had the musical chairs of partnerships which took Flybuys out of Airpoints, AA Smartfuel into Countdown and Westpac replacing BNZ in Airpoints before we settled back to a steady state of no changes.
We were world leaders in loyalty. Flybuys had the highest penetration in the world for a loyalty coalition, AA Smartfuel was a global first in its category and Airpoints was the only airline loyalty program in the world that had a clean, clear, unambiguous dollar currency. Until now. The rest of the world has caught up with us and its work is as good as ours, if not better. Woolworths Australia’s loyalty program is so much better than our Countdown Onecard that Woolworths will replace Onecard with the Australian Everyday rewards. Two things happened; one very slowly and one very fast.
The AA Smartfuels of the world disappeared slowly. In the beginning of the loyalty industry (the 1990’s) economies of scale made coalition loyalty programs, like Flybuys and AA Smartfuel, a licence to print money. Three specialist operating companies around the world (Aimia Inc, LoyaltyOne and Payback) dominated loyalty and by 2010 they managed a billion members between them. They were good empires as empires go. And as empires go; they went.
The cloud killed economies of scale and anyone could run a loyalty program for the price of a luxury car. The big retail loyalty coalitions met one of three ends. They were either acquired by their biggest anchor (Sainsbury's bought Nectar in the UK) or they went out of business (as has happened sadly to AA Smartfuel here in New Zealand) or they both failed and then got acquired (Bank of Montreal bought Air Miles in Canada).
Retail media became a massive industry, hungry for loyalty data, very fast. Retail Media is a big and growing line of business for retailers. Countdown / Woolworths have a huge head start on their Kiwi competitors. Their 4 year old retail media division, Cartology, made close to $500 million last year across Australia and New Zealand. In New Zealand we only started playing catch up a year ago with The Warehouse launching Market Media and Foodstuffs launching Precision Media.
The better the loyalty data the more money you can make in retail media. The transaction is the new cookie. Successful retail media networks run on the foundation of customer loyalty data and knowing who bought what and might be served an ad for something else. The Warehouse Group is scaling its MarketClub loyalty program across all of its brands. It already has 4 million customer IDs in its Salesforce stack.
Countdown Onecard becomes Woolworths Everyday Rewards on 1st February (the day after AA Smartfuel closes). It’s already promising member pricing (exclusive discounts for loyalty members) which Tesco pioneered in 2019 and has been copied by every UK competitor (Sainsbury's, Co-op, Morrisons and Marks and Spencer). A key outcome of member pricing is more loyalty data – more members scan their loyalty cards more often to access these specials.
What to do now depends on who you are.
So. How to decide whether to offer your own loyalty program, join someone else’s program, or do both? The goal in all is the same; make sure that customers buy from you when they buy in your category.
1. No loyalty program: you’re a retailer and hence don’t know your customers. You need your own loyalty program to gather first-party data and permissions. Bakers Delight has just launched a new loyalty program.
2. Retailer with a loyalty program or bank, insurer or power company without one: you’re a retailer with a loyalty program or you’re a bank, insurer or power company with extensive customer transaction history. Run your own program and invite partners to access your customers in your own loyalty program and have them pay. A new watch out is the rise in hacks (as happened at Latitude in New Zealand) and coming privacy legislation. Here customer data isn’t the new oil, it’s the new nuclear waste that’s dangerous to store and needs bulletproof grade protection. Choose your tech platforms carefully. Life Pharmacy and PGG Wrightson have just upgraded their tech and loyalty programs.
3. Retailer with very low transaction frequency: you have low transaction frequency or want more customer data. Run your own loyalty program (to collect first-party customer data) and offer a loyalty coalition’s points as a reward option. You gain access to a larger engaged audience. BNZ’s new rewards program converts points to multiple airlines and New World’s Clubcard lets you earn Airpoints.
There’s also a new customer acquisition opportunity for any of the scenarios above. To access a large, new audience join a multi-partner program (either a loyalty coalition or the new ones coming from The Warehouse and Countdown / Woolworths). If you’re not convinced this is practical, consider participating in the Retail Media proposition they offer as proof of value.
Simon Rowles is the New Zealand Partner with Ellipsis & Company – the loyalty experts. Ellipsis use Customer Science® to understand, manage and grow customer value.