New Zealand Marketing - - Contents -

Loy­alty New Zealand’s Lance Walker, Kyra Clarke, Ad/Vice, Eco­man, Clax­ton, num­bers, words and other jolly japes.

Af­ter five years at Loy­alty New Zealand, and three in the role of chief ex­ec­u­tive, Lance Walker is off for a six- month sab­bat­i­cal in France with his fam­ily. So does he call us loyal?

On change:

“The whole com­pet­i­tive re­tail en­vi­ron­ment has changed, and that’s partly a re­sult of chang­ing eco­nomic con­di­tions. There’s a lot more dis­count­ing ac­tiv­ity and things are a lot tougher gen­er­ally in re­tail. We’ve also seen dif­fer­ent loy­alty of­fers come on the mar­ket, whether that’s fuel dis­counts or AA Smart­fuel or what­ever it might be. And the third thing is tech­nol­ogy and in par­tic­u­lar mo­bile and the de­mand for real time. So the cli­mate in which loy­alty is op­er­at­ing and the de­liv­ery me­chan­ics have changed. But at the same time the fun­da­men­tals that drive us to be loyal to a brand a hun­dred years ago prob­a­bly aren’t that dif­fer­ent from now. It’s still about de­liv­er­ing great cus­tomer ex­pe­ri­ences, recog­nis­ing cus­tomers, un­der­stand­ing cus­tomer needs and re­ward­ing cus­tomers.”

On num­bers:

“Fly Buys is sit­ting at about 2.4 mil­lion ac­tive card­hold­ers and the coali­tion it­self re­mains very strong. The ac­tual net­work of part­ners that are part of the pro­gramme is pretty much the same as it’s been since it started in 1996. So there’s a lot of longevity in that model. In many re­spects, there are two things you’ve al­ways got to get right for a coali­tion pro­gramme: lots of places to col­lect points, and lots of ways to use your points. If you get those two things right by and large you’ll have a suc­cess­ful pro­gramme. What’s changed a lot has been the way you can use those points. In 1996 Fly Buys was just a flights pro­gramme, whereas now there’s over two thou­sand re­wards and we give away close to $70 mil­lion of re­wards ev­ery year. So I think the redemp­tion side is con­tin­u­ing to change as we look at the dif­fer­ent ways peo­ple use their points. And that’s go­ing to keep chang­ing be­cause the truth is ev­ery­one likes to be re­warded and that’s ul­ti­mately what drives their col­lec­tion be­hav­iour.”

On ex­pand­ing:

“We’ve been broad­en­ing the other ser­vices we of­fer un­der the Loy­alty New Zealand ban­ner [the com­pany is jointly owned by Z En­ergy, Food­stuffs, IAG and BNZ]. And this has been a fo­cus over the last three or four years. So while Fly Buys con­tin­ues to be at the heart of what we do, the other big driver for us has been the whole cus­tomer in­sights an­a­lyt­ics area and build­ing that ca­pa­bil­ity and com­pe­tency. We’re build­ing our in­ter­nal mar­ket­ing ser­vices and build­ing cam­paigns, right down to hav­ing our own in-house creative re­source. So we’re more a full ser­vice loy­alty busi­ness for our clients, rather than just be­ing the provider of the Fly Buys pro­gramme. It could be that one our part­ners, like 2de­grees, wants to do an ac­qui­si­tion cam­paign. We’ll ac­tu­ally cre­ate the con­cept, build the email or the mail pack and de­ploy that to the Fly Buys data­base and man­age it for them.”

On growth:

“The an­a­lyt­ics and mar­ket­ing ser­vices and so on have been ex­pe­ri­enc­ing growth of 50 per­cent rev­enue a year for the last three or four years. On the Fly Buys side of things, we had a record year for is­suance and redemp­tion and I think the redemp­tion one is a good one be­cause it says that peo­ple con­tinue to want to re­deem their points for re­wards. Redemp­tion is one of the key sig­nals of the pro­gramme health. If your mem­bers are ac­tu­ally con­vert­ing their points into re­wards, they’re see­ing value. It’s also been pretty steady for a long pe­riod with part­ners be­cause we have ex­clu­siv­ity across cat­e­gories and we’ve got most of the ma­jor cat­e­gories cov­ered.”

On bad data:

“I think con­sumer at­ti­tudes to the data col­lec­tion are evolv­ing. And I think peo­ple more and more un­der­stand that in all parts of their life data is be­ing col­lected—no more so than the on­line space. The key thing that ir­ri­tates peo­ple, and ir­ri­tates me as a con­sumer, is how that data gets used. If you’re go­ing to col­lect data about me make sure it’s used in a way that leads to a rel­e­vant of­fer or com­mu­ni­ca­tion. Peo­ple opt out of emails and com­plain about this stuff when the see their data be­ing used poorly. They might be vegetarian and they get of­fers for meat. Or they see that data not be­ing pro­tected prop­erly. We com­ply with all the nor­mal things you’d ex­pect us to in terms of Pri­vacy Act and so on. But I think there’s an un­der­stand­ing that part of the in­ter­ac­tion [with Fly Buys]—and part of the rea­son for any brand to have a loy­alty pro­gramme—is to un­der­stand how those cus­tomers are be­hav­ing and how to lever­age that. It’s no dif­fer­ent to the lo­cal green gro­cer years ago who knew your name, knew what you bought and knew what you al­ways liked. It’s a bit harder when you’ve got a hun­dred stores and 100,000 cus­tomers. But it’s also an area we’ve got to con­tinue to be very sen­si­tive to, be­cause is­sues around data col­lec­tion, data pri­vacy and data use are more in the con­scious­ness of the con­sumer. It’s im­por­tant, be­cause if any­one in the mar­ket­ing com­mu­nity doesn’t do it well, it re­flects poorly on all of us … I read a good quote in a book re­cently, some­thing to the ef­fect that be­fore the in­ter­net we were pri­vate by de­fault and pub­lic by effort. Now it’s the op­po­site.”

On the trade off:

It’s no dif­fer­ent to the lo­cal green gro­cer years ago who knew your name, knew what you bought and knew what you al­ways liked.

It’s a bit harder when you’ve got a hun­dred stores and

100,000 cus­tomers.

“Con­sumers are ac­tu­ally pretty smart and maybe we for­get that some­times. So they will be mem­bers of sev­eral loy­alty pro­grammes and they un­der­stand that if they’re smart about it they can ac­tu­ally do quite well out of them. Around the world loy­alty pro­gramme mem­ber­ships are con­tin­u­ing to in­crease, not de­crease. As long as the value ex­change is there then it’s okay … The fact is you’re shop­ping any­way, so it’s just telling you where you should shop so you can get re­wards … But the key thing about Fly Buys and one of the things that a lot of peo­ple don’t nec­es­sar­ily ap­pre­ci­ate is that we don’t share the data with any­one, not even the part­ners in the pro­gramme. That’s be­cause the re­la­tion­ship is be­tween the

cus­tomer and the Fly Buys brand. So we guard that pretty jeal­ously. We do anal­y­sis on an ag­gre­gated view, which we can then use to pro­duce re­sults. So rather than say­ing, ‘Lance does X’, we ag­gre­gate that to look at the trends of cus­tomers who look a bit like Lance. We stay away from iden­ti­fy­ing the in­di­vid­ual.”

On the joy of swip­ing:

“One of the things we’ve tried to in­tro­duce through ad­ver­tis­ing has been this no­tion that ev­ery time you swipe some­thing good hap­pens. Our jaffa bill­board in­stal­la­tions and var­i­ous things have been demon­stra­tions of that … The cam­paign did very well in like­abil­ity, en­gage­ment and, with things like the gum­ball ma­chines and so on, talk­a­bil­ity. So per­haps it got some peo­ple think­ing about Fly Buys who would wouldn’t nor­mally. And that’s been great. It also has good cam­paignabil­ity for us. There are lots of things that we’re go­ing to con­tinue to roll off the back of that propo­si­tion. The key thing for a loy­alty pro­gramme con­tin­ues to be en­gage­ment. We need peo­ple en­gag­ing with the brand and en­gag­ing with the pro­gramme.”

On speed:

“Our real time redemp­tion sys­tem has been re­ally pop­u­lar. Peo­ple don’t want to wait, so any­thing we can do that can play to that need and the im­me­di­acy of re­ward is re­ally im­por­tant to the brand. And I think we’ll con­tinue to see more of that in the fu­ture. A key part of that will be the whole mo­bile play. That’ll jump around a bit. But there’s no ques­tion that loy­alty is go­ing to go mo­bile over the next few years, be­cause if there’s one thing I hear more and more now it’s peo­ple say­ing ‘if the loy­alty card was on my phone I’d use it more’. The key for me is go­ing to be the no­tion of tap to pay, where ev­ery­thing’s done with one swipe. There’s a num­ber of ex­am­ples where peo­ple are tri­alling pay­ment on phones. And both the tel­cos and the bank­ing in­dus­try are lin­ing up to say ‘how can we make sure that this does hap­pen, and hap­pens in the right way’. It’s one of the great things about New Zealand, our ecosys­tems are quite small, so the abil­ity for us to ac­tu­ally get all the play­ers to­gether is quite in­ter­est­ing. And we’ve cer­tainly been talk­ing with the likes of Pay­mark around what the loy­alty of­fer will be … Cards aren’t go­ing to dis­ap­pear overnight. They’re go­ing to be around for a long time, but we will see that dual play hap­pen­ing I think.”

On joint ef­forts:

“One of the things about Fly Buys is that if you’re run­ning your own loy­alty pro­gramme all you can deal with is your own cus­tomers. Whereas a coali­tion gives you ac­cess to this much broader range of cus­tomers who have a Fly Buys card and shop for dif­fer­ent brands. And that’s why this model has been suc­cess­ful glob­ally, be­cause it has an ac­qui­si­tion el­e­ment as well as the re­ten­tion and growth el­e­ment … There are a num­ber of coali­tions that started up in the early ‘90s. The Fly Buys model here is based on mod­els that came out of Canada and from there came things like the Nec­tar pro­gramme in the UK. So in most mar­kets, with the ex­cep­tion of the US in­ter­est­ingly, be­cause it’s not as com­mon to have na­tion­wide chains, the coali­tion model has been very strong.”

On tar­get­ing:

“There are two rea­sons why loy­alty pro­grammes con­tinue to grow. One is that con­sumers to­day are more pro­mis­cu­ous. They’ve got more choice and bar­ri­ers to switch­ing are a whole lot lower. It doesn’t mat­ter what cat­e­gory you’re in now, cus­tomers are able to switch around a lot more eas­ily. So hav­ing me­chan­ics to lock cus­tomers in to your brand are more im­por­tant now than they used to be. The sec­ond thing is ab­so­lutely the rise of one-toone mar­ket­ing and the un­der­stand­ing that it can be much more ef­fi­cient to tar­get one of­fer to a par­tic­u­lar group of cus­tomers and min­imise mar­ket­ing wastage by un­der­stand­ing dif­fer­ent de­mo­graph­ics and dif­fer­ent cus­tomer be­hav­iours.”

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