Let’s play the rewards card shuffle

Companies form new alliances, but will customers stay true? asks Grant Bradley

Why the apathy over the Super City? illions of loyalty cards are being reshuffled this month as schemes form new alliances in what experts say is an increasingly intense battle to keep customers true.

From Monday, Countdown and AA Smartfuel team up, meaning the end of collecting fuel dockets from the supermarket.

A week later, Fly Buys and Airpoints go their own ways after six years. In the “coming weeks”, Foodstuffs’ Clubcard is moving into the North Island.

All that change follows pharmacy and retail group Green Cross Health, owner of Life Pharmacy and Unichem, leaving Fly Buys in August and going it alone with its 1.2 million card carriers.

Even more changes are looming, with Mitre 10 tipped to be on the move from Fly Buys, while Qantas, which has many loyalty card members in New Zealand, more actively chases partners here.

There are well over twice the number of loyalty cards in New Zealand than there are Kiwis, and there will be a whole lot of shiny new cards being given to consumers in the next week or so. This unprecedented shakeup is aimed at keeping increasingly demanding consumers engaged, says First Retail Group managing director Chris Wilkinson.

While those running the schemes say there’s plenty of life left in them, Wilkinson says there are signs that people have started to disengage.

“The need to have that card or that app open is a step too far for people and it may be for many cases they

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When there’s complexity there is very little engagement.

have realised that it’s not giving them the benefits they’d hoped for anyway,” he says. “Consumers get tired of things; no matter whether there’s a real benefit for them or not.”

Wilkinson, whose firm works with many of the hundreds of businesses involved in schemes, says the programmes had become expensive and difficult to operate, for smaller firms in particular. Linking to the programmes was costly and they also had to integrate online sales.

At the same time, businesses are increasingly looking to social media to communicate directly, and sell immediately, to their customers rather than using loyalty schemes.

“Many retailers recognise that this a very expensive space to be in and loyalty is so fragile these days,” he says. “I think the whole climate has changed a lot. What we’re starting to see is businesses bringing that back for themselves.

Many of the schemes are complicated and that’s what many of the recently announced changes aim to solve, he says.

“When there’s complexity there is very little engagement and I think we’ve got to a stage there with some of these cards.”

Whether the new alliance would be a game- changer for consumers was hard to know, says Wilkinson.

By contrast, the Countdown Onecard and Air NZ Airpoints schemes were relatively simple and didn’t require much customer effort.

“Air New Zealand is probably the most tangible of any of the points because it connects with such a large number of consumers and it’s a tech- nology driven system. The points just accrue naturally and people can relate to that really well.”

Consumer NZ reported on the big loyalty schemes earlier this year and has a clear message on them.

“They’re all trying to make themselves look big and different but from a consumer perspective, we say people should shop on price,” says Consumer NZ chief executive Sue Chetwin.

“If there’s a loyalty component to it that’s great, but don’t make your decisions based on how loyal you are because invariably it won’t work out for you.”

Many loyalty cards may just be taking up space in purses and wallets.

Consumer NZ found in March that

while Fly Buys last year had more than 2m members, just 850,000 rewards were redeemed.

It takes some determined spending to get any benefits.

Consumer calculated that to earn the points ( 115) for a $ 20 New World voucher, you’d need to spend $ 2875, equivalent to a $ 180 weekly shop over four months — a return of less than 1 per cent.

“You find with all of these things that you’ve got to earn so many points before you’re eligible for anything. Buy on price and treat the rewards or loyalty scheme as a bonus,” advises Chetwin.

Wilkinson says Fly Buys had previously been regarded as a global leader in the field. But the Countdown- Onecard tie- up with AA Smartfuel will have 3.5m members, overtaking Fly Buys with its 2.5m members.

Loyalty NZ runs Fly Buys and its chief strategy & growth officer Hamish Mitchell says the Onecard- AA Smartfuel partnership made sense as it was hard to succeed as a standalone player in the rewards sector.

Mitchell said Fly Buys had added up to 300,000 new members in the past year, though he acknowledged that some had left the scheme.

“The increased activity and increased interest in loyalty [ schemes] this year has been phenomenal for us, we’ve seen continued and massive growth and customer activity this year,” he says.

Mitchell said the connection between Onecard and AA Smartfuel wouldn’t change Fly Buys’ plans.

“We launched a fuel proposition with Z Energy earlier in the year, we’ve launched grocery discounting with the New World Club Card . . . So in some respects it’s good to see Onecard and Smartfuel following our lead,” he says.

There’s fierce rivalry between the loyalty schemes, something AA Smartfuel’s Ian Sutcliffe acknowledges.

“New Zealand’s a small place, everyone knows each other and there’s probably a bit of competitive spirit. There’s no doubt about that.”

He says the market is ready for a Consumer NZ’s loyalty tips To get the most value, make sure the discounts, benefits and returns are achievable for the level of effort and spend you’ll have to put in. Don’t spend just to earn points. If an item you need is cheaper elsewhere, buy it and pass up the points. Watch for restrictions on earning points or using reward vouchers, such as minimum spends and excluded products. Keep track of expiry dates on points, rewards and discounts using the schemes’ websites or apps. Be aware of opportunities to maximise discounts or boost points with bonus offers and competitions. Remember, loyalty is a two- way street. You provide data, they provide reasons to keep shopping there. If all you’re getting is an email inbox full of irrelevant offers — kick it to the kerb.

Source: Consumer NZ shakeup and i s seeing no signs of enthusiasm waning. “We’re still growing the number of cardholders at 15,000 to 20,000 a month after five years so that’s one sign.”

Retailers pay to be part of a scheme in various ways, which could include a communications system or a fixed rate.

Sutcliffe says businesses must weigh up whether they could go it alone rather than being part of the umbrella schemes. “It’s an age- old dilemma. Only a handful of businesses have the resource and financial tools to do it themselves.”

When Fly Buys and Air New Zealand announced their split, they said they had decided to focus on their own loyalty programmes.

Airpoints’ general manager of loyalty, Mark Street, says three years ago the airline made a conscious decision to expand its programme; last year it changed one of its financial partners — from BNZ to Westpac — and this year has focused on expanding its retail coalition.