Are Loyalty Cards really about Loyalty anymore?

Australians loves a good loyalty program. According to recent studies by Directivity & Citrus (2013), 88% of Australian Consumers over 16 years of age are members of a loyalty program. They feel they get something for nothing, they are going to spend the money anyway so why don’t they build up loyalty points and get rewarded at the end.

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But what do the companies get out of it?

Most would assume they are seeking brand loyalty, hence the name. However only 46% of consumers say they feel more loyal to the company/brand when they are a member of their loyalty program (Directivity & Citrus, 2013). Brands of course want to encourage their consumers to keep coming back to them, but according to The Economist (2011) loyalty cards are about so much more than Loyalty.

Rupert Duchesne, the chief executive of Aimia, a Canadian firm which runs Britain’s Nectar card scheme claims that the real value out of loyalty programs is the data (The Economist, 2011). Data about who you are, how old you are, your gender, where you live, and then also data about what you buy.

Most stores these days will have electronic Point-of-Sale technology that records purchases at the check-out and provides scanner data. Scanner data is what items are bought, how much you bought, which brands, how much you spent ect. However loyalty programs allow stores to tie this data to a specific person and effectively a market segment. This data together is a powerful marketing research tool.

Market research is crucial in the decision making process for any brand or company. Smart marketers constantly gather, analyse and compare market research data (Associate Professor David Bednall, MPK732 Marketing Management, Deakin University, lecture 11 April, 2016).

The market research data from loyalty programs can be used to target segments with specific discounts and marketing campaigns or ultimately decide what products to stock on your shelves. UK Grocery Store, Tesco, uses their loyalty program’s data to inform all parts of the Tesco business with the aim of improving it’s performance (Davis, 2013).

Many marketers say that we are only just scratching the surface with this type of big data and it is being utilised but at a rudimentary level (Graham, 2016). Former Global Head of Consumer Markets at Tesco’s data analysis firm, Peter Alexander, says

“Contact with customers was the cream on top for Tesco. It was the data underneath that did most of the work. This was the secret inside the Tesco loyalty scheme and most retailers still do not understand this.”

Australian grocer, Woolworths, is a prime example of this launching a new loyalty program late last year. The new program, completely changed the way consumers would earn points and also took away the redemptions its consumers claimed was the biggest reward, Qantas Frequent Flyer points.  While this is a prime example of the larger topic of market research gone wrong, if they had examined their previous loyalty program data closely could they have avoided this? Would it have shown that larger portions of consumers mainly redeem frequent flyers? Would it show that consumers are spending the minimum $30 everytime to ensure they collect their points? Nevertheless, the people have spoken and Woolworths heard. Back in with the frequent flyer points, now the only thing to worry about is where to go.

References:

Davis, G 2013, ‘Analysis: Loyalty Cards – How retailers are using their data’, Retail Week, 12 July 2013, retrieved 18 April, 2016 http://www.retail-week.com/sectors/grocery/analysis-loyalty-cards-how-retailers-are-using-the-data/5050868.fullarticle

Directivity & Citrus 2013, For Love or For Money? 2013 Consumer Study into Australian Loyalty Programs retrieved 17 April, 2016 http://www.ami.org.au/iMIS15/librarymanager/Resources/Marketing%20Update/2013%20Loyalty%20Program%20Research%20FINAL.pdf

The Economist 2011 Spies in your wallet, The Economist, retrieved 17 April, 2016 http://www.economist.com/node/21536604

Graham, D 2016, ‘Discounts for Data’, Choice, 11 January 2016, retrieved 17 April, 2016 https://www.choice.com.au/shopping/consumer-rights-and-advice/your-rights/articles/loyalty-program-data-collection

Student ID: 215390509

Username: naenarcis

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