Aviation, tourism and energy writer for the Business Herald

Loyalty cards: The big reshuffle

Millions 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 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.

When there's complexity there is very little engagement and I think we've got to a stage there with some of these cards.
Chris Wilkinson, First Retail group managing director

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 technology 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.

Air New Zealand airpoints loyalty card.
Air New Zealand airpoints loyalty card.

"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.

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.
Hamish Mitchell, Loyalty New Zealand's chief strategy & growth officer

Consumer NZ found in March that while 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 stand-alone 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.

Consumer NZ chief executive Sue Chetwin.
Consumer NZ chief executive Sue Chetwin.

"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 shakeup and is 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.

New Zealand's a small place everyone know each other and there's probably a bit of competitive spirit - there's not doubt about that.
Hamish Mitchell, Loyalty New Zealand's chief strategy & growth officer

"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.

"There is a lot going on. I think it shows that people are very interested in getting more out of their shopping," he says.

The Qantas frequent flyer business is a big part of the airline group and the members it has in New Zealand constitute its second biggest member group outside Australia.
Loyalty chief executive Lesley Grant says it is always looking at establishing new partnerships.

"Earlier this year we partnered with Meridian and we are talking to several companies at the moment across different sectors. During the past we've also grown our team in New Zealand to make sure we are building relationships on the ground and are closer to our members and partners."

New World's loyalty Clubcard.
New World's loyalty Clubcard.

Loyalty programmes have been around for hundreds of years in one form or another and in addition to locking in repeat business (and offering varying values of reward for customers) they've always been a way of harvesting information about customers.
Wilkinson says consumers are aware of this.

"Consumers have rationalised the fact that there is a lot of data out there about them: their buying habits; which stores they're shopping in. I think people have dealt with it. I don't think it's an overwhelming issue any more."

Chetwin says data collection can also work for customers.

"A lot of comment about these schemes is about knowing what you do, your patterns.

That's a two-edged sword. They get the data but you're probably served things that you're interested in."

In its report, Consumer NZ said the Privacy Act requires businesses to be open about what information they're collecting about you, how it will be used and who they'll share it with.
The act also requires information to be collected in a fair way and kept secure.

Customers are also entitled to request and correct any information the business holds about them.

However, it may charge a fee depending on the complexity of getting this information.

The student making loyalty cards worthwhile

Auckland University of Technology physiotherapy student Jasmin Gibbs-Grant believes loyalty cards are useful - if a person is willing to wait to accumulate rewards.

At any one time Gibbs-Grant has close to ten loyalty cards in her wallet.

Despite being frustrated that most loyalty programmes require a significant amount of spending before rewards are received, she said she believed they paid off in the long run.

"From a student on a tight budget, it's about the long game with rewards programmes - but only because it takes so much spending to receive any rewards," she said. "I've found it's a balancing act between investing in the long run and spending excess money in the short term to receive the rewards sooner rather than later."

AA Smartfuel, Qantas club, and Onecard are her main loyalty memberships, as well as other clothing and food outlet reward systems.

"I use my loyalty cards as often as I can afford to use them. Something I have had to learn as a student, particularly a student living out of home on my own finances, is that to earn rewards via loyalty programmes you have to spend money first," she said.

Gibbs-Grant said she makes loyalty cards worth the effort.

"I feel they are worth the effort if you are going to spend the money regardless - you might as well earn rewards with this.

"Loyalty programmes are advertised and shoved in your face a lot, so it's very easy to think you're getting a great deal but I don't think it is a deal at all. It definitely makes you loyal, but not because I feel loyalty to that company but because I might as well take advantage of the small financial opportunity presented."

Consumer NZ's loyalty tips:

A good loyalty scheme should work with your regular shopping behaviour and involve businesses you want to deal with.

• For you 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.

Fly Buys

Partners: About 45 retail and service business partners including BNZ, New World, Z Energy, State Insurance, Noel Leeming, Liquorland, Paper Plus, Contact Energy, Mitre 10.
Changes over the last year: Joined: Noel leeming, Hello world. Left: Green Cross Health, Pit Stop.
How to spend: More than 5000 reward products, Air NZ flights, cash for kiwisaver, new world dollars, partner gift cards.
How to earn: Differs at each participant. In most cases 1 point for every $25 spent.
Members: 2.5 million.

AA Smartfuel

Partners: Include Countdown, BP, Caltex, 100% Electrical, Trustpower, AA Insurance, BidVest, OPD, Specsavers, Bridgestone / Firestone, Hammer Hardware.
Changes over the last year: Joined: Carpet-Court, AA Insurance, Countdown, House of Travel. Left: Vinz, Paper Plus
How to spend: Instant fuel savings.
How to earn: Real money in cents per litre (not points)/varies by retailer.
Members: 2.2 million.

Air New Zealand Airpoints

Partners: 55 businesses and 140 retailers including Apple, ASOS, Marks & Spencer, Karen Walker, Rodd & Gunn.
Changes over the last year: Joined: 21 organisations including Westpac, Mitre 10, Mercury, Tower Insurance, Z, Umbrellar, Storage King, Snap Fitness, New World. Left: BNZ.
How to spend: Airpoints dollars' value is the same as cash that can be spent on flights.
How to earn: Vary by partner, about 1% of spend for high frequency household shopping and credit cards.
Members: 2.2 million.

- additional reporting Hamish Fletcher

- NZ Herald

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