Paula: Hello, and welcome to Let’s Talk Loyalty and Loyalty TV, a show for loyalty marketing professionals.
Paula: I’m Paula Thomas, the founder and CEO of Let’s Talk Loyalty and Loyalty TV, where we feature insightful conversations with loyalty professionals from the world’s leading brands.
Paula: Today’s episode is hosted by Carly Neubauer.
Paula: Managing Director of Elevate Loyalty, an Australian based company specializing in loyalty and incentive services.
Paula: Carly is also the Managing Director of One Tap Group, a UK based company providing loyalty payment services.
Paula: Enjoy.
Carly: Hi, I’m Carly Neubauer, Managing Director of Elevate Loyalty and One Tap Group.
Carly: Today I’m speaking with Phil Hawkins, a loyalty veteran with over 30 years experience in the loyalty industry.
Carly: Phil has particular expertise in coalition programs, having worked extensively with Flybuys in Australia over several stints, from its inception in 1993 until moving into semi-retirement three years ago.
Carly: More generally, Phil has loyalty experience covering program design, all aspects of program operation, and specific experience in email and digital communication.
Carly: These days, Phil is a keen loyalty observer, commentator, writer, and occasionally creating mischief on LinkedIn.
Carly: Please enjoy my conversation with Phil.
Carly: Hi Phil, and welcome.
Carly: Great to have you on the show today, and I’m really looking forward to this conversation.
Carly: For the upcoming series of Let’s Talk Loyalty and Loyalty TV, we are asking two key questions of our guests.
Carly: The first one being, which is your favorite business book?
Phil: Thank you, Carly, for the question, and thank you for having me on Let’s Talk Loyalty TV.
Phil: I’m gonna break the rules and show two books.
Phil: The first one is The Loyalty Leap by Brian Pearson.
Phil: That book’s about probably 11 or 12 years old now.
Phil: And I like that book because Brian, I suppose, is a contemporary of mine, a huge experience, particularly initially with the Canadian loyalty market with the EMS Canada, but then ran Loyalty One, a global loyalty company.
Phil: And I love what he has learnt over the years, but what that means going forward.
Phil: And my second book is this one, which came out last year.
Carly: Great choice.
Phil: Which is Omnichannel Retail by Tim Mason and Sarah Jarvis.
Phil: I liked the lessons in this book, particularly, you know, given Tim’s background, going right back to the start of Tesco Club Card in 1993.
Phil: I love the way that he brings the lessons he’s learnt from that, but makes it relevant for, you know, our digital present and future.
Carly: Great choice.
Carly: I love this one.
Carly: And the Turn the Dial model that he has, the data, insights, action, loyalty.
Carly: It’s so great to be able to apply it in our everyday loyalty world.
Phil: I totally agree.
Carly: Good.
Carly: Now we do have to ask the ever famous question as well.
Carly: Which is your favourite loyalty programme and why?
Phil: The programme I’ve chosen is a simple programme at my local bookstore.
Phil: And it’s not dramatic.
Phil: It’s like, I suppose, quite a few of the booksellers or the bookshop programmes.
Phil: My purchases there go and provide a future credit for me to use on subsequent purchases.
Phil: The thing I like about it, apart from its absolute pure simplicity, is that each time you purchase, they play back to you what benefit or credit you have at that time.
Phil: And that solves a challenge for loyalty marketers.
Phil: How do you keep reminding customers of the way the programme is assisting you and providing benefit to you?
Phil: And this constant playback that’s just part of the normal purchase experience, I think that captures an important essence of how to make a loyalty programme good.
Phil: Now, it’s a funny choice because the local bookstore doesn’t have a complex CRM program, doesn’t send birthday emails, doesn’t send me SpendGet offers.
Phil: It’s pure simplicity is what makes it strong and enjoyable to be part of as a customer of that bookstore.
Carly: And what else do they do?
Carly: What sort of things do they do that really engage with you as well?
Carly: And why them?
Phil: Well, I had massive excitement in my world a couple of years back because I didn’t know, but I must have exceeded the threshold in that year’s purchases that entitled me to go to a VIP night at the Bookstore after it had closed.
Phil: And me and quite a few others, we had drinkies and it was one of those surprise and delight moments.
Phil: And interesting reflection from my perspective, I didn’t know the threshold you had to spend to get there.
Phil: And a loyalty marketer might say, oh, you should have had a counter in all your emails saying, you’re only $150 away from getting the invite to the drinks.
Phil: But the surprise and delight was a wonderful thing.
Phil: And again, simple.
Phil: Sad to say, the last two years, I haven’t had the…
Carly: You didn’t reach the threshold, obviously.
Phil: I haven’t had the invite and…
Carly: You didn’t make it.
Carly: You didn’t make it.
Phil: But it was the bookshop equivalent of the lounge.
Phil: Getting into the, you know, the pre-lounge.
Carly: Getting into the lounge.
Carly: I love this.
Phil: So that was another good thing about the program.
Phil: But I’ve always been an advocate for a good program as a simple program.
Phil: So, and this is a classic example of it, yep.
Carly: Fantastic.
Carly: So we definitely have to talk about you and your experience of over 30 years in the loyalty industry.
Carly: For those that may not know the Australian programs or have heard of Flybuys before, some of our viewers and listeners, can you tell us a little bit about your history, your background and the Flybuys program that you are so well known for?
Phil: Well, I’m happy to do that, Carly.
Phil: You know, in 1993, Shell in Australia started talking to Coles, Myer, a conglomerate retailer in Australia, about ways that they could undertake activities for mutual benefit.
Phil: And somehow a loyalty program, the idea of a loyalty program popped up, but I think for international listeners, it’s really important to note that in the early 90s, Australia wasn’t a market, particularly for retail, that knew anything about loyalty programs.
Phil: They basically didn’t exist in any particular form.
Phil: Even the frequent flyer programs at that time, of both Qantas and Ansett, they were only six years old, and they were much, much different to what they are now.
Phil: In that, they were the domain purely of frequent flyers.
Phil: And the concept of Flybuys, that is getting to fly for your buying, struck a very strong chord at the time with Australian households.
Phil: The concept of getting to fly, which was not something as common or utilitarian as it is now, it really was associated with surf, sun, sand, escape.
Phil: The concept of getting a benefit for your, like a free flight for your everyday shopping, that resonated really, really strongly.
Phil: That led to the name of the program, Flybuys.
Phil: And it was a very exciting time to be involved with it.
Phil: And it’s such a feeling, Carly, of stepping out into the unknown, not knowing whether this would work in the Australian landscape.
Phil: And, you know, I was doing a lot of the economic modeling for it.
Phil: And I thought, oh my gosh, we need to get three or 400,000 households for this thing to fly.
Phil: And a million households joined in six weeks.
Phil: And we’re away.
Phil: But, you know, Flybuys has had many, many twists and turns over the 30 years of its operation.
Phil: You know, plenty of highs, plenty of lows, so many learnings on the way.
Phil: And, you know, there are so many different chapters in that story that could form case studies, some very positive, some less positive.
Phil: But, you know, I’m proud to have been associated with that program over so many years until I went into semi-retirement three years ago and so proud that it’s Australia’s most popular program to this day.
Carly: Yeah, it absolutely is.
Carly: There’s no one that doesn’t know it in this country.
Phil: Now, I need to say, Carly, I was a disloyal loyalty practitioner because I did leave Flybuys twice but came back and it ended up with a very long third stint.
Phil: So, but I was associated for many of those years.
Carly: And with those stints, you didn’t just go off and take minor roles.
Carly: You took some decent roles in between National Australia Bank, Coles.
Carly: You moved off and came back with some pretty significant roles in between.
Phil: Yes, and particularly at National Australia Bank.
Phil: It’s a long time ago now, but in the, I was basically in the credit card team and learnt quite a few lessons there about the dynamics of credit card programs, which was an interesting time.
Phil: And on my return to Loyalty Pacific, which operates Flybuys, in one of those stints, I was involved at the very start of the Myer One Loyalty program, which basically, Loyalty Pacific, assisted Myer with for a number of years.
Phil: And that was fascinating to see a different type of program start from scratch and how that fitted into an operation like Myer.
Carly: Yeah.
Carly: Wow.
Carly: Now you said you semi-retired for about three years.
Carly: So are we going to see another Phil Hawkins return to Flybuys or do you think you’re done now?
Phil: No.
Phil: No, I’m not returning to Flybuys.
Phil: And since semi-retiring, I’ve deliberately not become a loyalty consultant, but I suppose you can take the boy out of loyalty, but you can’t take loyalty out of the boy, which means that I’ve stayed involved from a mentoring perspective and from my own mental stimulation, writing articles on LinkedIn, and sometimes making myself a little bit of a nuisance on that forum.
Carly: Well, that’s great for today.
Carly: Fantastic.
Carly: We definitely have some great questions for you as well.
Carly: One thing before we move on from the Flybuys conversation, I’d love to ask you, you’ve been a speaker a number of times and been interviewed a number of times, but is there anything that you can tell us?
Carly: If you look back, do you ever look back and go, wow, why did we do that?
Carly: Or, jeez, I should have done that differently.
Carly: Tell us something we don’t know.
Carly: Any key challenges that you were facing through the Flybuys, especially around the launch, do you go, what did we do there?
Carly: And with your now perfect hindsight, what would you have done differently?
Phil: Yeah, the excitement, probably more trepidation around launching, I immediately jumped to the relaunch of Flybuys in 2012.
Phil: The period leading up to, say, 2011, the number of years leading up to that, it’s fair to say that Flybuys wasn’t particularly loved by its owners at the time, which was Coles and NAB.
Phil: And it was treading water in lots of ways.
Phil: And in 2011, Coles purchased NAB’s 50% share of Flybuys and a massive relaunch.
Phil: And it was so exciting because there were a lot of positive changes to the program, better value, new partners, a change to what was a fairly unpopular exploration rule.
Phil: And Coles really made a fantastic investment in Flybuys.
Phil: The scariest bit of all that was that we had a new card, produced new branding.
Phil: And when programs relaunch in this manner, what they normally do, or what they did back in those days when it was much more about the plastic, oh, let’s send new cards to our existing members.
Phil: We were given a challenge by Coles which was basically, no, why don’t we send cards to all of Australia?
Phil: And we thought, oh, how do you do that?
Phil: And so you didn’t want to send them to, you know, business addresses or to holiday houses.
Phil: And so we worked with Australia Post and with some data firms.
Phil: And we did pretty well the best job we could to mail what ended up being, I think, about 18 million cards to about 8 million households.
Phil: And we got it nearly right.
Phil: But one of the data sources, which I think the undertakings that were provided weren’t quite accurate, was to get the right name for, because we wanted to put a name on the address rather than to the householder, because the latter tend to get chucked in the bin pretty quickly.
Carly: Absolutely, yes.
Phil: But they were out of date.
Phil: And because I was heading up operations, I had the task of speaking individually to folk where we had addressed it to someone who had passed away in the last few years.
Phil: So that wasn’t great.
Phil: And it didn’t happen a lot, but it did happen.
Phil: So that was a point of reflection.
Phil: This was not a good thing, as I said.
Phil: It was the absolute minority, but it was a little exercise in just trying and find the right sweet spot to say, we’re going to do the best job we can in that circumstance.
Phil: But try and use your best judgment.
Phil: And I think the thing there, Carly, is it reminded me that when you’ve got such a big program, a small error becomes a significant thing.
Phil: When you’re sending millions of emails and you get a half percent error rate, that half a percent can create quite a bit of noise.
Phil: As opposed to if my local bookstore might have made an error.
Carly: And they invite you to the VIP night so you’d forgive them anyway.
Carly: That’s fine.
Phil: That’s right.
Paula: Oh, wow.
Carly: Well, thank you for sharing that as well.
Carly: What I would like to talk to you a bit more about are your views and opinions as well.
Carly: I mean, you’ve called yourself a loyalty observer and that you wear a range of hats, mentoring, speaking roles, and maybe a bit of consulting and assisting in the industry as well.
Carly: And with over 30 years experience, you’ve told me once before, you have the privilege of now knowing the answer to all of this.
Carly: So I thought, well, fabulous, I’ve got questions, I’ll ask you.
Phil: And I’ll just read them straight off my answer sheets.
Phil: And the answer can’t be questioned.
Carly: No, exactly right.
Carly: So if you know the answers, I’ll ask the questions.
Phil: Okay.
Carly: First of all, I wanted to ask you about program types.
Carly: What do you believe?
Carly: Which ones work?
Carly: Which ones don’t?
Phil: And the thing that occurs to me straight up and what I’ve lived through, my experience has been in coalition loyalty programs.
Phil: And if you think about the, particularly the 1990s and the 2000s, and where there were big companies basically traipsing around the world selling coalition models, one of the most debated things, particularly in the last few years, has been, does the coalition model work still?
Phil: And we’ve seen examples of coalition programs blowing up, such as in the examples in the US, which has always been a very challenging market for coalition programs.
Phil: We’ve seen examples of programs being bought out by major partners, such as Sainsbury’s buying out the NECTA program in the UK.
Phil: And very sadly, in this neck of the woods, this month, at the end of this month, Flybuys New Zealand, operated by Loyalty New Zealand, with whom I’ve had a connection over 28 years, that program’s coming to an end.
Phil: And so I think that’s a key question in terms of types of programs, is there still a place for coalition programs, and we could spend the next, the rest of this hour talking about that.
Phil: In summary, I think that the barriers to entry for individual programs are much lower these days.
Phil: And so I think individual retailers can more easily launch their programs back in the coalition days, where we would go in this Flybuys and say, look, we are the experts.
Phil: Let us do this for you and become part of our program.
Phil: I certainly think that’s less effective now.
Phil: But the thing that is still there is, and it is a little bit different now with digital cards, but back in the day, we knew the Flybuys card was more likely to find a place in your purse or wallet because you could use it in so many places.
Phil: And I remember the days of, I didn’t want to have the world’s biggest wallet, so there was some loyalty programs.
Phil: I would take it out.
Phil: And of course, then I’d go to that retailer and say, I haven’t got their card.
Carly: Now I don’t have it, yeah.
Carly: Yeah.
Phil: Now, surely it is different now where you carry your identification digitally, but it still is a factor that, thinking about Flybuys in Australia, at Bunnings, you’ll be asked for a Flybuys card, Officeworks, Kmart, Target, Coles, First Choice Liquor, Liquorland, et cetera, et cetera.
Phil: You know, that still makes a program compelling and top of mind.
Phil: So that is still there.
Carly: Definitely.
Carly: Well, as we’re talking about that as well, one pass.
Carly: Flybuys, one pass.
Carly: What are your views when I’m going to the store?
Carly: Which one am I supposed to scan or both?
Phil: Yeah, it’s a really fascinating question.
Phil: And I think you’ve captured in your question, Carly, the fact that, you know, they are closely related, particularly in the West Farmers’ stable.
Phil: Flybuys is owned 50% by West Farmers and Coles.
Phil: The West Farmers’ retail brands all participate in one pass.
Phil: And, you know, it is a subscription program, so it’s a subscription program, a loyalty program.
Phil: They are complimentary, particularly with the change that was made 12 or 18 months ago for one pass members in trying to enhance the benefits of my membership of one pass that I’ll get five times Flybuys points for all of my transactions.
Phil: That’s brought the programs closer together.
Phil: But, you know, it’s, my view is one pass has had an interesting kind of gestation period.
Phil: Part of the challenges for one pass have been, subscription programs aren’t easy.
Phil: And, in an Australian context and I suppose global context, you know, subscription programs always look to Amazon Prime and say we want to be part of that and do what they do.
Phil: And all of the examples I’ve seen in Australia, it hasn’t been an easy pass for them.
Phil: There are benefits to as farmers having one pass because thinking about the coalition thing and potential data sharing, well, they’re collecting their own data now.
Phil: So you kind of avoid some of the conflicts you get in coalition programs around who gets whose data.
Phil: So, you know, it gives West farmers kind of clean data in that sense.
Phil: But I watch it closely because it’s an interesting case study in with a multi-partner subscription program with some pretty big part, you know, pretty big retail names in an Australian context.
Phil: Will they get there?
Phil: And, you know, they’re suffering all the challenges like, oh, you know, to try and bump numbers, we’re going to have to discount it.
Phil: And it’s a bit like the experience we all have with our streaming services.
Phil: We all like to jump in for the free or discounted early offer.
Phil: But will we stick when the regular price comes in?
Phil: And, you know, I think one passes to being challenged by that a little bit.
Carly: Yeah.
Carly: And even the fact that I think in some of the reports, we don’t actually know how many full subscribers they have at this stage.
Carly: There’s a lot of debate around this, the disclosure of data as well.
Carly: So, and to your point, subscription programs, there’s also discussion around, is that considered even a loyalty program or not?
Phil: Yeah.
Phil: And, you know, the concept of paying for your loyalty program, well, the first instances we saw of that were in the probably the, yeah, the early 2000s with credit card programs where, when there was a change to the interchange rate, we saw banks introducing annual fees to be part of the loyalty program.
Phil: So, paying to be rewarded, you know, that’s not an easy concept to get across to your customers, where it’s like, well, you do the sums and if you get a return, that’s good.
Phil: And that’s what subscription programs basically play into because, although most of us won’t get a spreadsheet out and try and work out, well, am I ahead?
Phil: There’ll be some kind of internal counter that says, yeah, I’m thinking I’m getting enough benefit from this to overcome my subscription fee.
Phil: Yes.
Phil: But there’s something a little bit unsettling there, isn’t it?
Phil: Because if you think that an essence of a loyalty program is, thanks for being a great customer, Carly.
Phil: I want to reward you for your custom.
Phil: This is just a thank you.
Phil: It’s more like, well, if you want to be in this, there’s a price.
Phil: And good luck to you in getting enough benefits to overcome that price.
Phil: It’s a totally different dynamic there.
Carly: Yeah.
Carly: So one other question I wanted to ask you about program type as well, tiered programs.
Carly: Yeah.
Carly: Okay.
Carly: Your reactions is a lot.
Phil: Yeah.
Carly: Tiered programs.
Carly: Are we good or bad?
Carly: Where are we at?
Phil: So I did write an article on LinkedIn, which is still there, called, Where Your Program Ends in Tears.
Phil: And my gut feel is that particularly retail programs, they jump too quickly to having tiers.
Phil: And the simplest argument against tiers is that it makes a program more complicated.
Phil: And guess what?
Phil: Don’t expect your customers to look at the rules of engagement about how I get up between tears.
Phil: Now, the obvious exception to that, I think, is around frequent flyer programs and putting points currency to one side.
Phil: It’s all about the status credits and the fact that it’s been demonstrated very clearly that people will make uneconomic decisions to gain tears.
Phil: And the pull of getting up to a gold tier or even higher, that’s where tiering seems to work.
Phil: But even the airlines, in my view, have a problem that all retailers have, and it’s usually about the difficult second tier.
Phil: You know, put the great unwise into your bronze or whatever.
Phil: But the silver tier, I find, is universally a challenge, because what treats do you give that middle group?
Phil: It’s sometimes a big group, and economically, I see companies struggle to provide a suite of benefits that makes the silver tier look any good at all.
Phil: And whereas the top tier, you can see where even retail companies sometimes can do it quite well.
Phil: I think of all of the health and beauty programs like Medica Cosmetica and their peers.
Phil: You know, the treats you get for being a big customer, or a high spending customer, are there.
Phil: The big question for me is though, can you still say to your best customers, thank you for being a fabulous customer and here’s a treat I want to give you.
Phil: Can you still do that without having the formal tier structure?
Phil: It’s a little bit easier these days with digital cards, because back in the day with plastic cards, you always had to reissue cards.
Phil: And the toughest bit about tiering is when you downgrade people.
Phil: Hi Phil, you used to be important to us, now you’re not.
Phil: Throw away your glitzy sparkling card and have this comparatively dull card.
Phil: And by the way, do better in future.
Carly: You’re not as important anymore.
Carly: How do you deliver that message?
Carly: Because you can’t leave everyone at the top tiers unlimited.
Carly: So what do we do?
Phil: Exactly.
Phil: And I’ve seen some absolute disasters with tiering programs where clearly they’ve had very high paid consultants, global consultants come in and advise them on program design and end up with a construct that even the marketing people in the company didn’t know how the tiers worked because it was so complicated, let alone customers.
Phil: And so you do, I think you tread into that tiering structure very carefully because before you worry about any benefits and any rules, it’s making a simple program more complicated.
Carly: Well to your point earlier, keeping it simple, it gets the excitement factor and makes sure the customer and the member can understand it and engage with it accurately.
Carly: Now points programs, I’m guessing you’ve got a view there as well.
Carly: You’ve got a little bit of history in that one.
Carly: What do you think about points?
Carly: How do we use them sizing of the currency?
Phil: Yeah, I think the first article called Points Programs are dead, probably I read about 20 years ago, and they come out with regularity.
Phil: And I do admit my bias here, because I’ve been associated with a program like Flybuys that is out and out a points program and probably at the more transactional end of the scale as a points program.
Phil: I think if you think about points programs as really having a currency of influence and a point is a very flexible currency of influence.
Phil: And when we were recruiting new partners to Flybuys back in the day, we would say, look, this currency is for you to use however you like within limits, you know, as long as it’s ethical and legal and all that kind of stuff.
Carly: Certain limits.
Phil: You know, whatever behaviour change you’re seeking, throw points at it and test and learn.
Phil: And in that sense, points programs are very flexible.
Phil: Now, the argument against that is, yeah, but what’s a point worth?
Phil: And so that will lead programs to say, oh, no, our program is all about dollars.
Phil: And so, and, you know, to be fair, my favourite bookstore program, they don’t talk to me in points.
Phil: They say, oh, Phil, just letting you know you’ve got a $8 credit.
Phil: Do you want to use that now?
Phil: And that’s dollars.
Phil: So I’m not saying there’s not a place like that to have points programs.
Phil: But, you know, dollars are limiting.
Phil: And so for a program like Flybuys that has advertised in the past and probably still can, there are over a thousand reward choices.
Phil: And this is how many points you need for that and points you need for that.
Phil: It’s not about here’s how many dollars you need for that.
Phil: You know, it provides that flexibility.
Phil: Now, another argument about being focused purely on points is it’s transactional nature.
Phil: And, you know, you think about programs with soft benefits that it’s nothing about points.
Phil: And I think programs that are just points benefits are very self-limiting.
Phil: But let me give a Flybuys example.
Phil: You know, for many years Flybuys has sent out on behalf of Coles your weekly specials.
Phil: And that is just saying to me each Wednesday, Phil, here are 12 items that are on special in Coles this week.
Phil: We know that they’re products you buy.
Phil: And look, there are no special bonus points on them.
Phil: They are just highlighting from the whole catalogue of hundreds of specials, just letting you know, Phil, the Twining’s tea bags are on special.
Phil: Now, that’s an example for me.
Phil: It’s got nothing to do with points.
Phil: And it does bring a different dimension into loyalty programs, that they just make your life easier.
Phil: And this concept of, yes, reward programs by the very name intended to be rewarding.
Phil: Well, this is a reward in a different way.
Phil: It’s not a financial reward.
Phil: It’s making your life easier, you know.
Carly: It’s solving a problem.
Phil: For a new Coles Online customer, new to Coles Online, if you put your Flybuys number in, it’ll say, oh, it’s you, Phil.
Phil: Well, here’s a starting shopping list for you to make your first shop with Coles Online easier.
Phil: Again, that’s an example of making your life easier.
Phil: So that’s been an emerging dimension.
Carly: What about the introduction with some of the supermarket programs where they introduced the $10 off at checkout?
Carly: What are your thoughts there?
Carly: Cause that’s a real change to bring that in, where there’s this instant $10 off or X amount off when you’re at checkout and you’re about to leave the store, finalize your transaction.
Phil: Now, just a note for viewers, this is the secret sealed section.
Phil: So proceed.
Carly: It gets better from here.
Carly: It’s fine.
Phil: No, it is, I mean, it’s, it’s, it’s an interesting, it’s an interesting concept.
Phil: First up, the years and years and years, if you ask the general consuming public, what’s your favorite reward?
Phil: They say, give me the cash.
Phil: And so that almost suggests the model that is, oh, we just have cash as rewards.
Phil: But the other side of the coin is, we will be agnostic about reward.
Phil: You have, here’s a thousand different rewards.
Phil: And, you know, someone will go for the toasters.
Phil: Someone will go for the flights.
Phil: Someone will go for the discounted movie tickets.
Phil: Others will go for the cash.
Phil: And guess what?
Phil: The numbers who say cash is our favourite reward, not all of them take cash.
Phil: So, you know, there’s a couple of schools of thought here.
Phil: It’s interesting, and it wasn’t just Flybuys, but, you know, through the 90s, could see a lot of programs that were very hesitant to put out cash or near cash rewards because it gave a direct translation for what each point is worth.
Phil: Other reward types, you know, certainly there wasn’t that exact, oh, because taking Flybuys and flights, what’s a Melbourne Sydney flight worth?
Phil: Back in those days, you’d get 10 different answers.
Phil: And so we thought, oh, we’ll be bad if people would have an exact equivalent between points and the cash.
Phil: But we went down that track and certainly very popular with people.
Phil: And Flybuys, in the Flybuys world, we extended it to Flybuys dollars, which is still an important reward type.
Phil: And as you said, recently Flybuys and Coles give you the option of being prompted at point of sale once you’ve hit a certain point threshold to say, do you want X dollars off your shop?
Phil: And clearly in the Australian context, Woolworths has been doing that for quite a while.
Phil: How much does that help with the dopamine hit that all loyalty practitioners like to look at?
Phil: You know, the moment of truth at redemption.
Phil: We learnt very early on that if the reward experience went well and they chose the right award, then members will redouble their efforts in the program and it’s all beauty and light.
Phil: If the reward process stuffed up and it didn’t quite work, people would be inclined to say, I thought this program was going to be a ripoff, and it is.
Phil: Thankfully, not many of them.
Phil: What kind of hit do you get when you get a small amount of dollars back?
Phil: And we learned, I think it was just anecdotally, but there was certainly effect with other programs overseas that said, I’ll get X dollars or X pounds off at point of sale.
Phil: And that would be part of the experience with the checkout person.
Phil: They would do Vox Pops interviews 10 seconds later and say, what just happened then?
Phil: And a significant proportion of people didn’t realise what that interaction meant and that because of their loyalty program involvement and they were getting a reward, not a big reward, for that shopping experience, it passed them by.
Phil: And so for that cohort, no, there wasn’t the warm glow and the redoubling of efforts, and you lost that moment of truth.
Phil: So I think based on all of that, the truth lies somewhere in between.
Phil: I don’t have the definitive answer in my answer sheet here.
Phil: But it’s been very interesting to see that change with Coles and Flybuys.
Phil: And it was reported publicly a lot of members actually redeeming for the first time at Coles.
Phil: So that’s a positive thing for Coles.
Phil: I think a challenge for a coalition is if all the happy faces are in one retailer with redemption, and by definition, not at the other retailers, how does that make the coalition partners all feel about that mechanic?
Phil: So it’ll be interesting to see how that goes in future.
Carly: Absolutely.
Phil: End of sealed section.
Carly: We might open it up again.
Carly: So being from Adelaide, I think I’m correct there.
Carly: There’s another very popular gentleman from Adelaide, who’s currently based in Adelaide, Byron Sharp, Ehrenberg Blass.
Carly: There are plenty of articles from Byron and his views on loyalty.
Carly: Plenty of quotes around Byron Sharp trusts no one when it comes to loyalty, customer retention, it’s too inefficient, it’s expensive, schemes have very little impact.
Carly: It goes on.
Carly: You can Google a lot.
Carly: What are your views on this?
Phil: No comment, Carly.
Carly: I’m beating this out.
Phil: No, it’s a great topic.
Phil: Byron Sharp’s first comment on loyalty was, I think, within the first couple of years of Flybuys launching.
Phil: So it was probably something like 1996, 1997, and came about with some qualitative research.
Phil: And Byron Sharp and his Institute have been pretty consistent over the years in promulgating a certain message, and backed up by data and research.
Phil: I think it’s a good test for the loyalty industry.
Phil: It’s, it’s popular to dismiss out-of-hand what’s been contributed by that Institute.
Phil: And I don’t think that’s fair.
Phil: Having said all that, you know, the, the longevity, the growth, the expansion of loyalty programs, particularly in Australia, over the last 30 years would, would, in, is in itself a testament to the fact that these programs do work and it’s, and it’s, and it’s not just some apparition.
Phil: But I think my main point, Carly, is that it, it does, I think, make loyalty practitioners, they, they should, as a response, think about the measures and by which you assess whether your loyalty program is working or not.
Phil: And, you know, in programs like Everyday Awards and Flybuys and Quantum Stream Flyer, you know, there are, there are a lot of, there are big teams that doing a lot of that, and a lot of it’s probably not for publication.
Phil: But, you know, I think it puts the emphasis on loyalty practitioners to do a good job, to convince themselves, convince their shareholders, and convince their customers that these, you know, these programs are not a trifling thing.
Phil: They’re not a scam, you know.
Phil: I really detest programs being called schemes because schemes are for scheming.
Phil: And, you know, nearly everybody is not scheming in their loyalty program.
Phil: They are well-intentioned.
Phil: And so, you know, I think it’s a good thing that Byron Sharp and others are there in the background, keeping programs honest.
Carly: Yeah, pushing everybody to do better and making sure we’re reporting on the right things.
Carly: That is also a good conversation around, I’d like to ask you, member versus non-member metrics, I think, is hilarious.
Carly: Yes, you’re laughing.
Carly: Because we always talk about this self-selection, but then so many programs still measure that.
Carly: Why are we still measuring member versus non-member when it stands for reason that your higher spending that customers and members are going to be your highest participants?
Phil: Yeah, it really is crazy.
Phil: And I think a couple of things.
Phil: It’s naivety.
Phil: I mean, it’s absolutely naivety if you’re reporting that to your stakeholders, that members spend more than non-members.
Phil: It’s lazy when you want to come up with metrics to convince the great unwashed and, you know, the media and that.
Phil: And so the fact that this is so often reported in annual reports and in news releases, and it’s a source of annoyance that in Australia, some regular producers of newsletters or news updates just pass that information on blithely without questioning it, which keeps me active and grumpy on LinkedIn.
Phil: But it’s like lemmings falling over the cliff.
Phil: It’s as if people can’t help themselves and they fall for that every time.
Phil: And, you know, this opens up the wider topic, which I’ve explored quite a bit over the last two or three years, and thankfully is becoming more a discussion now.
Phil: But about what are the metrics that you should be talking about?
Phil: And some of them are hard, you know, one really hard one, and something that we kept very close to our chest in the Flybuys days was redemption rate.
Phil: You know, and I can understand why for the commercial reasons, metrics like that are kept quite safe.
Phil: But then you see, you see reports of, oh, this cash back program is so popular, they’ve given back this many millions of dollars.
Phil: And you divide that by the number, by the number of members, and you say, oh, that’s 80 cents each.
Phil: Well, what a great program that is, you know?
Phil: So it’s a slippery slope.
Phil: But for anyone who’s read my grumpy pronouncements on LinkedIn, they’ll know that the one that I’ve chased down the most is around membership numbers.
Phil: Because again, for fanatic reasons and for corporate chest-thumping reasons, over the years, too many programs, most programs would say, we’ve got blah a million members.
Phil: And it’s usually very close to the number of members who have ever joined.
Phil: And, you know, I saw a report from someone in South Africa and said, oh, yeah, our biggest program, their number of members is more than the population of South Africa, you know?
Phil: And we’ve got pretty similar.
Carly: We have seen this here as well.
Phil: Pretty similar stuff in Australia as well.
Phil: And when spokespeople get up and say, do you realize that three-quarters of Australians are in a bar program?
Phil: It is a fiction.
Phil: The dead people, they’re duplicate people.
Phil: There are people that have thrown their cards away 15 years ago.
Phil: And purely for vanity reasons to say, ours is bigger than yours, you know, this has persisted.
Phil: But there’s been light at the end of the tunnel.
Phil: And part of this was, particularly when I was working for Flybuys, we had two difficult, I suppose, our numbers were always smaller because since 2012, if you don’t use your Flybuys card for a year, not only do we expire the points, but we kick you out of the program.
Phil: And I think, you know, that’s a good thing in these privacy days that, oh, you know, we found out 15 years after we threw the card out that that company X still had all my details.
Phil: And guess what?
Phil: They’ve all been breached.
Phil: And so there’s, you know, this is bad times.
Phil: But happily over the last couple of years, there’s been a mini revolution that the likes or the major programs in Australia, with two big exceptions, are reporting on active members.
Phil: So Woolworth’s Everyday Rewards report on 12 months active members.
Phil: Myer do, although they still like to put their big number in as well.
Phil: Priceline do.
Phil: You know, the major retail programs are now reporting this thing on activity.
Phil: But the two big Frequent Fly programs don’t.
Phil: And I think part of that is because unless you’re attached to a credit card, and unless you fly a lot for business, then you’re not going to use your card so much.
Phil: There are a handful of metrics that have been produced in industry reports over the years that hint at that because they’ll say, well, which programs do you belong to, Carly?
Phil: And the Frequent Fly programs will be fourth and eighth in that list.
Phil: But whenever the popular press wants to report, they’ll pick out whatever is being quoted by those companies and say, oh, these two programs are massive and they’ve got 16 million members and 12 million members, respectively.
Phil: And away from the fact that it used to annoy me because it would make programs look more city-of-gun than they were, it’s a really big loyalty lesson to say it’s not just about people joining your program.
Phil: They’re very, you know, they’re not big barriers to entry to joining.
Phil: It’s about what do you do once they’re there?
Phil: And engaging those members and keeping them active, that’s the big game, not have they got the card.
Phil: End of rant.
Carly: Not at all, I’m going to keep that one going.
Carly: So you are a seasoned professional and have seen a lot of different programs, worked in a range of programs.
Carly: I mean, obviously with one very big one.
Carly: What would you say is the silver bullet?
Carly: What’s the secret to success for this industry?
Phil: I’d say keep things simple, genuinely be rewarding.
Phil: It sounds like a kind of motherhood statement.
Phil: But treat your members with respect.
Phil: One of my favourite loyalty quotes, this is not about them being loyal to us, it’s about us being loyal to them.
Phil: You know, I’d say from an engagement perspective, be respectful in terms of the number of times you contact them.
Phil: You know, I think the problem with email these days is it’s too cheap.
Phil: And, you know, it’s something that Flybuys, I took, we took very seriously, because with so many partners, you didn’t want to flood the inboxes with stuff from Flybuys, particularly stuff that they’d given you enough signals that wasn’t relevant to them.
Phil: And so, you know, I think running a good loyalty program embodies a lot of important human behaviors like respect and fairness and generosity.
Phil: So, you know, you see the programs that succeed doing that while keeping things simple.
Phil: I think that’s, and I think that’s important these days where there’s a lot of talk about devaluation of programs, and sometimes devaluing a program is commercially necessary.
Phil: But I get really annoyed where a program is devaluing and the way they hide that is we’re making a number of changes because we’ve listened to you and three of them are positive and 16 of them are negative, but we will hope that if we blur it all up, then you’ll think it’s better.
Carly: Not as genuine and generous as we were previously stating then.
Carly: Not quite.
Carly: Not really.
Carly: Okay.
Carly: I’ve only got a couple more.
Carly: Birthday rewards.
Carly: Do we send birthday rewards?
Carly: Do we not send birthday rewards?
Carly: It’s up for debate these days.
Phil: I write an article called Don’t Wish Me a Happy Birthday.
Phil: And that was around the fact, you know, my viewpoint was the people that share my birthday, we’ve got nothing in common, except the fact that that’s our birthday.
Phil: So why send us all an offer that looks really similar?
Phil: And look, I think it’s, I’m really happy that during my time at Flybuys and to this day, we never sent a birthday email because it didn’t pass the test.
Phil: It wasn’t valuable enough.
Phil: And you know, I think there are exceptions.
Phil: Now I liked the fact, and I’m not sure what happens these days with the Myer program, but you know, for their best customers, they would send you a gift voucher, unencumbered gift voucher on your birthday.
Phil: Thank you, Carly, for being a fabulous customer of Myer.
Phil: Just spend some money and have a great time.
Phil: You know, that’s the essence of the gift, isn’t it?
Phil: Yep.
Phil: The other end of the scale is, is a pretty paltry offer.
Phil: By the way, it expires in a week.
Phil: And by the way, this discount only extends if you spend this much.
Carly: Here’s the asterix as well.
Phil: Yes, exactly.
Phil: Exactly.
Phil: Exactly.
Phil: And so the cursor of the asterisk is a big one.
Phil: And, you know, if you need to condition something that’s meant to be a gift, then don’t send it.
Phil: And the worst in class is when a company sends me a happy birthday note with no gift, just to wish me happy birthday and say, well, you know.
Carly: Where’s my gift?
Phil: Well, firstly, where’s my gift?
Phil: But, you know, who is sending this?
Phil: There are 20 people associated with this company who say, oh, it’s Phil’s birthday, let’s send him something.
Phil: No, it’s Mr.
Phil: Robot sent by ABC Company.
Phil: You know, it’s not a relationship enhancing, is it?
Carly: Not really.
Carly: Okay.
Carly: So before we close out as well, I would like to ask, what do you think our loyalty world is going to look like in the next five years?
Carly: What’s coming up for us?
Phil: Five years is hard to predict.
Phil: And I’ve listened to and read a few bits about people’s predictions for the next year or so.
Phil: I think by and large, and particularly in Australian context, the climate is quite healthy for loyalty.
Phil: I think programs are doing probably a better job, probably assisted a bit by the technology that enables it.
Phil: I hope that the narrative will change a little bit on hyper-personalization and AI assisting hyper-personalization.
Phil: I think it’s exciting that the tools are out there, but two comments in that regard, just get the basics right.
Phil: I despair at sometimes the total lack of personalization and I won’t name the recent ones I’ve had.
Phil: But against that, there is a little bit of a danger to being so laser focused that it in fact could make my offers quite boring, you know, allow a bit of fuzziness at the edges.
Phil: So I think that’s, I hope there will be that movement with personalisation, very excited about and eager to learn more about the expansion of retail media, which is, you know, making some loyalty programs so much more mission critical for companies than they would have regarded in the past.
Phil: So, you know, I think that’s something to watch as well.
Phil: And I just hope that there’s a maturity around CRM and contactability, that people can see a benefit not to blasting e-mails just because you’ve got an e-mail address.
Phil: They’re the ones top of mind, Carly.
Carly: They’re fantastic.
Carly: Thank you so much.
Carly: I really enjoyed chatting with you today and thank you for taking the time to talk to us.
Phil: Thanks so much, Carly.
Phil: All the best.
Paula: Thank you.
Paula: Thank you so much for listening to this episode of Let’s Talk Loyalty.
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