Only 131 kilometres to my "local" reward

As much as information collected by loyalty programs provides a great opportunity for relevant, personalised communications to, or indeed in these enlightened days, conversations with its members, it's something that occasionally gets lost in translation. With email marketing providing a low cost form of communication, I know from the program I work with, there's often the temptation to batch and blast a message to all and sundry.

But if that's a sin in loyalty land, I reckon an even greater one is attempting to provide a personalised, targeted communication and failing miserably in the execution. And without naming names, one of Australia's most prominent loyalty programs has managed to do that with an email stream in recent months.

A couple of days back I received my "exclusive January offers" promoting the program's affiliates. (Never mind it was received on the last day of January, I'm assuming the offers didn't expire that day). But tellingly the email is headed up "my range of local rewards". And that's where the problem really begins, since each time I have received these emails over the past ten months, they are full of retailers that are anywhere but "local" to me. Some examples:

• Hair salon in Wantirna, 24 kilometres away
• Coffee in Doncaster, 12 kilometres away
• Liquor from Fitzroy North, 16 kilometres away
• Jewellery in Frankston, 50 kilometres away
• Travel agent in Ringwood, 22 kilometres away
• Fruit from Cheltenham, 12 kilometres away

The pièce de resistance came on Monday, with an invitation to pop in for a spot of Japanese at Ballarat Tokyo Grill, a mere 131 kilometres away. About as useful an option for local casual eating as heading to Tokyo itself!

A couple of extra pointers here - it's not as if the above examples are the exceptions among a range of other truly local shopping options; these anything-but-local offerings form the majority. Also, you'll note that none of them are for specialised goods or services that warrant long travel to hunt down. A hairdresser can be found in suburban Melbourne without necessitating a 24 km trip. Fruit can also be quite handy.

However, the most disappointing aspect is this - they know from my purchase behaviour where I DO shop - and it's not in any of the suburbs listed above.

To be fair, the program in question often does a good job in using transaction data, even at a product level, to make relevant offers. In the particular case of the program affiliates, I suspect that there may be other commercial factors that get in the way. But despite ten months for them to get this right, targeting excellence, like these "offers", seems yet some distance away.

How my local coffee shop got loyalty all wrong

My local coffee shop near work has recently got competition, a short walk away. No surprises then, I suppose, that to provide a little disincentive for us to try out, or indeed switch to the opposition, a coffee card appeared. Every ninth coffee free.

The general vibe from customers appeared to be slightly on the cynical side - the shop didn't seem to particularly care about us before they had opposition. But a discount is not to be sniffed at, and pretty quickly we were filling up our cards with stamps.

But then, some strange behaviour. Unannounced, ordering a "medium" rather than "small" earned two stamps, not one. But the next day, "medium" reverted to one stamp. Then, a few days later, again unannounced, I received three stamps for a "small" - an unexpected bonus - customer surprise and delight, even.

But then the bonuses totally disappeared. A sense of frustration not knowing what behaviour I had to exhibit to be treated any more favourably.

Then, today, shock above all shocks, only a matter of weeks on, they are not handing out any more coffee cards! End of program looms! "Head office directive", mumbled the barista. I'm wondering now whether they'll "lose" the stamp, leaving me with unredeemed cards!

The prevailing theory among we, the hapless clientele, is that the coffee shop feels it has weathered the onset of the new competition just down the road. Therefore, they need not "pay" for our loyalty any longer.

Phew! My reflection is that this little whirlwind over the last two months has provided a salutary microcosm concerning things loyalty.

The "launch" phase, while unremarkable, was flawed. The sell-up of the offer seemed to lack a raison d'etre, or sufficient promotion at the least, that it came across as a disingenuous ploy only because decent opposition loomed. Certainly not part of an integrated customer-focused strategy.

Secondly, the rather bizarre, inconsistent crediting of bonus stamps left a sense of confusion rather than goodwill. A loyalty currency, even in the base and unsophisticated form of coffee stamps, can provide a strong mechanism for behaviour change. Yet it was never clear what behaviour they were seeking in order to gain the extra benefit. And having had a brief taste of the complimentary stamps, they disappeared. Such is the challenge for a loyalty marketer that the introduction of bonus points - or any additional benefit - creates an ongoing obligation to keep up that supply. And for it to be crystal clear what a customer has to do to earn a premium.

And finally, this tawdry vignette adds another chapter to the book entitled "it's harder to end a loyalty program than start one". In the case of our coffee shop, the end game could hardly have been executed in a less customer-friendly manner. The fact that it is being shut down so soon after beginning has reinforced a notion that we poor customers have been mere pawns in a brazen and coarse exercise.

Of course, in the larger loyalty landscape there have been any number of much higher profile (and very costly) failures. Any loyalty strategy needs to be finely planned and carefully executed. The ultimate cost for my coffee shop has been customer disaffection and distrust. Any modicum of goodwill that was tentatively established when the cards and stamps appeared has been more than wiped away by the brusque nature of its abandonment. Ironically, from this sad exercise the coffee shop has indeed created a unique "point of difference" from its competitors - just not the one it was looking for!

Counting the beans

Nescafe's Cup of Rewards is a new player in the Aussie loyalty space, and represents a brave play in a loyalty market which has been almost devoid of product-specific programs.

Loyalty watchers are quite familiar with some of the big global players in this space, with My Coke Rewards weighing in as possibly the biggest, with 14 million members in the US. Programs in the FMCG sector (read CPG in the US) have been quietly garnering a corner of the loyalty territory traditionally claimed by retailers. Not that this has been a smooth pathway, as LoyaltyOne's Sol Zia recently neatly summarised.

However, it's not surprising that Australia has to date provided a barren landscape for FMCG programs. Although older Australians may recall exchanging Robur or Lan Choo tea labels for teapots in years past, the simple lack of scale has hindered the economics of such initiatives here.

So will the Nestle program work? The program is simple to join, and the website has a contemporary, friendly feel. A head start of 50 "beans" (plus a further 25 if I refer a friend) means that rewards are instantly within my reach. There's been a deliberate attempt to have the lowest possible bar on rewards, but I think it comes at a cost. Low-level rewards such as $30 off a $130+ Red Balloon experience, or a free game of bowling for every paid one, can come for nothing with existing member benefit programs. The balance of the reward catalogue seems a little sparse at present and surprisingly there appears to be no current link to social media but I expect these aspects will come in time.

The giveback is by necessity generous, given the narrowness of the category. With a 150 gram jar costing $8.50 earning me 150 beans, a $20 Repco voucher or iTunes benefit for 1,900 beans implies a very healthy giveback of just under 20%. Beans remain "fresh" for 24 months.

It's early days for Cup of Rewards. With the increasing appetite of Australian shoppers for private label products, programs like this have potential to provide additional brand stickiness. More than a few bean counters will be watching!

Good one for Myer?

The Myer One program has risen in less than five years to the position of one of Australia's better loyalty offerings. Importantly, Myer appears to "get" loyalty programs. Myer chief Bernie Brookes made a few marketers sit up and take notice when he recently revealed that the department store now spends more money on Myer One than it does on its entire above-the-line marketing. Now, you have to take into account the millions spent on those reward gift cards, but when one considers Myer's massive triumvirate of TV, press and catalogues, that's still saying something.

And for me, the true sign of success of a loyalty program is when it pervades the entire organisation and occupies a position in the middle of the organisation - as opposed to being viewed as a discretionary marketing activity. The Tesco Clubcard is the much-cited international example of this. But Myer One is heading in the Tesco directionin my view. For it is clear that the profound power of the data that Myer collects upon every swipe of the card (and the resulting gift cards) is being used by management to gain insight into all parts of its business - from store selection, to product ranging, to price points across different stores and so on. Additionally, Myer is going to great lengths to speak (generally) in a relevant, timely and appropriate manner to its members.

The recent tiering introduced by Myer (the first attempt in 2004 was a bit of a mess) is a step in that direction, with its best and better customers plonked into Gold and Silver categories. Myer takes this a step further by encouraging each store manager to develop a dialogue and close relationship with that store's best customers. Even chief Bernie gets into the one-on-one action, stating he's had Myer's five best customers nationwide around for dinner.

To Myer's credit it appears to have found sufficient resources to unearth the jewels in the database that Myer One has provided. In this respect, it provides a salutary lesson to its fellow major retailers in Australia. It is the power of the data above all else that will generate a return on loyalty investment. Myer seems to get that point best of all.

Books and cards: an update

Further to my engaging treatise on loyalty in the Aussie book retailing space, there's been some movement. Angus & Robertson, which incidentally failed in its recent bid to buy out the Borders chain in Australia has recently jumped into the loyalty space with its own program. It appears to be a fairly standard spend-$100-get-a-$5-voucher deal, similar to Dymocks Booklover, which rewards you at the same 5% level without the need for the $100 threshold.

A&R ignored my sage advice that they were previously creating a point of difference via their mouth-watering $5 discount tables. Presumably that wasn't doing enough for them, but I wonder if this program is more a defensive strategy. And interestingly, A&R has used as its platform the graphic card interface promoted by NZ-based Visible Results. The neat looking technology rewrites the loyalty entitlements and other marketing info on the loyalty card at each successive visit to the retailer. While this technology has been bouncing around for some years now (Mobil Max, an early competitor to Fly Buys in New Zealand was among the first in 1998), and the Brazin Pulse program is the most "visible" Australian client, it's curious that Dymocks moved on from this technology in favour of a traditional card format when it revised Booklover a few years back. I don't know the ins and outs but presumably A&R is happy to jump into a format that didn't appear to suit its competitor. Can't wait till the next chapter!

Reverse thrust for Boost loyalty?

Boost juice bars have been one of the retail success stories of this decade, with rapid expansion and acquisition taking the chain from its first store in 2001 to not much short of 200 stores today under the leadership of entrepreneur Janine Allis. The fresh, bright, youthful execution of the brand has been one of the keys to the success of the venture.

But in the loyalty stakes, I'm not sure the execution has been handled as brilliantly. Boost's first loyalty device was an unremarkable stamps-on-card, get-nth-juice-free deal. Then came the VIBE club, accompanied by a nice bright piece of plastic, and an unfettered 10% discount on every juice purchased. Great deal for the consumers, but who were they rewarding? Well in my case, I was by any measure an infrequent visitor to my local Boost juice bar, but on one such visit, I was given a VIBE club card - no questions asked! I think I may have just had to hand over an email address - easy-peasy.

So I was a happy camper, but I couldn't help but wonder, why were they frittering away 10% of their margin on me? In my case, I enjoyed the discount, but I'm just not so keen on those bars and it certainly didn't increase my frequency, and I don't think I particularly hunted out a Boost bar compared with the competition. So any sense of rewarding your best customers, or providing an incentive targeted at gaining the maximum sales uplift appeared to be missing.

Fast forward a few years and the impact of whatever happened in the intervening period meant that Boost had to change their tune for their valued club members. And they did so via a simple message - the 10% off deal was gone.

Withdrawing a benefit isn't easy. Perhaps if Boost had garnered its best customers under this scheme, say the best 20% of their juice-buying public that was generating 70%-80% of their revenue, they would have considered providing a 10% discount ongoing. As it turned out it was hard not to avoid leaving a pithy taste among their juice-buying public.

Loyalty: inside the shoppers purse

Vogue Australia's website forum provides an often fascinating insight into the hearts and minds of a interesting slice of Australian heartland.And a thread I came across recently gives us a sly peek inside the purses of what I suspect is probably a hard-core shopping sisterhood.For those seeking insights into the each of loyalty programs and discount cards, it's some interesting research that comes for free!

When prompted to empty their purses and handbags for their favourite or most-used cards, three were heavily mentioned - FlyBuys, Myer One and Priceline. No surprises there I suppose. For me, it shows that the Myer program has come a long way in relatively short time. And for Priceline, an affirmation of its place in Oz loyalty land despite my misgivings. What came next, or didn't come next, was of more interest. Clothing retailer cards are dime-a-dozen, and Country Road, Cue and Portmans stood out from the pack. But food-related cards were surprisingly prevalent, with the Boost Juice card the 4th most cited overall. The Dymocks booklover program got a few mentions, but after that it was the ones not mentioned much that was of interest.

The ubiquitous Qantas frequent flyer program rated only a handful of mentions. Is it not regarded by shoppers as a loyalty program? Is the overlap of heavy shoppers with frequent flyers that small? That had me guessing. Also, the various pharmacy programs were rarely mentioned. Amcal Club, with its million-plus members, barely hit the radar. Is visiting the pharmacy seen as drudgery, to the point that its hard for these programs to engage? The comparison of supermarket / petrol purchasing and FlyBuys perhaps suggests something else is at play? Has Priceline moved into Amcal's space?

Bulletin boards and forums aren't immune from bias and even viral marketing, although there's not much evident in this thread. Readers of Vogue may not perfectly match middle Australia, but their news and views do provide loyalty food for thought.