Tight privacy laws may hamper much needed development of Australian loyalty programs
Australian loyalty programs have become “frayed at the seams” and must move away from transactional schemes to ones that “inspire and excite” if they are to stay relevant, an expert in loyalty has said.
Matthew Heath, chairman and chief strategy officer of customer relationship agency LIDA, the CRM arm of M&C Saatchi, warned that local points-based schemes are in danger of becoming outdated in a data driven world where customers have moved on quicker than brands and are demanding more personalisation.
But he said whilst there was a move towards “hyperpersonalisation” that inspires people and gives them memorable experiences, Australia’s “strange” privacy laws are hampering this development.
But he added that Australia’s strict privacy laws may be a major obstacle to unlocking new levels of customer interaction.
Speaking on the future of loyalty schemes at an event at the Sydney M&C Saatchi office last night, Heath told Mumbrella Australia was “ripe for change”.
Brands in the UK – where Heath is based – have refined their approach to loyalty in recent years not by launching programs or creating membership schemes, but by developing more personal relationships with consumers.
“Hyperpersonalisation is the biggest challenge but it is also the biggest opportunity,” he said. “We used to put people in segments but that is not reality. It’s more complicated and everyone is an individual.
“One to one marketing was discussed 10 years ago but only now is it a possibility and my perspective of Australia is that it is ripe for moving on to a new level of relevance of personalisation and touching people much more closely.
“The core loyalty programs here that have run for a while are in need of taking that next step. It’s about instilling loyalty and maintaining a passion for a brand and a product without all the supporting infrastructure or scheme of any sort.”
Heath referred to UK supermarket chain Tesco, whose Club Card was once the “darling of the loyalty market” but which has failed to evolve and remains deal driven and transactional. IKEA on the other hand has created loyalty through imaginative targeted marketing which develops personal relationships, he claimed.
Australian schemes are in the same mould as Tesco and need to develop, he said.
“The Tesco Club Card was incredibly clever, but it’s also incredibly transactional,” Heath explained. “When we do research and talk to Tesco customers they talk in very transactional terms. They receive vouchers and offers.
“But when you speak to an IKEA customer they talk about being inspired as the company gives them great ideas for their home. It’s a far higher level of conversation and that’s what you need to aim for. There are no points offered by IKEA, but it requires us to understand the customer better.
“The Tesco model is still in play in a number of brands in Australia and it’s starting to fray at the seams because people’s expectations are higher.”
LIDA’s remit in working with brands has expanded far beyond traditional loyalty programs to one of targeting consumers in a way that “gets into their heads and inspires them.”
He cited confectionary brand Milka as one example where bars were produced and sold with one square of chocolate missing. Consumers were given the option of either claiming the missing square for themselves or sending it to a loved one with a personal message.
Heath suggested three-for-two offers can remain part of the loyalty mix, particularly for retail brands, but said points-based schemes are essentially “buying” loyalty.
“Those offers will still be possible and retailers are driven by habitual behaviour. But if the brand really got to know you, they would be a little less dependent of having to buy loyalty through points because the consumer would think ‘that’s great, they do know me’.
“For big retailers in particular they are probably not ready to step away from something that has served them so well for so long. But I think the ones that are more adventurous will be open to the idea of becoming more interesting, more exciting and more surprising. They will be able to do that by knowing their customer so well’.
“The digital revolution has opened up a new world of personal possibilities.”
One of the challenges will be meshing the best of the traditional schemes with this “new way of thinking”, Heath said, as he acknowledged that tearing up long standing schemes will not happen overnight.
“It isn’t as easy as saying just scrap your points system and tomorrow it will all be fine. It’s a question of enhancing the scheme and dialling down the volume of points, offers, coupons and vouchers,” he said.
But Heath warned that privacy laws in Australia could be a barrier for brands as they seek closer relationships with customers through the collection of personal data.
He told Mumbrella that for such a liberal open society, Australia’s tight privacy laws are “strange”.
“I completely respect and understand peoples’s desire for data privacy but you need to lift the argument and get people to understand that it is not a threat,” he said. “You need to put control in customer’s hands. There a lot of people who are happy to provide details for a better richer, more relevant, more fun experience.
“One of the whole points about brand is that you trust them and brands need data to keep improving.”
“In the UK we are rapidly approaching this world of one to one marketing, it’s about using clever technology. Here in Australia that will start to gain traction. You’ll get this new layer of loyalty which won’t be about points. It will be about knowing consumers better as individuals and serving their needs in a more appropriate, relevant and exciting way.
“Points will recede and maybe they will die. In theory they should not be needed.”
Steve Jones
Smart and relevant insight overall, but I’m not clear where Australia privacy regulation is more draconian than the UK / EU.
Can Steve / anyone clarify?
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Customer relationships are all about relevant customer interactions, but relevance can’t be the only Reward for customers trading their personal, transactional and preference behavior.
This article talks about the theory that customers will trade there private details purely to get tailored messages, relevant pages/offers popping / more engagement etc. From years of experience I can assure you they won’t. the mentaility is WIIFM (whats in it for me), and relevance is not top of their list.
Loyalty Programs are incorrectly named, they are really rewards programs / customer engagement programs but you do need something to trade…even IKEA offers great deals for family members on certain products, without them the customer would not swipe their membership card and IKEA would not know that this basket relates to that customer and therefore couldn’t use that info to be more relevant. Yes there are other sources of data like cookies etc, but those customers are really anonymous (especially across devices) until they choose to trade their details in some sort of overarching club?
The privacy laws in Australia are not bad, they are simply there to ensure that customers who wish to remain anonymous can do so, those that don’t want contact are not contacted. The power is in the consumers hands and the corporate will need to offer something…a reward?..to get them to trade/engage.
If we don’t protect peoples data then before we know it we will have law enforcement agencies using Telco GPS data to establish who has been in a licensed premise for longer than 1 hour and therefore has a higher propensity to be drink driving and should/will be pulled over.
All relevant, but where do you draw the line?
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Great points, well made.
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I was at the talk and I think Matthew was talking about the trend towards more privacy rather than directly comparing us to other markets.
The strange bit was that we seem more fearful of abuses of privacy here where in other markets the consumers seem to get it more. We’re not really collectively doing enough as an industry to communicate the value exchange going on here.
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