The Loyalty Podcast
Newscast 4 – The End of FlyBuys New Zealand & the rise of the “Zero Consumer”
With recent changes to Air Miles in Canada and Nectar in the UK, the coalition model continues to evolve. But will it go extinct? Iain Pringle explores the seismic shift in the New Zealand loyalty landscape that led to the demise of the FlyBuys coalition while Rick explores the rise of the “Zero Consumer” and Airbnb’s customer loyalty strategy.
- Duration:
- 32m
- Broadcast on:
- 22 Jul 2024
- Audio Format:
- mp3
(upbeat music) - This week's episode of the loyalty newscast is brought to you by Tricycle Marketing. Since 1996, Tricycle Marketing has provided advisory, studios, and technology platform services. Tricycles inside its outward platform is a proprietary platform as a service loyalty solution. Built from the requirements of 100+ loyalty implementations, serving retail, entertainment, dining, travel, financial services, and healthcare industries globally. For more information, please visit tricyclemarketing.com. (upbeat music) - Hello, and welcome to episode four of the loyalty newscast, I'm Katie Topring. Thank you for joining us all. Ian Pringle journeys down under this week to explore the changing loyalty landscape that led to the demise of New Zealand's flybys program. Rick Ferguson unpacks the rise of the zero consumer with Columbia Business School's Matthew Quint. And we ask the burning question, does Airbnb need a loyalty program? We'll take a look at all the data as usual and share some sponsor love with Tricycle Marketing's Michael Hemsey. A jump-packed episode of the loyalty newscast this week. And so without further ado, I'll hand over to Rick Ferguson now with your loyalty headlines. - Hello, all you beautiful people out there. I'm Rick Ferguson, and these are your loyalty headlines for the week of July 22nd, 2024. Despite continuing inflationary pressures and global instability, summer 2024 is the summer of spending led in the US at least by Amazon Prime Day, the veritable Roman Bacchanalia of online shopping. Let us not forget that Prime Day is the biggest loyalty program promotion on the planet with Adobe Analytics, predicting a record-breaking $14 billion in sales. So while you're buying with one click, spare a moment to thank all those Amazon warehouse workers and delivery drivers who will be working overtime to fulfill those orders. Also fueling the summer of spending a rewards credit cards, the adoption of which shows no signs of slowing down. In fact, the spherical insights report predicts the global credit card market will reach 1.15 trillion. That's trillion with a T dollars by 2033. While North America will continue to hold the largest slice of that pie, Europe is expected to grow at the fastest pace, fueled largely by loyalty programs and the ubiquity of reward points. Now back to Amazon, the company announced that it has rolled out Rufus, its generative AI shopping assistant to its US customers using the Amazon shopping app. CEO Andy Jassy says that Rufus has already responded to tens of millions of customer questions. In partnership news, the Air France KLM group has added Uber as an earned partner in its flying blue loyalty program. And in industry news, the customer engagement platform Jebith has been acquired by the CDP provider Blue Conic. Congratulations to both for that acquisition. Those were your loyalty headlines for this week. Now if you'll excuse me, I have to ask Rufus about the delivery date. For the $24 hydro-class tumbler, I just dropped into my Amazon basket. With recent changes to the air miles program in Canada and the Nectar Scheme in the UK, the multi-merchant coalition model of loyalty continues to evolve. But will it go extinct? In our first segment in our series on the evolution of coalition loyalty, Ian Pringle explores the seismic shifts in the New Zealand loyalty landscape that led to the demise of the flybys coalition. At the end of May, loyalty New Zealand announced that after 28 years, it plans to close flybys at the end of 2023. In a statement to the press, CEO Liz Riley stated that the closure was due to a rapidly changing loyalty landscape. To help us understand the market conditions in New Zealand, I'm joined by new world loyalty consultant, loyalty expert and native Kiwi Craig Grimshaw, who has seen this history firsthand. Hi, Craig. - Hi, Ian, how you going? - Good, brilliant. So can you talk about just what is happening in New Zealand and why, what is the landscape changes that have driven to this? - It is, Ian. The landscape recently has been what I call a seismic shift has gone on the loyalty landscape in New Zealand. Flybys has been around for 30 years and owned by Yazid Energy, which used to be Shell BNZ, which is owned by National Australia Bank, IAG, and foodstuffs, who grosser. And over time, and it's a 25% share holding by each, and over time, there's been a concern about how the flybys program works. There's a discussion around the relevance of it to card holders. The generosity of the program to card holders then makes it really difficult for people to earn a lot of points, unless you've got to be like every coalition program and every airline program. If you've got a credit card, you learn the rest of the time you'll struggle. With the change in the landscape, in terms of marketing technology, in terms of consumer data, in terms of privacy, it appears the shareholders are creating their own capabilities to make themselves more relevant to their own customers. And therefore, the concern they'd look at is why am I paying into an external party? To reward the very same customers that I get in my store, why don't I look after myself and get the reward coming back into me, rather than going to an external reward? So people looking for an honest transaction in effect. So that's happened. The bit that's happened even just six months prior was there was a petrol coalition program called ASmart Fuel on that closed down. And that was where people could earn points at Countdown, which was a Woolwiss owned supermarket chain. And you'd earn cents per liter off your petrol. And that closed down primarily because Woolwiss said, we're going to rebrand in New Zealand and bring our own alti program across from Australia into New Zealand. And that is, we've spoke just before this interview in is all around the retail media discussion. And particularly when you look at, got some figures of Woolwiss last year, got 550 million retail network media revenue, Coles in Australia, got $250 million of retail media network revenue. They're looking at the New Zealand market and going, why don't we have a common platform going across both countries and seeing how we can sweat that in New Zealand as well? That's then changed the landscape significantly, I think. And it's caused the retail media network pieces in my eyes, as foodstuffs have been working on that. Whilst they're also looking at the future of their involvement in the coalition program of fly bias. And as I mentioned before, all shareholders have looked at their involvement in that and going, what should we stay involved? Is it working for us? The interesting thing I've found also is that with fly bias closing down, the holding company, Lawty New Zealand is, fair chunk of it is going to be moving into IAG to ensure and that's going to be an interesting lawty play by the looks of it and be interesting to see what they're up to in that space. - And it's interesting what you say about seismic because just to get, can you give people listening who aren't from New Zealand an indication of the size of both of these programs? Because AA Smart Fuel was massive and so... - Right. - And so it's fly-by. - Yeah, definitely. For law bias, head about 75 to 80% of households is their customer base. AA Smart Fuel, I believe, head about 70% of households as customers, as well as a strong B2B component. So it's caused a big shift and it's going to be interesting to see who fills that gap and with what? Airpoints are putting in, which is the New Zealand's Lawty program, putting in a new Lawty platform, but the generosity of airpoints has been interesting for some people that they're not getting rewarded enough for all the spend that people do. So it's a really interesting landscape. Personally, I think like everywhere around the world, there's a cost of living crisis going on. If there's anything that a Lawty currency can do to help people alleviate their cost of living crisis then, that will be, for the next two to three years, will be a big opportunity. For example, a fuel, someone stepping in, the fuel perspective or someone else driving whether foodstuffs provide a compelling proposition against the Woolworth's program. - Yeah, so as these seismic plates move in New Zealand, we'll keep an eye on it. Well, thank you very much. Time, Craig, and dad, we'll speak soon. - Thanks so much, Ian. (upbeat music) - A recent McKinsey research study coined the phrase zero consumer to describe a new generation of shoppers with zero boundaries between the physical and digital. Zero mid-range shopping habits, a net zero attitude towards climate and health concerns, and zero brand loyalty. To unpack this research, Rick Ferguson spoke with Matthew Quint, director of the Center for Global Brand Leadership at Columbia Business School. Are zero consumers a trend or a buzzword? Matthew and Rick are on the case. - Hi, Matt, welcome to the program. - Pleasure to be on the podcast with you, Rick. In terms of the zero consumer discussion, now it's easy because I've done it myself to take some loosely connected consumer behavioral data and tie those behaviors together into a broad trend, which seems to be what McKinsey has done with this latest research. Is this the case with this zero consumer concept, or do you see these behaviors? They describe them as omni-channel, declining mid-tier brand loyalty, fickle loyalty overall, sustainability concerns. Are these behaviors legitimately connected in your view? - I think your assessment is right that it is a little bit emerging out of convenience in terms of putting all these consumer trends together. Clearly, some of the behaviors have links between them, but I don't think there's necessarily one underlying element that connects them all, such that they're a particularly connected trend. I mean, you get things like definitely self-reported evidence as McKinsey notes, and there are plenty of other polling and research companies that have similar reports around consumers leaning towards getting deals, balanced out by the occasional premium splurge now and then, but some of the problems that let's say this sort of zero mid-range or challenges in mid-price products are much more related to underlying real estate economics, inflation pressures, the shrinking of the middle class, different investor expectations, right? So there's a lot of underlying things between them. - One of the trends that the McKinsey study honed in on was this truly horrible word that they called digital, which I vow never to use again, but it seems obvious today that consumers do want that seamless multi-channel experience, but are there still obstacles to brands delivering that experience today? Are there any brands that you've seen that are delivering on that promise? - Right, a 15-year-old's challenge that brands have been talking about in terms of multi-channel, omni-channel, blended digital physical experiences, et cetera. So it's still a work in progress. I've seen improvement from a category level in airlines, and their app and multi-channel experience with tickets on your mobile phone, reminders, and various ways on text, on your app, et cetera. So we're seeing some advances there, and another great one, I think, is Ulta, the beauty company. I just hosted their chief marketing officer, Michelle, Crow San Matos at my bright conference this April during our fireside chat. She noted they have a huge loyalty program, over 40 million people, and part of what makes it connect and create this experience is a full management commitment at all levels of staff to understand the value of the Roards program, to have them utilize the data that comes out of it, to have them focus on driving that value to customers who are not already a part of it. - I understood that this study was initially directed towards Asian consumers, right? That seemed to be where they were focusing. But I've certainly seen, you know, at least some anecdotal examples of these types of behaviors happening in the West. We've seen the decline of mid-tier restaurant chains in favor of either super-fash casual or fine dining, and we've seen the result of some mid-tier retailers struggling. But some of that may be driven by consumer behavior, and I think you touched on this earlier, some of it's completely unrelated. The Red Lobster being the example, that's a mid-tier restaurant chain that's really struggling, but that's more of a real estate and financing issue than it is consumer behavior. Is there evidence of these types of behaviors happening in the West and a shift that you've noticed in your work with brands? - Certainly. I think the McKinsey article was really actually bringing up the fact that these more Western shifts that have been going on for the last five to 10 years have hit Asia, which used to be a community in which brand was more heavily important and valued, and now some of this shift away into, hey, where can I be deal-oriented? Where do I make sacrifices on my purchases to sort of hit Asia in a way that it was slower to get into the changes we've seen in the West already. - And then I did want to touch also on the sustainability aspect of this behavior. We've heard the term greenwashing used extensively in terms of corporations and brands, more or less just doing PR driven sustainability efforts. Do you see evidence that there's an actual shift in younger consumers demanding more concrete actions and something that brands will need to respond to? Are they gonna be able to continue to get away with doing as little as they possibly can? - It's a very complex issue. The sustainability question, there's definitely greenwashing going on. And yet at the same time, I think many companies are heavily committed to sustainability efforts because of changes in their bottom line and supply chain issues in which being more sustainable is important. Unilever is heavily focused as an example on water issues because they have no product to sell if there isn't clean water for them to go through the manufacturing process. People are leaning towards sustainability more now. There's no doubt about that. They like that, provides a sense of value. But it's a percentage of their purchases and it's mixed into decision making about value, about price, that all these other things. So I think on particularly younger, more affluent consumers who can afford to push towards more sustainable brands and have potentially the time and energy to truly try to understand whether they're more sustainable. That you are beginning to see those shifts rise. - Thank you again, Matt. We appreciate it and we look forward to chatting with you again soon. - Great, thanks Ray. Pleasure to be chatting with you again. (upbeat music) - And now it's time for sponsor love. Our spotlight on those companies who make this newscast possible. In this week's edition, Rick Ferguson continues his conversation with tricycle marketing CEO Michael Hemsey on the loyalty shift. A shift to innovative uses cases and the new business models changing the market for loyalty tech. - Michael, the last time we spoke, you talked about a phenomenon you described as the loyalty shift in which both B2C and B2B brands are reimagining the loyalty platform as a tool to facilitate the journey of sales associates or as a way to build loyalty within client or partner relationships. Now I'd like to hone in on the client requirements of today's loyalty platforms, the RFPs, if you will. Are those requirements shifting as well? And if so, what does this shift mean for the traditional models of loyalty tech? - My time at ESC loyalty, TESIS loyalty, Kobe marketing, Merkel, and now tricycle, I would say 99% of the opportunities I engaged in over those years were really about scanning up those B2C value propositions. The solutions in market were very similar over time. There were requirements to make the currency more available in real time to get it to the point of sale, to get it integrated into mobile applications, to e-commerce sites, to call centers, all of the different channels that consumers would interact with their brands. And that served very well. And the SaaS model for loyalty platform was born, whether it was hosted in a managed service capability or hosted on behalf of the client in the cloud, clients would engage with agencies and pay them to both stand up to value proposition. This could take months and a whole bucket of money and budget, and then they would engage those agencies to retainers and tech fees to manage that program and innovation over time. Now, the notion of gamification of leaderboards, of publishing processes that are working for certain sales folks and may not be working for others is what clients think of as phase two and phase three. First step, of course, is to understand and get insights as to what's working and what's not working. In a similar fashion, we've seen brands look to leverage a loyalty platform to enable content consumption. So if you think of an offering that's content-focused relative to read this article, watch this video, provide some information, give us some feedback, go back and forth because there's a journey we wish you to follow, same thing. They are looking to the loyalty platform to help them first understand what that journey is producing. And then number two, to leverage the fact that you can mend currency to perhaps inspire people to continue along that journey. - So the opportunity is there to leverage the tools of loyalty tech to enable real organizational change. But as you and I have spoken about before, taking advantage of this opportunity requires organizations to maybe rethink their relationship with platform providers. - If you look at what the marketplace offers, it's typically referred to as software as a service. And brands have the ability to lighten to that tech. It's like putting a quarter into the pinball machine. The pinball machine works as long as you're paying those fees. So Insights Outward, first and foremost, is a platform as a service. Well, one of the design tenets we included in Insights Outward, among others, was our ability to offer from a commercial perspective to a brand for them to actually purchase the asset. In the legacy way of working, when a brand was interested in your platform, you quoted an implementation price and time. This could take three or six months, it can cost quarter of a million dollars of half a million dollars or pick your level of complexity. And then oh, by the way, when we're in production, we're gonna retain you to manage that on your behalf and we're gonna need you along the way. When you design something to be able to sell it to someone, a couple of things need to be considered. Number one, that you're not needed to stand it up. Number two, that you're not needed to manage it. And number three, if you do a really good job, when you sell someone an asset, they don't ever need to call you for anything that it is a self-contained solution. So that's changed how we compete. So when a brand comes to us and says, we want to understand what it would take to stand up, the Insight's outward solution looks very different. So the implementation time frames are compressed, the cost to manage those are really negligible. You're not paying us any retainers, it's a flat price no matter how large your market and database is, whether you're leveraging for B2C, B2B, new and innovative ways to purchase media, to inspire prospects and leads. It's not going to impact your budget in a negative way. - Platform as service sounds like that's a great model for brands and businesses to consider. I know we want to spend some more time diving deeper into the capabilities of the Insight's outward platform, taking it out for a spin as well. So I'll look forward to talking with you again next time, Michael. - Thank you, Rick. It was a pleasure to chat with you and have a great day. (upbeat music) (upbeat music) - Our look at McKinsey's zero consumer trend is part of our commitment to you, dear listener, to parse the latest customer research for its impact on your business. Now, McKinsey describes zero consumers as adding zero boundaries, zero mid-tier shopping habits, net zero sustainability expectations and zero brand loyalty. But should we take McKinsey's word that zero consumers are a thing? To test this hypothesis, we looked for research that supports the notion of zero consumers. Focusing on the US market, here's what we found. On zero boundaries, research from Think Google reveals that today's consumers use an average of six shopping touch points, with nearly 50% using more than four. Meanwhile, a Genesis survey found that companies with strong omni-channel strategies enjoy 90% higher retention rates than those businesses that don't. On the mid-tier shopping front, anecdotal evidence includes record profits from US discount retailer TJ Maxx and luxury brands such as Louis Vuitton, Christian Dior, Ralph Lauren. Meanwhile, department store retailer Macy's announced plans to close 150 stores and other mid-tier brands such as Joanne Fabrics and Bed Bath and Beyond, a file for bankruptcy. As for net zero sustainability, a hop off the presses survey of 6,000 global consumers by Simon Coocha revealed some contradictory indicators. While the survey saw a 6% decline, in the number of consumers who consider sustainability as an important purchase consideration, the research also revealed a 64% rise in consumers ranking sustainability as a top three value driver. As for zero loyalty, the most recent SAP and Marsis Customer Loyalty Index revealed that US brand loyalty is falling fastest globally. The US experienced a 14% decline in customers who are loyal to one or more brands, plunging from 79% to 68%. Our verdict? The research supports the idea of the zero consumer. So kudos to McKinsey for identifying the trend. We have just one request. Lee's McKinsey never used the word digital, a portmanteau of the words physical and digital ever again. And that's how I look at the data for this week. We'll see you here again next time. In a recent interview, Airbnb CEO Brian Chesky revealed that he's not a fan of currency-based loyalty programs and considers them a subsidy. His comments raise a few questions, not only about the need for Airbnb to launch a loyalty program, but also about the role of currency-based programs in today's saturated marketplace. To answer these questions, Rick spoke with Loyalty-Wired contributor, David Slavic. - Welcome to the program, David. It's a pleasure to have you here. You're a consultant and you travel extensively for business. And my guess is that you have super titanium status and a bunch of hotel programs. So my first and maybe most obvious question is, have you ever booked an Airbnb stay for business? And if you have or have not, have you booked for leisure travel? - I'm telling that for business because of my Hilton status, I'm pretty loyal to them and love those points and all their properties. But actually for vacation, we just did that the end of January in Anamaria Island in Florida through Airbnb and one of their partners. - And the reason I ask that question is because one of the reasons that's often cited for Airbnb's lack of a reward program is that they lack penetration in the business travel sector. Like most people, that most people who book with Airbnb do so for leisure, they've tried to make inroads with corporate travel planners and so forth, but thus far, the company's bread and butter seems like vacation travel and given the business focus of most hotel loyalty programs, is it even necessary for Airbnb to get into the loyalty game? - If they were gonna go and do something in the business space, I think they could make it work. Obviously the financial modeling is essential to figure all that out in terms of the value proposition. And I actually think on the business side, if they offer aspects that are complimentary to the business traveler and his or her trip, then you could create something that's of benefit that perhaps the business traveler hasn't quite yet experienced. So do something out of the ordinary, not car rental benefits, but as it relates to other aspects that the business traveler is looking for. And the idea is that if you bring in partners, you could make that aspect of the benefit structure in business and Airbnb worthwhile, generate incremental revenue, and create the kind of differentiation where I'm willing to give up my Hilton points for an Airbnb experience, where I actually probably would have a pretty comfortable existence. - So through partner benefits, perhaps start to emulate some of that feeling of status and inclusivity and special treatment that you would get in a typical hotel loyalty program. - Yeah, return your points and get $10 off on the business day is not gonna cause someone to give up their relationship with a Hilton or a Marriott. So the fact of the matter is when it's a business traveler, just any kind of a discount off of the rate is not going to be motivating. What you're gonna have to do is tie in with restaurants, tie in with workout facilities. Those could be your thought starters in that regard. And some place with a working hot tub, right? Because one of my beefs with Airbnb say is the hot tub never works. So just do the access to a working hot tub and I'll be happy. But you'd mention points for a steam room. - Or a steam room. Let's not forget steam rooms at a health club too. That's actually quite healthy. - Yes, exactly right. And one of the things that sparked my interest was this quote from CEO Brian Chesky in Skiff. And he talked about the fact that he doesn't like points programs, he considers them a subsidy. He says you're taking your most valuable people and making them less valuable. Now it is perfectly legitimate to say that a points program isn't right for Airbnb. And it sounds like you would agree with that statement and probably I would too. But that quote, it seems to bash maybe the entire idea of programs that are built around promotional currency. So in your opinion, and of course you don't know his mindset, but just based on that quote, does that represent somewhat of a misunderstanding of what these programs are built to accomplish? - In his position, doing something that looks me toish, I agree with him a thousand percent. He needs true creative innovation. And it has to be distinctive and motivating. And again, it's a tough one in the business to business world, but maybe not so much in the consumer space. But the bottom line is it takes hard work to come up with that differentiated value, especially in a crowded space and in a mature space when it comes to business travel. - I did spend some time proling the community pages on Airbnb, the host pages and the Reddit subreddits for Airbnb hosts. And they seem pretty mixed on this possibility. Most hosts seem concerned that they're gonna kind of be coerced into playing along. And if they don't play along, then they're gonna get buried in the search results by the algorithm. Do you see a way, just briefly David, to design a program that host can get behind? - You can do it on a regional basis. So try to do some test and learn and set up measurable goals and objectives that are associated with it, study the satisfaction from the business traveler that's associated with it, and give them differentiated value. So that's where your advantage can come from in an Airbnb situation. But if you're losing out on your search, yeah, that could be a very valid concern. (upbeat music) - In podcast 66, we explore why retail media is exploded around the world and how loyalty is driving this success. As Steve Gray explains, - The TV companies when you log in and increasingly most of us do log in now know what we're watching, but they don't know what we're buying, whereas the supermarkets do know what we're buying, but they don't know what we're watching. And so it's really quite exciting for marketeers to have those two data sets combined. - So join us for podcast 66 out on the 5th of August with a global retail media industry worth an astonishing $128 billion. Can you afford to miss it? (upbeat music) - And that brings us to the end of the loyalty newscast for this week. If you are enjoying the loyalty newscast, do let us know and spread the word. You can reach us on LinkedIn or at loyaltywired or one word.com. I'm Katie Topping and on behalf of Ian Pringle and Rick Ferguson, thank you for listening. (upbeat music) (upbeat music) (upbeat music) (upbeat music) (upbeat music) (dramatic music)