The Loyalty Podcast
Podcast 65 - Changing Customer Needs - A Global Perspective
(upbeat music) - The Loyalty podcast is brought to you by Niax Coinbridge, turning loyalty into currency instantly, spendable at any shop worldwide. - Male audiences and also slightly younger kind of gen Z demographics. Those two audiences have had a big increase as well, and they've been typically quite hard to reach for us in the UK. - So it's really interesting to see that we as marketers might be jumping on the personalization bandwagon, but consumers, if you ask them to rank, they want value, simplicity, and then personal. - That loyalty has really kind of skyrocketed. It's everywhere membership and activity of just massively increased, and I think, and two of the big kind of learnings again, we saw in this paper is that actually brands are looking to kind of utilize those brand partnerships and also loyalty promotions to help them achieve more for less. - Hi, I'm Ian Pringle. This is the podcast from loyaltywired, where we help you make the most of your loyalty strategies by listening to us talk about what we like to talk about most, which is loyalty and loyalty programs. One thing that struck me in the four years we've been doing the podcast is just how similar customer needs and behaviors are across the world. To assess this theory, I'm joined today by two loyalty experts who have tested this recently on two different ends of the planet. So please can I join today, Adam Posner, from the point of loyalty, to discuss his study for love or money in Australia. Hi, Adam. - Hi, Ian. - Good to see you back on the podcast, Adam. - Yeah, well, we can't see each other, but great to hear your voice again. - And James Davis from Mander Connect in London to compare his study, what Brits want from loyalty. Hi, James. - Hi, Ian. - Yep, really pleased to be here and great to have Adam on the conversation as well. - So just to get us started today, can you give us a quick introduction to yourselves and your study? So Adam, would you like to talk about yours first? - Yeah, thanks, Ian. - Hi, James. - Great to see you as well and hear you as well. I'm Adam Posner, the CEO and founder of The Point of Loyalty here in Melbourne, Australia. For the past 17 years, I've been advising brands on customer loyalty and loyalty programs. And for since 2013, I've commissioned this independent research study called For Love or Money. I've done 17 studies, and this is the 12th year of this specific Australian edition. So I've been tracking trends and looking for new insights. And yeah, it's just a continuously changing market. - No, brilliant. I really like the depth of your study too, which we'll get into in a minute. And James, can you give us a bit of introduction to yourself and your study? - Sure. I'm James Davis. I'm the senior strategist and analyst at Mandic Next. We're a partnership loyalty and rewards agency based in London. And I'm here talking about our latest white paper, which is the 2024 British white paper and the fourth in our series of what the Brits want from loyalty. And like Adam, it's a long-running study. It's not quite as long-running as Adam's, but we've had four kind of iterations working in partnership with UGov to really try and understand the British loyalty landscape, looking at membership, what Brits want and actually what motivates them. And yeah, some case studies along the way as well. - And so what are the main trends we're seeing? 'Cause these studies have been running for a number of years on both sides. So what are the main trends you'd pick up from that are changing in that time, Adam? - Yeah, the trend specifically is not with membership, Ian. That hasn't changed too much. I mean, we're still seeing that nine out of 10 or stranded adults are a member of at least one program and the average, what I would call unprompted. And so for the first time this year, we've identified a prompted and an unprompted membership. And what I mean by that is, unprompted has been the trend we've been tracking for the last 12 years at 4.3 is pretty much what they say unprompted is how many members, ships they have. But we also this year provided a list of 114 loyalty programs. And suddenly, it's very interesting because when you suddenly see the name of a brand who has a program, you think, ah, I didn't realize I was a member of that program. And so that jumps to 9.4 with an identified list. So it's remarkable that people don't even realize that they've got pixel dust collecting on their loyalty programs, which brings me to that trend about, you know, memberships versus activity. And I'm sure James will jump in soon after this. But for the first time this year, we've been then asking, so how many, actually, it's not the first time, sorry. It's the same trend we've been asking for the last 10 or 12 years, which is of all the programs that you're a member of, you know, how many are you actually active in? Active by definition in our study is you've made at least one purchase as a member in a 12 month period. And 50% is the statistic this year. So half of the programs that they say they're a member of, they're actually active in. So I'm interested to hear what James' trends are. - Yeah, it's an interesting warning. And quite similar, actually. I think the first key trend for us is really around a big kind of increase in membership appeal and engagement since the last time we ran the study back in 2022. So we've seen now that 79% of Brits say they are members of at least one loyalty program. And that's up kind of 9% points from the 2022 survey. And with just up, well, 97% finding at least one program being as well. And the interesting thing, hearing what I was saying was actually we asked a similar question around actually how many programs are Brits kind of engaging with. And that's something we've run twice. Back in 2022, it was four programs. This year it's up by two and up at six. And again, actually, we asked the same question around the kind of activity rates. Our kind of definition was a little bit different. So it was whether you had been kind of active, engaged with a program within the last three months, but that came up as 51% as well. So more or less the same with a slightly different definition of what activity means, but yeah. - But correct me if I'm wrong, James, but you were seeing a steady decline in membership over the last several years. And then now you've seen a significant uplift in the last year, is that not right? - It is, yeah, it's the pandemic definitely had an impact. And I think we were starting to see kind of a bit of a recovery, a bit of a bit of leveling out the last time we run the study. But I think there's been a few things, certainly the British market, which have led to quite a big increase in participation. I think the kind of cost-looking crisis has definitely driven more people to kind of lean on law to programs, to kind of help them with their kind of day-to-day spending. And we've also had some big law to use in the last two years, the likes of member pricing coming in, again, it's been something which has seemingly kind of moved the needle in terms of people engaging with programs. And actually one of the other kind of key findings we had in this year's research is actually some of those groups and demographics that previously haven't really been engaging in programs. And by that, I'm talking about male audiences and also slightly younger kind of gen Z demographics. Those two audiences have had a big kind of increase as well. And they've been typically quite hard to reach for us in the UK. So yeah, I think there's been a few things which has kind of contributed to that kind of rising membership and engagement. - Have you seen a similar thing too, Adam? Were you seeing a slow decline that's then been arrested? Where has that membership been going? And again, about the younger members, have you seen anything there? - There has been a slight drop-off in what I call a certain segment which is what I call the loyalty lovers or loyalty program lovers, which is the people who have members of 10 or more programs. That's dropped off quite significantly in this last study. And Gen Y seemed to be more, joining more programs, Gen Y and the Zs are steady, but it's not significant decline. But I think the Gen Y is sort of like the Gen Y Gen X, the family orientation, which is trying to get more savings out of programs, joining more programs. We all talk about the economy, but we have seen a little jump up in that generation of cohort. Other than that, nothing too significant in terms of drops, but just a slight increase in that generation. - And what are people looking for from loyalty? Have you seen any changes in those trends? - So when we look to ask questions about what are you looking for, we actually define what I call the loyalty program experience. So what do you want from a program in terms of three fundamentals? We actually don't go into lots of specifics around structures like points and perks and things like that. We've done it in previous years. But we looked at strategically three elements. How simple a program is, how personal a program is and how valuable it is. Now, there's lots of dimensions underneath those, but we call it the SPV, so simple, personal and valuable. And it's a new index that we're creating just to get an idea of how important is it that a program is simple, simple to understand, easy to join, easy to identify as a member, easy to earn a redeem reward. So there's simplicity element. And then we look at the personal element, which is more about other communications personalized, other rewards relevant and you feel special. So very generic descriptions, not really saying exactly what those are. And then the valuable element is also generic because we don't go into, is it discounts or is it cashback or is it member pricing. We just say, so how valuable are the programs to you in terms of meaningful, desirable and the rewards are valuable to you. So the SPV index, and this year and last year, valuable is two thirds. So two thirds are all about how valuable is the program to them. Again, as I say, not specific, then it's actually simplicity. 26% this year said they want a simple program and then it's personal. So it's really interesting to see that we as marketers might be jumping on the personalization bandwagon. But consumers, if you ask them to rank, they want value, simplicity and then personal. Although, I mean a call out on this one to everyone listening is, it's the integration of all three. You know, you can't have a complex program that's valuable and personal, otherwise you'll lose it. You've got to have all three humming along. Some of the personalization can make the program simpler. Absolutely, 100% it can. So James, you looked at specifics about what customers are looking for from loyalty, won't you? You did do the questions that Adam used to do, yes. We did, yeah, and again, there's some correlation there. I think we ran the survey right to the start of 2024. So Brits were very much still in the kind of cost-living crisis. We've got a high interest rates, high inflation, et cetera. So the responses did kind of reflect that. I think we very much saw value being the number one result. We saw 60%. So very much in line with Adam's stats there. 60% of Brits saying that they want rewards to kind of save the money. And I think that kind of value exchange, as Adam's kind of saying, is key. It's almost kind of a hygiene factor. Now for loyalty programs, as kind of consumers really do way up, whether they're worth kind of engaging with or not. The second highest response, again, in a bit of a recession, we saw people saying that they wanted something to provide the treats. So again, in a recession, we see that kind of classic lipstick effects whereby people kind of looking to kind of perk up their days with kind of small treats as opposed to kind of spending more. And I think those two results have been fairly common. We've seen that in previous studies. I think what has been particularly interesting for us is actually looking further down the list of responses and actually seeing where some of the bigger movers have been. And I think the two in which really jump out to me are the users were saying, sorry, the Brits were saying, that they wanted rewards that were fun. That was a kind of 47% increase from the previous study. And they also were looking for something, looking for rewards to offer them something kind of new to try, and that was a 23% increase. So it's that interesting thing there, kind of slight. And there were some big losers as well that James weren't there. There were, I think, again, it's that kind of customer value kind of equation when times are tight, where are the losers and the winners, I think. We've had some kind of CSR rewards kind of dropping down the kind of priority list. I think if you look at the data, it was a kind of 19% drop in respondents saying that they wanted rewards, which helped the environment. And we also had a kind of data point in there about something that helps others, and that had a kind of 40% decrease as well. So that kind of CSR-related reward has definitely kind of suffered. Again, I think we kind of feel that as times get better and people have a little bit more money, that kind of consumer equation of actually what is important to them and what they're looking for, may shift again. And we would anticipate that those CSR rewards could go back further up the list of important factors. But yeah, I think that was one of the biggest losers in this year's study. I think it's important to say to James that in your study, they were saying that they think the environment's important. It's just that when they said for the rewarding, they would rather be rewarded themselves as why to cater to it. Because they did still think the environment was important. It's the typical thing, isn't it? They want everything, and they want it now, right? What rewards and the environment, but if you give them a push comes a shove, they'd rather have rewards for themselves. Yeah, it's that classic what I say and what I do. Yeah, say do gap, yeah, exactly, James, yeah. And so what about frustrations? Adam, in your study, you've got a very deep understanding of what makes people frustrated about programs as you release. Yeah, I thought I'd take the negative angle this year instead of asking what do you want. I asked this year what parts of your overall elements and experience of the program causes you frustration. So I put forward 21 member frustrations and asked them to identify them and also what was the most frustrating element. And look, it's no surprise to all of us that the number one frustration is slow earn rates on rewards. So, I mean, it's a little bit of the irony of, well, sometimes if you're not shopping often or buying a lot, well, clearly you won't earn a lot of rewards from the one brand. You know, if you're promiscuous and you're shopping around, well, then you're, you know, but there's also the actual dynamics of the financials that are offered to you. So the rewards are slow. Earn rate was the number one frustration. Number two is the old expiry and you know, we've got to keep remembering that us as loyalty program managers, we know why we expire rewards, but it is certainly a mass of frustration for for members, especially if they feel that earned it and worked towards it and then suddenly they're expired. But it is a balancing act because we know that expiry drives an outcome. And then a little bit further down the roads, you know, your one in, the rewards were not immediate, certainly comes in the top five or six, you know, the brand's changing the value of rewards. I mean, certainly you can see certain categories who are, you know, tightening the bell, changing the value, changing the points economy and rewards. So that's clearly it's been seen by members. And as you look down the list of 21, you know, it goes all the way down to the actual experience, like complex proposition, complex login, unclear process. You know, some of the fundamentals, but it's an ask list because out of the list, we've created the opportunity for loyalty program managers to create a what I've called a frustration reduction plan, which is I've given a framework in the study of take the frustration, identify its downstream impact and then, you know, work out an action plan to resolve it. But first and foremost, ask your members, you know, put forward these 21 frustrations to your members of your program, get them to rank them and then fix them. You didn't have a similar thing in there, James, just checking what you didn't have a similar thing in there. No, we didn't ask a direct question. I think we summarized some of the big industry news that we've seen over the last couple of years. And I think that devaluation of benefits is certainly being kind of prevalent. We know the kind of realities of this higher engagement, high unit costs across the board and really those kind of reward budgets being squeezed has kind of resulted in a number of the bigger programs really having to kind of reduce the benefits that sort of reduce their benefit or kind of require those consumers to either do more steps, give them, give them fewer points. And just that slightly kind of longer reward loop is something that we've obviously seen in the market. And I think what sort of web programs are able to offer that immediacy on the kind of the flip side, again, to kind of bring up member pricing again. But that kind of immediate effect. So I think I've read a recent study in the grocer just last week and talking about just the fact that member pricing does allow law team members to immediately get a benefit they can see even before they even bought an item, just what kind of tangible benefit they're going to get. So yeah, I think that that immediacy is certainly important and clearly the opposite for the frustration is that that kind of devaluation of benefits has been something which is a little bit wearing on the British consumer. And Adam, just on yours, you will have been very pleased to see the statistic that James just quoted about about the growth of fun. I mean, what was it again, the rise of fun? Rewards should be fine and that was a 47% increase. It's because of that jointly tattoo. The royalty message is getting across to the Brits and they're finally realising that we're going to do put some more fun into programs, more royalty is spot on. That specifically is, I've been talking to lots of customers. I keep doing workshops and things like that for clients. And one of the things that often the first question I ask is, what are the programs you favourite, one and why? And what's come out the last few years is that the growth of Liddell's programme has been really big and they do this really well. James, do you want to talk about that? Do you think that's had an influence on the fun piece where people are now saying, I need it to have more kind of entertainment in it. It needs to be more engaging. I do, yeah, I think the, I mean, I love the "jawty" phrase, that's great. And I think we've seen, I mean, again, in the last couple of years, we've seen a lot of brands, sorry, and lots of programmes, kind of utilising promotions as in kind of short-term bits of activity to really kind of drive awareness on boarding and engagement and adding an element of joy is a big part of some of their success. And that kind of new and novel experience is particularly needed, especially when times are kind of tough for consumers. And I think the little example is a really good one of that in February this year. They ran a promotion called their Bakery Soup Spin and essentially every little shopper who had the little bus app could play a spinning wheel at the end of their shop and they were guaranteed to win a low cost kind of item from the bakery. And it was just that nice little kind of end-of-shopping experience, a bit of joy where you have the fun of playing the game. Everyone walks out with a tree and it was just a really nice kind of all-round experience, which rewarded everyone, which I really, really liked. I've got a fresh one for you, Ian, so I care here, I care family, and just released a little royalty moment called the plant dog. So it's not a, it's a new hot dog which is made out of plant food, so a vegetarian, and they released a plant dog as a freebie for their members and it really has resonated. Would you believe that IKEA, which is known for furnishing, is now known for the plant dog and it's created a lot of joy and a lot of members, the members were giving one for free. And it's just those small things like that that adds some more fun, as you've said, James. No, fantastic. I love it. It's a gift that keeps on giving. So finally, just if you're going to give two takeaways for your pieces of work, both of you, so James, do you like to go first this time? What are the two key insights that you'd take with you? Sure, I think that the main one from us is that that loyalty has really kind of skyrocketed. It's everywhere, membership and activity have just massively increased. And I think we've seen that these increases are kind of bringing challenges, higher competition, higher cost, etc. And so really the second point is around how we can look at it, so we can look at and negate those as a loyalty master. And two of the big kind of learnings again, we saw in this paper is that actually brands are looking to kind of utilize those brand partnerships and also multi promotions to help kind of help them achieve more for less. We've seen just how kind of desirable they are in this year's data. And I think it's some two nice bits of activity that loyalty program owners can use to help with some of the big challenges they face at the moment. Perfect. No, thank you for that. And Adam, what are you two? Well, look, the one that I'll say and share that is this activity element. You know, the North Star very loyalty program should be how active your members are. And my little mantra there is, you can talk about how many members you've got, but how many how active are they? So, you know, volume is for vanity, activity is for sanity and cash is reality. And so that's a little mantra and a little poem that, you know, whenever we're out there, we're talking with loyalty programs is really, you know, started that North Star activity and my research study saying as well, if only 50 percent are active, what about the other 50 percent? So there is a lot of clutter and chaos. And, you know, what can you really do to lift their activity? So that's the number one. And I think, you know, programs should really, you know, step into their the currencies that members care about. And you know, the study, I have the six currencies of collection. We didn't talk about it. But really, they should look at those six currencies and just very briefly, you know, we've got the financial layer, the experiential layer, the utility will make my life easy layer, you know, the personalization, ego, and exclusivity layer. And then the choice, the choice category layer, just, I didn't even mention that has jumped remarkably this year. People want more choice and then the social currency. So that's a long answer to your question of the two, but activity and then look at the currencies that your members care about. Perfect. Well, thank you very much to our guests tonight. So thank you very much, Adam Posner. Thanks very much, Ian and James. Thanks very much. And thank you much, James Davies. Thank you very much. It's a pleasure. So all that is left for me is to thank you for listening. Before we go, here's a sneak preview of what's coming up in Newscast 3. Hi, this is Rick Ferguson with the Loyalty Newscast. We have an action-packed episode of the Newscast coming up for you next week. The news is happening so fast that it's hard to keep up. For example, no sooner did we record a segment addressing the Visa MasterCard swipe the settlement than a federal judge put the whole thing on ice. We examine the implications with our Loyalty Roundtable. We also ask if Apple Loyalty is peaked by talking to some Apple customers in the wild. All this and more on episode 3 of the Loyalty Newscast, dropping on July 8th. Look for it wherever you get your pods on the Loyalty podcast feed. I'll see you there. Thank you, Rick. If you like this podcast, please like, share, and comment. Use in the hashtag, the Loyalty podcast, and we'll look forward to a company again soon. Thank you, and goodbye. [Music] [BLANK_AUDIO]