March Loyalty Market Update
Courtesy of Loyalty Central we share the most comprehensive loyalty market update for Australia and New Zealand. Find out the biggest program in Australia, what the recent privacy regulation changes mean for you, the latest market movements, what's happening at Airpoints and the latest on Crypto Rewards.
Qantas Frequent Flyer – The Biggest Loyalty Program In Australia
National carrier Qantas’s Frequent Flyer program is worth $6bn (13th most valuable Frequent Flyer program globally). Competitor Virgin’s Velocity Frequent Flyer is 31st globally at a $2.1bn valuation (up from $1.78bn in 2020). The Qantas Frequent flyer program delivered $1bn in revenue in the first half of the year. Points earning and redemption are higher than pre-Covid levels, Financial Services partners issued more points than ever before, and the Qantas co-brand credit card portfolio still accounts for 35% of all credit card spend in Australia.
Retail Conglomerate Wesfarmers – Onepass Vs Flybuys (They Own Both)
Wesfarmers is increasing its use of loyalty programs across the multiple retail brands it owns as a strand of its digitisation strategy to deal with higher costs. They've invested Au$1 billion in digital since 2019. The new OnePass program, which cost about AU$45million to set up, attracts younger customers across the group (includes Target and Kmart). Wesfamers also owns half of retail coalition Flybuys (8.5 million members) and now appears to be favouring OnePass over Flybuys. They’ve halved the earn rate for Flybuys at their online-only retailer Catch and indicated they’ll grow OnePass across home improvement chain Bunnings, Officeworks and it will be considered at pharmacy Priceline.
Loyalty Membership And Activity Levels
Wesfamers Group conglomerate companies:
- Retail coalition Flybuys has 8.5 active million members (out of 8.6m)
- Pharmacy Priceline Sister Club has 3.6 million active members (out of 8 million)
- Home Improvement retailer Bunnings’ PowerPass has 1 million active members.
- Australia’s biggest, the Qantas Frequent flyer program - 14.1 million members.
- Competitor airline Virgin Australia’s Velocity Frequent Flyer - 11 million members.
- Australia’s largest bank, Commonwealth - 140,000 members in the pilot of its new whole of bank loyalty program Yello
- Leading Telco Telstra’s Plus program - 4.8 million, slightly behind target of 5.4 million. Next year's target is 6 million.
Conglomerate Super Retail had 9.7 million loyalty program members transacting in the last year. Their various loyalty program account for:
- 71% of sales at sporting goods chain Rebel (program re-launching this year)
- 63% of sales at automotive parts and accessories retailer Supercheap Auto
- 74% of sales at outdoor apparel retailer Macpac
- 88% of sales at outdoor sporting goods retailer BCF (re-launching next year)
- Autobarn launched Accelerate (on Emarsys) in December which now has 100,000 members.
- JB Hi-Fi launched JB Perks in November which now has 405,000 members.
The Biggest Upgrade To Privacy Regulation In 20 Years Adds Cost To Loyalty
Post two massive customer data breaches last year at health insurer Medibank and Telco Optus (as well as some other minor breaches), Australia will upgrade its privacy laws focusing on “targeted marketing and advertising”. The changes will favour loyalty programs and platforms already adhering to other global privacy laws (such as GDPR and CCPA) and disadvantage those who need to catch up.
Loyalty program members can opt out of being targeted and can also have their data deleted. Gartner estimates that costs $2,200 per customer deletion. If this happens in categories where the loyalty programs are designed to identify customers and their transactions such as retail, the loyalty program won’t be able to recoup its investment. The regulation won't slow the accelerating growth and launch of loyalty programs as alternatives in the big cookie driven targeting platforms are drying up. It could be worse though; the Californian privacy regime (CCPA) classifies loyalty program rewards or discounts as a payment for customer data. Loyalty programs "must document how they are telling members what their data is worth”.
Australian born loyalty provider MyRewards, which was the source of a breach at Telco Telstra last year, has again been breached. They’re identified as the source of a breach (this time in August last year) at electronics retailer The Good Guys and affecting 1.8 million customers.
Big Banks Using Customer Data To Get Bigger
In the UK, Open Banking lead to a raft of neo-banks taking on the incumbents. In Australia, Open Banking led to the Big 4 banks using the new customer data capabilities to get bigger.
The biggest bank, Commonwealth, will help its business banking customers market their products and services to Commonwealth retail customers at point of sale from next year. It's the holy grail of an ecosystem play which will tailor customer rewards based on their location and preferences. It points to Commonwealth entering the market for internet retail search (a key driver of Afterpay’s growth). Target sectors include restaurants. Commonwealth bought restaurant Saas solution aggregator Doshii and they've signed up Uber Eats.
Shortage of Loyalty Talent
The growth of Australia's loyalty industry has outstripped the supply of talent to operate the growing roster of loyalty programs. This demand for talent sees USA based The Loyalty Academy running in-person training in May in Melbourne. Historically the Middle East, Europe and USA were hotspots for this type of qualification and Australia has caught up.
- John Merakovsky, former CEO of Flybuys Australia, has joined the board of ANZ Bank owned Cashrewards (he follows Anthony Seymour-Walsh who left Flybuys to become Cashrewards CEO)
- Miles Toolin has left Cheetah and joined Eagle Eye (following the departure from Cheetah of Rian Smith and Billy Loizou to Amperity)
- Aussie Merciadez has left ex-EonX to join Komo Technologies who plan to build a Saas loyalty capability.
Frequent Flyer Program Airpoints
National carrier Air New Zealand’s Airpoints Frequent Flyer program is estimated to be worth NZ$ 1 billion to Air New Zealand (roughly 40% of the value of the whole airline). High valuations for Frequent Flyer programs are common (American Airlines loyalty program is famously worth USD38bn while the airline and the program together are worth only USD21bn).
Concerningly, Airpoints is one of 33 Frequent Flyer programs whose estimated value has declined (from NZ$ 1.3 bn in 2020) while the other 67 top Frequent Flyer program valuations have grown. It’s still the 41st most valuable Frequent Flyer program globally (between Finnair and Thai Airways). It’s also more valuable than Flybuys who’s carrying value is reported to be zero.
Frequent Flyer valuations are driven by the volume of points the airline can sell to partners like banks and retailers. Airpoints sales volumes will have been stunted by the banks (ANZ, American Express, Kiwibank and Westpac) all reducing how many points customers can earn from February on the back of new payments regulation that cut the funding they use to buy Airpoints.
Airpoints partner Mitre 10 ran a very rich Airpoints earn offer over the last weekend in February. The earn rate is usually 1 Airpoints Dollar per $115 spent (a 0.87% return). The weekend's 5X offer equates to a 4.4% return. While there’s been no announcement, these types of rich offers occasionally proceed a partner’s exit from a coalition program. This is something that Genesis Energy also did when exiting Flybuys.
Premium Airpoints customers are finding free upgrades in short supply as demand for all seats outstrips supply. This will normalise as more of the grounded 777-300s return to service. Airpoints are exploring new ways to improve the loyalty experience including recognition upgrades.
Exporting Loyalty - First Table
Global restaurant booking player First Table has 750,000 customers across 6 countries (NZ, Australia, Canada, UK, Ireland and Bali). It was founded in Queenstown, New Zealand. It’s now launched the Frequent Foodies loyalty program starting in New Zealand. Members earn status points which unlock discounted bookings, gift vouchers and early access. It’s also looking to raise between $2m and $4m on Snowball Effect to fund market and product expansion.
Exporting Loyalty - Michael Hill
Jeweller Michael Hill opened the first of his stores in Whangarei, New Zealand, in 1979 and now has 280 stores across Australia, New Zealand and Canada. They launched the Brilliance loyalty program in 2019 with DXC on a Microsoft platform. This is perhaps the only loyalty program in this region running on Microsoft. The program now reports 1.7 million Brilliance loyalty program members across their three markets. Their most valuable customers, as with all loyalty programs, were their best customers who were first to sign up. 80% of sales are now inside the loyalty program. Basket size, as with most retail loyalty programs, doesn't materially differ between members and non-members (22% variation for Michael Hill) and the challenge will be growing frequency.
USA based Zero Hash, which issues crypto rewards, has formally registered as a Financial Services Provider in New Zealand. It enables any loyalty program to embed digital assets in their own customer experience. Crypto rewards from Plaza are already integrated in the Gratifii platform. New Zealand also has a first in this area with Kiwi firm Immersve launching the world's most decentralized card with MasterCard last month enabling payments directly from a web3 wallet.
Woolworths Group (owner of Countdown Supermarkets) called out their loyalty partner Eagle Eye in strong half year results. Across both Australia and New Zealand they achieved a 34% increase in app users and in Australia a 57% increase in loyalty app users. Eagle Eye in New Zealand (lead by Phil Devlin) also counts The Warehouse Group's expanding MarketClub loyalty program as a client.
Rewards Donations to Charity
ASB Bank's credit card loyalty program currency, True Rewards, can now be donated to New Zealand Red Cross to support their Cyclone Gabrielle response. The volumes of points gifted to charities by loyalty program members is typically very low single digit percentages but historically doubles in response to national disasters.
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