There was a chance the Flybuys brand name could have been scrapped entirely.
Last year, on the eve of the company’s 25th anniversary, executives had in-depth discussions about what the brand represented and whether the loyalty programme’s name was still fit for purpose.
Flybuys was initially launched in September 1996 as a travel rewards programme that enabled customers to “fly through their shopping” with flights via Air New Zealand and Ansett.
But the departure of the national carrier from the programme in 2016 meant the “fly” aspect wasn’t as prominent as it once was.
“When we relaunched the brand, one of the key questions the board considered was whether we should still keep the name FlyBuys because we no longer had the flight component,” FlyBuys chief customer officer Bridget Lamont tells the Weekend Herald.
Lamont took that discussion out of the boardroom and on to the streets to gauge what customers thought.
“It was overwhelming that we had to keep the FlyBuys brand and it had to be blue,” says Lamont of the study that aimed to measure the brand’s relevance to modern consumers.
“It was so deeply entrenched in consumers’ minds that to call ourselves anything other than that was always going to be a mistake.”
A recent independent study conducted by insights firm TRA showed 85 per cent of the population (based on a sample size of 4000) are aware of the Flybuys programme, while 77 per cent are members.
Internal data from FlyBuys shows the programme today commands 2.9 million members across 80 per cent of New Zealand households – a saturation level any business would envy.
But after 25 years of being in this game, was any definitive proof that Kiwi customers are loyal – and more importantly, whether that loyalty can be bought?
“Customers aren’t loyal,” says Lamont without a moment’s pause.
That statement may raise a few eyebrows, coming from a business boss who rewarded customers with the equivalent of $65 million over the course of the past 12 months, but Lamont accepts that she isn’t Don Corleone and that any offer she makes can be refused at any given time.
“Deal hunting and shopping around is almost a national pastime for us,” she says.
“That hasn’t changed in Covid. We just spend more time doing it online now. We definitely have a convenience- and deal-driven shopping culture. ‘Loyalty’ in that context is an interesting challenge.”
She says the debate about the effectiveness of these programmes often centres on the choice of the word “loyalty”.
“People are loyal to their friends, their families, their pets,” she says.
“The concept of emotional loyalty is almost a distraction. People might have a transactional commitment to a particular brand or business in the form of repeat behaviour, but they aren’t loyal in the human sense.”
This isn’t unique to the New Zealand market. A 20-year study of consumer purchasing behaviour in the US, Europe and Japan conducted by legendary marketing scientist Andrew Ehrenberg showed that undivided loyalty in the form of buying from one brand exclusively simply doesn’t exist beyond a small niche of buyers. The rest of the market tends to be polygamous and no loyalty scheme has been able to shift that behaviour.
So what is the advantage of a loyalty scheme to the participating company if loyalty isn’t the end target?
“That depends on how you define advantage,” says Lamont, stressing that the aim shouldn’t be some utopian idea of customer monogamy.
“Accepting that I do have a vested interest in loyalty programmes, my view is that the power lies in engaging consumers in a relevant and valuable way. That I think is the motivation of a brand to be part of a loyalty scheme.”
Loyalty schemes give companies access to data on shopping behaviour and preferences, which can then be used in communications or to improve what’s on offer. In some ways, we are paying for the loyalty scheme in the currency of data.
Lamont says that all data acquired through the FlyBuys scheme is held by Loyalty New Zealand and is not shared between the individual participating companies.
“If I shop at New World in the afternoon, the Z Energy team don’t see that, but Loyalty New Zealand has the data asset, which we can use for the benefit of the programme.”
The insights derived from that data are then used by FlyBuys in its communications with consumers, thereby pushing a narrative that aids all companies involved and makes consumers aware of what’s on offer.
“A loyalty programme itself is a mechanism that enables a brand to get insight into consumers.
“And then the responsibility is on the brand to use that insight to tailor their offering and to communicate in a meaningful way to provide valuable incentives to shop or spend. That’s the power of a modern loyalty programme and that’s the advantage that brands can get from their programme.”
What Lamont is describing here is the principle of reciprocity playing out in the shape of the businesses offering a reward to customers who shop with certain stores – and this is backed by research.
The tyranny of reciprocity
Colleen Ryan, a partner at business insights firm TRA, reflects on a study to show how powerful even a small reward can be in nudging human behaviour.
In the study, two groups of students were sent on to the streets in the middle of New York’s financial district, putting them among some of the richest people in the city. The students were required to ask passersby if they would be willing to give up a day of their salary for a worthy cause.
Part of the study was to determine whether expressing the commitment in non-monetary terms would have a greater uptake (it did), but the real dealmaker came in the fact that one of the groups gave people a lolly while the other didn’t.
Ryan says uptake among the group armed with the lollies was about 30 per cent higher.
“It shows that reciprocity works,” she says.
It’s something we can see also see playing out during Christmas, when gift-giving almost takes on an obligatory air based on what our family members give to us. This psychological nudge is incredibly powerful in pushing people to behave in a certain way – and it can also play out in the shopping aisles.
“When loyalty is emotionally driven, it’s because of the sense that the company gives something to you in some way. There’s some reward that makes you feel that you’re in this together. There is certainly evidence of emotional loyalty, but a lot of loyalty is purely behavioural.”
Ryan says that in most instances, people just tend to swipe the card of the store they happen to be at, rather than actively seeking out a company affiliated with a certain scheme.
She says the real battleground in this space lies in the customer experience that is provided via the loyalty programme. If your loyalty is rewarded with a better customer experience, you are more likely to engage with it.
This is one area where the foundations of the FlyBuys programme give it a slight edge over other players in the market.
“FlyBuys is not unique to one retailer,” says Ryan.
“This dynamic is different from what we see in most countries. A clever bit of Kiwi ingenuity saw four big entities work together to do something.”
FlyBuys remains equally owned by BNZ, Foodstuffs, IAG New Zealand Ltd and Z Energy, but today more than 40 businesses are participating in the programme, giving consumers the opportunity to accumulate points as they shop across sectors.
FlyBuys has pulled both the reciprocity and customer experience levers hard in recent years, expanding its online reward store to now include more than 6000 items.
The company has also given the consumer the power to choose how to be rewarded by opting either for FlyBuys points, New World Dollars or Z and Caltex Discounts.
The Covid effect
The impact of Covid-19 on reward choices offers some fascinating insights into the shifting psychology of consumers over the past two years.
In the past 12 months alone, a staggering 1.4 million items were purchased through the FlyBuys store (equivalent to $65m in value).
Lamont says that during the first lockdown, many Kiwis were using their Flybuys points to purchase printers, hair clippers and heating, whereas this time it’s all been about kids’ bikes, headsets and gardening tools.
Some of this is attributed to the shift in seasons, but it also provides insight into the fact that many of the things people are buying are relatively basic necessities. The reward lies in being able to get something you need without having to pay for it.
Other popular items in recent years have included Google Chromecasts, Apple AirPods and slow cookers.
The diversity of preferences is part of the reason FlyBuys continues to keep such a wide range of options available on the store.
“Choice is a really important mantra for us in running the programme,” she says.
“We need to give our members as much control over what they get and how they are rewarded as possible.”
The future of loyalty
A quarter of a century is a decent run in any business, but it doesn’t give you an automatic right to another 25 years. Staying relevant at a time when payment methods, shopping habits and consumer behaviour are changing will prove a challenge.
Critics of loyalty programmes argue that these schemes will eventually fall into disuse, as younger consumers opt out.
There are perhaps some warning signs in the demographic breakdown of FlyBuys users, which shows that 70 per cent of customers are 40 and older.
Despite this, Lamont remains confident that the company won’t slowly age with its users, pointing out that 40 per cent of all members who have used FlyBuys for the first time in the past 12 months are younger than 29.
This demographic accounts for only 10 per cent of the company’s overall membership.
Another factor affecting the business is the rapidly shifting payment preferences of consumers and the growing comfort consumers have shopping online.
These trends have made the old habit of swiping a loyalty card seem less relevant – and it’s forced change at FlyBuys.
“My vision for FlyBuys is that it becomes almost a daily habit,” says Lamont.
“We’re very much a mobile-first programme and that’s really the future as far as I’m concerned. We’re just going to keep looking at new ways to give people value, whether that’s through hard currency, products or access to discounts. We have to give people a reason to pick up their mobile phone in the morning and go: ‘I wonder what I can get from FlyBuys today’.”
The other possible future threat hanging over the loyalty industry lies in the shape of regulators clamping down.
The ACCC competition authority in Australia has already conducted an extensive investigation into loyalty schemes across the Tasman and our own Commerce Commission recently posed some serious questions about whether consumers were getting enough from the supermarket loyalty schemes as part of its probe into competition in that industry.
The pressure comes from dual forces of ensuring that these companies keep their customer data safe, while also ensuring that they give enough value back to consumers.
Polygamous Kiwi shoppers may like a freebie and a good deal, but they’re also not shy about letting you know when they’re not getting a shoddy deal.
The future of FlyBuys largely depends on continuing to get that balance right.
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