Loyalty programs are becoming increasingly important in Australian retailing as companies leverage data analytics to learn much more about their customers and send them personalised offers.
Big W recently took a big step in nudging shoppers into scanning their Everyday Rewards card with every purchase, through the introduction of a members-only discount pricing initiative that Woolworths supermarkets introduced in August.
"What it does for us is, it reminds the customers that they are a member of Everyday Rewards, and it does prompt them therefore to scan the cards to get all the personalisation," Woolworths Group chief executive Brad Banducci told analysts last month.
He said it helps the company's scan rate, the percentage of offers that are tagged to Woolworths' loyalty program.
"Through that process, we get to learn a lot about the member, and therefore we get to personalise a lot of experiences for them, as well as a lot of offers for them."
Unlike the "boosts" - customised special offers that customers are required to activate in the Everyday Rewards app - there are no extra steps needed to take advantage of members-only pricing beyond scanning the card, notes WooliesX managing director Amanda Bardwell.
Flybuys, meanwhile, in December 2021 expanded to include Bunnings and Officeworks, which Kmart Group managing director Ian Bailey says has been resonating with customers.
"Clearly the way in which businesses like Bunning, Officeworks, Kmart use Flybuys is different to how a supermarket uses it - but that seems to be adding value," he said.
"And that's what's driving the increase in membership, increasing engagement, and NPS (net promoter score)" used to measure customer satisfaction, Mr Bailey said.
Myer has beefed up its member reward program, MYER One, after partnerships with American Express, Commonwealth Bank and Virgin's Velocity program.
Some 4.2 million of the program's 7.3 million members were active in 2022/23, with nearly three-quarters of all Myer purchases tagged to an account, according to the retailer.
"The role of first-party data is incredibly important in today's marketplace - and we have reaped the benefits from our MYER One program," Myer chief executive John King told analysts recently.
Myer sees the loyalty program as underpinning growth for its business, Mr King said, as it uses analytics capabilities and machine learning models to inform its business decisions with actionable insights while deepening its connection with its most loyal customers.
Loyalty programs actually date back to the 1850s, with their first documented use by a New York soap-seller, says consulting agency boss Philip Shelper.
Mr Shelper is the chief executive of the 10-year-old Sydney-based global loyalty consulting agency Loyalty & Reward, a former executive with Qantas Frequent Flyer and the author of Loyalty Programs: The Complete Guide, which recently launched in a second edition.
"They've been going for a very long time," Mr Shelper said of loyalty programs.
"The digital age enabled a really major re-invention to them. Over the last few years, they've become very, very important," he told AAP.
"During COVID, a lot of companies realised that without having a member database that they could go out and market to and maintain that engagement, they were really left out to dry, and a lot of companies suffered because of that."
Loyalty programs are a win-win for customers and businesses, Mr Shelper said. They provide customers with special benefits and more relevant offers, while businesses use the programs to reduce churn, stimulate members to spend more and learn more about their customer base.
"The data is really where the game is changing within loyalty right now - companies are getting very good at understanding exactly what kind of data they want to collect about customers, and using that in a way that enhances the customer experience in order to drive that deeper engagement," he said.
Airlines and supermarkets are also effectively monetising their loyalty programs by selling customer insights to third parties, and building new digital marketing capabilities to sell advertising, he said.
"So data is where it's all happening right now."
Mr Shelper named Woolworths' Everyday Rewards as the best-run Australian loyalty program, one he described as world-class.
"They've invested heavily in the evolution of their program, they're doing a really good job of personalising offers, they're driving a lot of engagement with the primary shopper, and they're just getting it right."
All their communications are artificial intelligence-powered and individually tailored, he said. "And then how you respond to that email will inform their next communication to you as well.
"It's very, very advanced stuff."
Australian Associated Press