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Chapter 1: How can loyalty programs help save money during a cost of living crisis?
In a cost of living crisis, we're all looking to save wherever we can, and loyalty programmes seem like a good way to pocket a few extra dollars at the till.
We'd like to welcome everyone aboard KORU, Air New Zealand's loyalty programme, with even more rewards influenced by our customers.
Zed Rewards gives you a discount on fuel every day and points for almost everything you buy, including EV charging and fuel.
If you're a New World Club Card member like me, starting June 15, New World's saying goodbye to Club Card and hello to Club Plus. It's everything you love about Club Card, just smarter.
All you need is 2,000 points to earn a $15 voucher. Spend $100, $500, or sometimes even thousands of dollars and get some of your money back, or even a free coffee. But as the saying goes, there's no such thing as a free lunch. So what are you giving up in exchange for a couple of bucks back?
You know, sometimes loyalty programmes, for instance, airlines' loyalty programmes, can be worth more than the airline itself.
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Chapter 2: What changes are being made to popular loyalty programs like New World Club Card?
So, you know, it clearly shows something about the value of the data.
That's Associate Professor Laszlo Sajtosz from the University of Auckland's Business School. Later on in the podcast, I'll talk to him more about how loyalty programmes create a personalised experience and the clever ways they're costing you. Kia ora, I'm Chalice Tansey and today on The Detail, is the price you pay for being loyal a fair one?
Loyalty programmes were created for the purpose of attracting new customers, keeping the current ones, and enticing people to buy more. And they're becoming a big part of Kiwi's shopping habits. According to Consumer NZ, 9 out of 10 Kiwis are part of a supermarket loyalty programme, and it's not just the supermarkets running them.
Of course, there's Everyday Rewards and Foodstuff's new Club Plus, but we've also got Kuru, Mecca Beauty Loop, Mobile Smiles, the list goes on. Let's start with where they started. Here's Consumer NZ's research lead, Rebecca Stiles.
Chapter 3: What are the hidden costs of participating in loyalty programs?
Well, I think the biggest one in New Zealand was probably flybys, and that started in the late 90s. Of course, flybys is no longer, and we see more these days as individual stores that are offering their loyalty programs rather than sort of a collective of retail outlets that are controlling the reward points.
And how have they developed over time?
Well, I think they've developed as it's gotten easier to collect shoppers' data. So, for instance, when you go to the supermarket and you swipe the card, the supermarket is getting a view of... Everything you buy, where you live, they can contact you.
So for instance, Woolworths is closer, so I go there, so I'm signed up to their rewards program and it will now send me, there's like bonus offers or deals, so it sort of can target particular products.
to you it all can also see you know what brands what you're willing to pay for particular products as well so it's getting these really useful insights basically to collate and you know see if they can get as much money from you as possible essentially and outside of collecting our shopping data what other information may consumers give when they're signing up for these loyalty programs
Sort of, you know, your phone number, your email, your address, so they know where you live and they can, you know, use that to extract the demographics of that particular area and get more of a picture of a neighbourhood and what they're willing to spend on, you know, whether it's clothes or shopping or what have you.
It can seem quite benign, data, as we're giving it away, but it is actually used to the most benefit for businesses to see, you know, in what specials work, what specials don't work, what promotions we respond to, what stuff falls flat. So it's a huge data pool that can extract this really useful information for businesses to see what we respond to and what we're likely to spend money on.
And that is really important data. How valuable is that to these companies?
I think it's super, super valuable. I think we see it with the, you know, Foodstuffs has come out with the new Loyalty Card Club Plus and it's encouraging people to join and you can't shop online without joining and you can't collect points at Pack and Save, but you can spend points there. So they're encouraging us to swipe. our card.
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Chapter 4: How do loyalty programs collect and use consumer data?
It's getting a real, really detailed picture of our household habits and what we're spending.
That's a lot of information for one company to have. Does that leave consumers vulnerable at any point?
It is a lot of information for them to have. And under the Privacy Act, you know, they're meant to only collect the information that they need. They can't collect extraneous information that they're not going to do anything with. And of course, when we sign up to these things, there's privacy terms, there's T's and C's. But, you know, no one reads them. We want the discount, so we tick the box.
So it will be very interesting. I guess we don't know really how strong the rules are for protecting our information until there's a breach. But I think perhaps the biggest vulnerability is it could open the floodgates for more dynamic pricing. So that's when I could be offered a price for, you know, a can of baked beans that's X amount and then someone else is offered a different price.
And how we monitor whether prices are being offered in accordance with the Fair Trading Act, I think that is potentially a slippery slope. If there becomes a lack of transparency about what the actual price is, are we actually getting good deal or are we being offered prices depending on our demographic information or in our shopping information that we've handed over to these companies?
But despite all of this, loyalty programs seem to still be really popular. What is it about these reward systems that are just so enticing to consumers?
Well, I think everyone loves a deal. You know, especially with supermarkets, why spend more on a grocery shop when you don't have to? You know, remember pricing.
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Chapter 5: What vulnerabilities do consumers face when sharing their data with loyalty programs?
I mean, times are tough, so you're going to do all you can to get the best deal possible and not spend too much. I mean, people do love the rewards. I mean, if you go somewhere regularly and you're buying stuff that you intend to buy and any collecting points and that works for you, I think, you know, that's all great.
It's just perhaps doesn't work as well for a customer when they're enticed to buy stuff that they never intended to or you're enticed to buy more stuff that perhaps you never intended to in order to get points. Rewards can work.
if it's actually what you wanted to buy, but if you're being swayed to different things and you didn't want to do those different things and they're more expensive, perhaps it's not quite working for the consumer. And I also think it's rewards in very concentrated markets, especially for essential services like food. I mean, we've got a duopoly. We're probably loyal to both.
The Commerce Commission has found supermarket competition hasn't improved despite years of reforms. The Commission's third annual report into the grocery industry found foodstuffs in Woolworths' share of the market pretty much unchanged over the past five years. They have a combined share of 82% of the market that was as at last year.
Most New Zealanders would go to both. So it's, yeah, I think it brings up the question of are we being priced fairly and do rewards really work in markets that aren't particularly competitive in the first place?
And you mentioned there that these loyalty programs could entice consumers to buy products just for the points. But we are in a cost of living crisis.
Consumer New Zealand has released new supermarket research that shows pressure remains on New Zealand families. It also indicates... Little confidence in some of the things intended to help ease food price rises. Well, Consumer's new survey shows that 82% of people say their food budgets are under strain.
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Chapter 6: Why are loyalty programs still popular despite their drawbacks?
A third say they're not getting enough food. Half aren't getting what they'd like to be getting.
Do you think consumers right now are even enticed to go outside of their budget just to earn a couple more points?
That's a very good point. I mean, yeah, budgets are constrained. I guess I'm just thinking the way that new Club Plus card is structured. You get points for shopping at the more expensive chains like at New World and Foursquare, but you don't really get points for shopping at Pack and Save where you're probably more likely to get the best deal.
So I think that's an example of a company trying to entice us Maybe not all the time, but occasionally you might shop at those more expensive chains to collect points that you could then spend at the cheaper chain. So I think that's sort of wooing us to different options that may or may not work for us.
In the name of research, I went around the RNZ office to ask what loyalty programs people are a part of. Okay, let me get out my wallet.
That's a New World one, which I will drag out, but I hardly ever go there. My Airpoints one I love. Pretty much just Woolworths. I don't even have a New World one. I only go to Woolworths and have the rewards card.
Club card. I've had flybys, but we don't have that anymore. Real groovy.
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Chapter 7: How do loyalty programs affect consumer spending habits?
Farmers.
I'm all of them. Mecca Beauty Lube, Everyday Rewards. Do you feel like you get enough out of your reward programs though for how much you spend?
Oh, absolutely not, but I'm such a perfect consumer that I just think, you know, if it's there, I'll use it. If I can get 50 cents off, I'm there for it. That's worth it. I mean, every dollar that you save is something you're saving, right? And yeah, no, I think even if you're just saving a dollar or a few cents, it adds up over time.
Although you are trading off your information for that, but I don't really mind that these supermarkets know what products I buy because they're almost always on sale.
Which is convenient, isn't it? The product that you love and buy often seems to frequently be offered at a cheaper price. But it's not really convenient. It's strategic. Associate Professor Laszlo Sajtos from the University of Auckland explains how our data is being used to tailor our encounters with a brand.
If you think about it, the main idea behind loyalty programs is basically just understanding who you are. Who are the customers we are talking to? So if you don't have loyalty programs, I guess, you know, this is the interesting aspect. I guess I tend to discuss with my class that, you know, imagine a company that doesn't run a loyalty program. Imagine a company that it comes naturally to them.
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Chapter 8: Do loyalty programs provide real value to consumers?
to run a loyalty program, you know, what are the differences? So, you know, at least you actually get to know your customers. You get to know who they are, the demographics, you know, all this transactional data that we talked about and the rewards side of things. So the app data that it comes with it. So what they do is on its own, each, every type of data is very useful, right?
So if I just think about your identity, it would be really important for me to segment my market, to target certain customers. And that could be just based on your identity, demographics, or any other data that you have, location data, or just based on your transactions.
So all these types of information, what you actually do is basically sort of feeds the next stage, which is all about this personalization aspect of loyalty programs that depending on the type of customer, the type of purchases, or the type of way, the way in which you actually make your decisions,
I can put you in smaller and smaller sort of segments or segment to one, and I can basically personalize all the messages. And I can basically learn whether you actually respond to these messages, right? So if I push out these notifications to individual customers, then I can learn how price sensitive people are, whether, you know, lowering a price is actually useful. How often do you buy?
So it's, you know, in marketing, at least, it's a huge challenge. The question is whether a customer is still alive or they have so-called churned. So whether they left the company. So knowing about that, it's very important.
And it's basically, you know, all the data that loyalty programs capture make companies decisions on targeting loyalty type of issues like retentions or churn, cross-selling, up-selling. So all this information is very, very useful to personalize the offers and see how those offers are treated or received by these customers.
As a side note, I guess there are many loyalty programs that are sort of location-based. So if they know that you are in the mall, then you just happen to have a notification of upcoming offer or their current offer. So this is just on the side that there's a lot of things that I guess more recent versions of loyalty programs are capable of doing.
And I guess that really helps companies with targeting more effectively.
Do you think consumers, when they're handing over a lot of data and information when they sign up for these loyalty programmes, do you think that they mind that they're giving this data to the companies in return for that more personalised experience?
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