Horse’s Mouth: Lance Walker

After five years at Loyalty New Zealand, and three in the role of chief executive, Lance Walker is off for a six-month sabbatical in France with his family. So does he call us loyal?

On change: “The whole competitive retail environment has changed, and that’s partly a result of changing economic conditions. There’s a lot more discounting activity and things are a lot tougher generally in retail. We’ve also seen different loyalty offers come on the market, whether that’s fuel discounts or AA Smartfuel or whatever it might be. And the third thing is technology and in particular mobile and the demand for real time. So the climate in which loyalty is operating and the delivery mechanics have changed. But at the same time the fundamentals that drive us to be loyal to a brand a hundred years ago probably aren’t that different from now. It’s still about delivering great customer experiences, recognising customers, understanding customer needs and rewarding customers.”

On numbers: “Fly Buys is sitting at about 2.4 million active cardholders and the coalition itself remains very strong. The actual network of partners that are part of the programme is pretty much the same as it’s been since it started in 1996. So there’s a lot of longevity in that model. In many respects, there are two things you’ve always got to get right for a coalition programme: lots of places to collect points, and lots of ways to use your points. If you get those two things right by and large you’ll have a successful programme. What’s changed a lot has been the way you can use those points. In 1996 Fly Buys was just a flights programme, whereas now there’s over two thousand rewards and we give away close to $70 million of rewards every year. So I think the redemption side is continuing to change as we look at the different ways people use their points. And that’s going to keep changing because the truth is everyone likes to be rewarded and that’s ultimately what drives their collection behaviour.”

On expanding: “We’ve been broadening the other services we offer under the Loyalty New Zealand banner [the company is jointly owned by Z Energy, Foodstuffs, IAG and BNZ]. And this has been a focus over the last three or four years. So while Fly Buys continues to be at the heart of what we do, the other big driver for us has been the whole customer insights analytics area and building that capability and competency. We’re building our internal marketing services and building campaigns, right down to having our own in-house creative resource. So we’re more a full service loyalty business for our clients, rather than just being the provider of the Fly Buys programme. It could be that one our partners, like 2degrees, wants to do an acquisition campaign. We’ll actually create the concept, build the email or the mail pack and deploy that to the Fly Buys database and manage it for them.”

On growth: “The analytics and marketing services and so on have been experiencing growth of 50 percent revenue a year for the last three or four years. On the Fly Buys side of things, we had a record year for issuance and redemption and I think the redemption one is a good one because it says that people continue to want to redeem their points for rewards. Redemption is one of the key signals of the programme health. If your members are actually converting their points into rewards, they’re seeing value. It’s also been pretty steady for a long period with partners because we have exclusivity across categories and we’ve got most of the major categories covered.”

On bad data: “I think consumer attitudes to the data collection are evolving. And I think people more and more understand that in all parts of their life data is being collected—no more so than the online space. The key thing that irritates people, and irritates me as a consumer, is how that data gets used. If you’re going to collect data about me make sure it’s used in a way that leads to a relevant offer or communication. People opt out of emails and complain about this stuff when the see their data being used poorly. They might be vegetarian and they get offers for meat. Or they see that data not being protected properly. We comply with all the normal things you’d expect us to in terms of Privacy Act and so on. But I think there’s an understanding that part of the interaction [with Fly Buys]—and part of the reason for any brand to have a loyalty programme—is to understand how those customers are behaving and how to leverage that. It’s no different to the local green grocer years ago who knew your name, knew what you bought and knew what you always liked. It’s a bit harder when you’ve got a hundred stores and 100,000 customers. But it’s also an area we’ve got to continue to be very sensitive to, because issues around data collection, data privacy and data use are more in the consciousness of the consumer. It’s important, because if anyone in the marketing community doesn’t do it well, it reflects poorly on all of us … I read a good quote in a book recently, something to the effect that before the internet we were private by default and public by effort. Now it’s the opposite.”

On the trade off: “Consumers are actually pretty smart and maybe we forget that sometimes. So they will be members of several loyalty programmes and they understand that if they’re smart about it they can actually do quite well out of them. Around the world loyalty programme memberships are continuing to increase, not decrease. As long as the value exchange is there then it’s okay … The fact is you’re shopping anyway, so it’s just telling you where you should shop so you can get rewards … But the key thing about Fly Buys and one of the things that a lot of people don’t necessarily appreciate is that we don’t share the data with anyone, not even the partners in the programme. That’s because the relationship is between the customer and the Fly Buys brand. So we guard that pretty jealously. We do analysis on an aggregated view, which we can then use to produce results. So rather than saying, ‘Lance does X’, we aggregate that to look at the trends of customers who look a bit like Lance. We stay away from identifying the individual.”

On the joy of swiping: “One of the things we’ve tried to introduce through advertising has been this notion that every time you swipe something good happens. Our jaffa billboard installations and various things have been demonstrations of that … The campaign did very well in likeability, engagement and, with things like the gumball machines and so on, talkability. So perhaps it got some people thinking about Fly Buys who would wouldn’t normally. And that’s been great. It also has good campaignability for us. There are lots of things that we’re going to continue to roll off the back of that proposition. The key thing for a loyalty programme continues to be engagement. We need people engaging with the brand and engaging with the programme.”

On speed: “Our real time redemption system has been really popular. People don’t want to wait, so anything we can do that can play to that need and the immediacy of reward is really important to the brand. And I think we’ll continue to see more of that in the future. A key part of that will be the whole mobile play. That’ll jump around a bit. But there’s no question that loyalty is going to go mobile over the next few years, because if there’s one thing I hear more and more now it’s people saying ‘if the loyalty card was on my phone I’d use it more’. The key for me is going to be the notion of tap to pay, where everything’s done with one swipe. There’s a number of examples where people are trialling payment on phones. And both the telcos and the banking industry are lining up to say ‘how can we make sure that this does happen, and happens in the right way’. It’s one of the great things about New Zealand, our ecosystems are quite small, so the ability for us to actually get all the players together is quite interesting. And we’ve certainly been talking with the likes of Paymark around what the loyalty offer will be … Cards aren’t going to disappear overnight. They’re going to be around for a long time, but we will see that dual play happening I think.”

On joint efforts: “One of the things about Fly Buys is that if you’re running your own loyalty programme all you can deal with is your own customers. Whereas a coalition gives you access to this much broader range of customers who have a Fly Buys card and shop for different brands. And that’s why this model has been successful globally, because it has an acquisition element as well as the retention and growth element … There are a number of coalitions that started up in the early ‘90s. The Fly Buys model here is based on models that came out of Canada and from there came things like the Nectar programme in the UK. So in most markets, with the exception of the US interestingly, because it’s not as common to have nationwide chains, the coalition model has been very strong.”

On targeting: “There are two reasons why loyalty programmes continue to grow. One is that consumers today are more promiscuous. They’ve got more choice and barriers to switching are a whole lot lower. It doesn’t matter what category you’re in now, customers are able to switch around a lot more easily. So having mechanics to lock customers in to your brand are more important now than they used to be. The second thing is absolutely the rise of one-to-one marketing and the understanding that it can be much more efficient to target one offer to a particular group of customers and minimise marketing wastage by understanding different demographics and different customer behaviours.”

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