The changing shape of Loyalty Reward Programs

Everyone knows that loyalty reward programs are not only designed to nurture the loyalty of customers but also to allow the collection of data on their customers, market research.

It is curious then to see some of the recent behaviour from Woolworths including the decision to dump and then quickly reinstall a new and ‘improved’ Qantas Frequent Flyer partnership. At the time the suggestion was that their customers were suffering from ‘points fatigue’ and instead want straight discounts, I’m suspicious that the $80 million annually paid to Qantas was also a reasonable incentive for a review. Regardless we should consider this further.

card-rewardThe new and improved  Woolworths Rewards program allows conversion of Woolworths dollars to Qantas Frequent Flyer points but more significantly you can only earn rewards on a limited number of products, those with orange tickets. Surely this new approach will skew customer data collected for the loyalty program.

292fd680ec74e6e1eb513fb6fafc8161I can only speculate but perhaps Woolworth recognises that customers within loyalty programs are only a subset of all Supermarket customers and so the data is skewed anyway toward customers with a predisposition for loyalty programs. On the other hand perhaps Woolworths is ready to leap beyond the bounds of loyalty programs and to completely rely on scanner technology to analyse its customers.

This YouTube clip suggests how this might be navigated but it becomes immediately apparent that this type of analysis is beyond the reach of your average statistician and is pushing into the realms of neuroscience.

Assuming that Woolworths has a team of neuroscientists standing by ready for action I’m still not convinced on how they would move past the basic statistical idea that a strong correlation does not necessarily imply causation. The data is only useful if a causation link can be found. Put simply, even if people all around Australia buy a carton of milk and a potato peeler at the same time, it does not necessarily mean that these purchases are connected, though it is worth investigating further. This often requires stepping away from the data and thinking about consumer behaviour.

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And so in marketing research it is often more effective to start with questions or problems you want to solve first rather then looking for patterns that may or may not be relevant. But starting with a problem doesn’t necessarily give you a clear run either, you need to be equally alert to not use the data like a drunk uses a lamppost – for support rather than for illumination – the danger of confirmation bias should always be in view as you look to interpret the data.

So looking to a future where business’ no longer need to collect data via loyalty programs what will become of loyalty reward programs?

Some commentators have suggested that it is likely that loyalty programs will be gone in five years but I think they are more likely to evolve, to change shape, into something different. I think loyalty reward programs will focus less and less on analysing their own existing customer data because that will be taken care of by other systems.  Rather I foresee that these programs will look to bring together different organisations and sharing of data sets.

In November as part of its Frequent Flyer program Qantas announced a new health insurance product in partnership with nib health insurance. Amongst Qantas Assure’s other features and benefits is the suggestion that you will actually be able to earn Frequent Flyer points by staying active – tracked by FitBits.

This obviously raises all sorts of questions about data privacy and data sharing and I’m sure that a particularly diligent employee will point me in the direction of the relevant privacy policies and terms and conditions to alleviate my concerns.

But I dont think its too far fetched to imagine a day when I might miss out on an emergency exit row seat on a Qantas flight because I haven’t been active enough throughout the week. I’m just not sure I want my airline knowing my resting heart rate.

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Posted by Daniel Joy (dmjoy) 215138594

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