Interview with Simon Morgan, General Manager ICLP, Australia. With responsibility for ICLP’s operations in Australia and New Zealand, Simon is an accomplished marketing strategist and business leader with specialisms in digital, brand and data driven marketing. His career in loyalty marketing began with frequent flyer programmes back in the late 80’s and he has since developed many award winning and innovative initiatives whilst growing and advocating digital and one-to-one disciplines in the region.
1. How would you describe the current state of customer marketing in Australia?
Australia certainly appears to have entered what Forrester describes as the “Age of the Customer” with customer focussed marketing experiencing a strong upturn in recent times. Customers are now seeking more value from their brand interactions and Australian brands are responding by re-prioritising their customer retention and loyalty initiatives. As an example, Telstra (Australia’s largest telco) recently claimed that a total of 40% of its marketing spend will go towards CRM - up from just 3% two years ago. It’s also clear that new levels of data-driven marketing sophistication are being increasingly employed and enjoyed by both marketers and (when done well) by customers alike. In short, brands want to deliver an experience that is increasingly customer-centric and the tools to enable this are becoming more intelligent and accessible.
2. How about the loyalty market specifically?
In terms of what I’d call the organised loyalty market, all of the mainstays, such as reward programmes, are present and working hard to engage and drive value for members and differentiation in the market. Some examples in the travel sector that have caught my eye are:
- Virgin Australia’s Velocity frequent flyer programme announced that pets are now eligible to earn Velocity points when travelling with their owners. Most recently they have announced the sale of 35% of the programme to private equity firm Affinity Equity Partners with the aim of transforming it further into a world-leading loyalty business.
- Qantas Frequent Flyer launched a merchant-funded rewards initiative, communicating the changes via a simple gamified learning concept.
In other sectors such as retail, telco and financial services, there is also an increasing focus on loyalty initiatives and the commercial potential that they present in extending customer relationships into new product and service areas:
- Telstra’s year old ‘Thanks’ campaign, is claiming big results at a fraction of its previous costs in pursuing a value added benefits rather than a points based loyalty approach with 1.5 million customers claiming a free, subsidised, or just plain hard to get event ticket.
- Powered by the insight generated from the customer data acquired through their programmes, which themselves touch 14.5m Australians, our two biggest supermarket chains - Coles and Woolworths - are speculated to be extending their financial services product propositions.
3. What effect do you think technology advances are having on a customer’s experience with brands?
I think the most profound effects and opportunities stem from three different technology trends.
Firstly, let’s consider Australia’s rapid mobilisation, with smartphone penetration sitting at an estimated 85% (Nielsen/IAB). Despite this, the actual time spent on the device lags somewhat behind our European & US counterparts yet many believe that this gap could be closed in the coming year or two.
Location-reliant businesses, particularly retail and hospitality, are incorporating mobile into their customer engagement strategies and, occasionally, are putting mobile at the heart of their approach. At the sharp end of this is a trend we’ve been calling Customer Presence: the ability for technology to sense if a known customer is physically present and inform either the customer or service staff to facilitate the delivery of a truly tailored experience.
Whilst still relatively new, a lot of interest is being shown in iBeacon technology as a customer presence tool. A number of large implementations are being discussed in market and a few pilots are already in play, such as Sydney-based Chatswood Chase mall. They recently trialled a simple iBeacon initiative employing Passbook to glean insights on shopper behaviour, test the ability to drive customer engagement and footfall.
Secondly, we need to look at this from a data perspective. I won’t use the ‘sizest’ description, but yes data is, well, big in Australia! With Woolworths purchasing Quantium last year and Australia forecast to continue its leadership as the largest business intelligence platform software market in Asia Pacific, according to Gartner, there is no doubt that data analytics and insight are high on the agenda for all brands across Australia and New Zealand.
Another area that I find particularly interesting is the ability to combine data sets over APIs to create stronger customer propositions. In the US both Sears and Walgreen’s have allowed programme members to link health trackers to their programme to earn reward currency. A similar initiative just launched in the Australian marketplace with MediBank announcing that it’s customers can now earn extra FlyBuys points by linking their FitBit activity tracker.
Last, but certainly not least, are the new approaches to innovation which we are seeing emerge, particularly with tech start-ups. Despite the fact that Australia lacks some of the state-supported tax initiatives of other markets such as Singapore or the UK, the start-up scene is vibrant. E-commerce itself continues its inexorable rise and even though the overall proportion of retail sales in Australia is still small, the country has been earmarked as a key driver in the overall e-commerce growth of the APAC region.
One interesting e-commerce start-up is Wynbox – a service that allows online retailers to offer customers a ‘1 in n’ chance to win the product they purchase for free rather than incentivising purchase behaviour through a discounting strategy. This takes place without interrupting the shopper journey and has shown impressive results in reducing shopping cart abandonment and increasing conversion rates.
Enabled by technology and more flexible commercial and pricing models means that we’re going to see some really exciting loyalty initiatives spring up in the near future. It will be interesting to see if shorter lead times and lower cost deployments will encourage brands to pass on these savings to consumers, create strong value propositions and look to prove an incentivising purchase behaviour through a discounting strategy. This takes place without interrupting the shopper journey and has shown impressive results in reducing shopping cart abandonment and increasing conversion rates.
4. What is the most significant challenge faced by loyalty marketers in the region?
I believe that Australia is similar to other markets in that it is sitting at a crossroads in terms of the way that loyalty marketers use data. A huge 88% of Australians have joined at least one loyalty programme and 11% are members of 10+ programmes, so the appeal continues (2013 Citrus Consumer Study). However, the dual impact of increasing privacy regulation and changes in expectations of customers will drive continuing change.
But the key point is that customers are beginning to understand the value of the data they share and expect brands to be using it in a more intelligent way. Some marketers are using their organised loyalty initiatives as a key mechanism to generate a deeper understanding of their customers and as a way to deliver smarter, more relevant customer experiences. Marketers, and not just loyalty marketers, that focus on delivering actionable insight through consolidated sources of data will reap the rewards.
5. What does the future hold for loyalty/CRM?
I believe that in the next 12-18 months the powerful closed loop trackability that exists in online tactics will materially cross to the offline world, largely powered by smartphones and smarter POS integration approaches.
This will open up a raft of new possibilities considering that offline retail still accounts for 94% of all retail sales in Australia.
One enabler is affiliate-style initiatives where retailers pay for store traffic that leads to a sale. Yub is just one company in the US developing this market opportunity by linking offers and promotions to payment cards to access instant savings when using the card for in-store transactions allowing merchant, retailers and restaurants to track online clicks to offline purchases - and I think it's only a matter of time before we see similar brands in Australia.
Another example will be for programme currencies used as cash. CBA and Myer have started the ball rolling in this regard and I believe it’s simply a matter of time before many more programme partners accept points and cash as payment in-store.
Rewards for non-transactional behaviours, such as living healthily, will continue to increase as brands loyalty initiatives become more human, transparent and rounded in terms of messaging.
Lastly in striving to become more customer obsessed, brands want to make things simple and easy for their customers to do business with them. However this cannot be done by simply employing a one size fits all loyalty approach, forgoing the great benefits of employing a strong data-driven approach.
All of this makes for a very interesting and exciting year down-under for brands and customers alike.