Gemma Acton: Rewards wars heating up, with physical rewards stores and frequent flyer point perks

Overnight campers and queues stretching five blocks greeted visitors to Melbourne’s iconic Chapel Street shopping precinct on a sunny Saturday earlier this month. The frenzy, pictured, owed to Virgin Australia opening a physical rewards store where you could buy any item on offer for the flat rate of just one Velocity frequent flyer point. Premium toasters, kettles, vacuum cleaners, speakers, AirPods, BBQs — and of course, flights — were quickly snapped up. A marketer’s dream given our penchant for both rewards and bargains is currently flying high. Recent research from NAB shows more Australians are coming to see rewards points as another weapon in their ongoing fight against rising living costs. Instead of cashing in our points for upmarket casserole dishes or flash coffee machines we’re now trading them in for cash with a 120 per cent leap in the number of people selecting that option. The swapping of rewards for gift cards has also jumped by 16 per cent with the most popular choices being those from Coles and Woolworths to help bring down the grocery bill. As economists have ratcheted up their terminal cash rate predictions in the wake of the June rate hike and with the Reserve Bank warning that “the upside risks to the inflation outlook have increased”, we’re likely to lean ever more heavily on rewards to cover daily costs. It’s brand marketers’ time to shine. Never has there been more at stake with winning over loyal customers. According to a recent McKinsey report, members of top loyalty programs spend more, shop around less, and are more inclined to recommend their favourite brands to others. Which seems to work. When McDonald’s introduced its loyalty program, the average number of customers using its app daily tripled. But the same report also warns the more the economy deteriorates, the more inclined consumers are to switch brands in pursuit of a better deal. The Champagne Mile’s Adele Eliseo, an expert in rewards, concurs, saying that at the same time that Australian consumers are looking to leverage loyalty programs, “we’re also seeing a strong trend in ‘value shopper’ behaviour. This is resulting in a growing number of consumers looking to shop around for the best possible price, regardless of the brand.” Which means brands need to treat us, their customers, right — right now — to get us to stay. There’s a good reason to cling more tightly to the existing rewards programs we belong to. We accrue more powerful purchasing power having 10,000 points from Flybuys or Everyday Rewards than 5000 points from each program. Coles has cottoned on to the rising popularity of gift cards by offering a recent deal in some States where you can buy a full value Coles gift card for 90 per cent of the price plus a purchase fee. In other words, pay $94.50 for a $100 gift card. Yes, it’s free money and you can buy up to $1250 worth of cards, saving $93.50 in the process. But you have to sign up to the Flybuys program to join in and it’s going to keep you coming back to Coles for at least as long as there’s value left on the cards. So it’s a smart deal for the retailer too. A justifiable customer acquisition cost in the current climate where bringing more loyal fans onboard is key. This type of offer usually flares up around particular times, such as in the lead-up to Christmas or Black Friday. But we’re likely to see more, particularly from large retailers which can afford to pay for them, as the fight to win over and keep customers becomes fiercer. The latest pulse check from the monthly NAB business survey made for fairly grim reading. Forward orders — which give a clear indication of future demand for products and services fell sharply — with the retail industry posting the steepest decline, enough to make it the weakest of all. The latest retail numbers showed department store sales picking up during April which surprised some observers. Subsequent analysis has, however, pointed to discounting being a key driver of that unexpected sales recovery. And it seems to have been short-lived with figures leaked last week revealing significant sales drops of up to 39 per cent year-on-year for David Jones for a week in June. The Hay St Mall location suffered an 18 per cent tumble. According to a recent survey from eCommerce brand consultants, Yotpo, discounts is the number one reason Australians like loyalty programs, followed by early access to sales. In other words, we’re looking for bargains upon bargains. Major corporates have ramped up the teams behind their loyalty programs in recent years and the darker the storm clouds over the retail environment, the more they’ll be expected to step up. So keep your eyes peeled for what your loyalty programs can do for you. Subscribe to alerts, take advantage of promotions and if they’re not doing much to retain your custom, take it elsewhere. Another program will be.