tag:theconversation.com,2011:/fr/topics/loyalty-programs-784/articlesLoyalty programs – The Conversation2023-11-20T14:37:27Ztag:theconversation.com,2011:article/2172312023-11-20T14:37:27Z2023-11-20T14:37:27ZAirlines are frustrating travelers by changing frequent flyer program rules – here’s why they keep doing it<figure><img src="https://images.theconversation.com/files/558086/original/file-20231107-267500-6jwx0k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A boom time for airlines can a bust for loyal passengers.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/friends-at-the-international-airport-in-barcelona-royalty-free-image/1009031554">Martin-dm/E+/Getty Images</a></span></figcaption></figure><p>As the U.S. <a href="https://theconversation.com/us/topics/holiday-travel-47493">holiday travel season</a> picks up, many people are noticing that their frequent flyer benefits aren’t going as far as they used to. </p>
<p>In September 2023, <a href="https://www.wsj.com/business/airlines/delta-loyalty-program-changes-reward-biggest-spenders-most-dcefa85e">Delta Air Lines revamped its frequent flyer program</a> to make it tougher to earn status — a tiered system offering travel privileges based on the reward points earned — only to partially <a href="https://www.wsj.com/business/airlines/delta-air-lines-makes-changes-to-its-skymiles-loyalty-programagain-b66519e6">reverse course</a> a month later and make it easier. American Airlines also made <a href="https://news.aa.com/news/news-details/2022/American-Airlines-to-Offer-AAdvantage-Members-More-Rewards-More-Often-Before-and-Beyond-Reaching-Status-AADV-12/default.aspx">big changes to its loyalty scheme in 2022</a> and <a href="https://www.foxbusiness.com/lifestyle/american-airlines-adjusts-loyalty-program-switches-to-dynamic-pricing">minor changes in spring 2023</a>. And British Airways recently announced that it is <a href="https://www.britishairways.com/en-us/executive-club/faqs/collecting-avios-changes">adjusting the way it awards points for travel</a>.</p>
<p><a href="https://www.bu.edu/questrom/profile/huseyin-karaca/">We are</a> <a href="https://www.bu.edu/questrom/">business school</a> <a href="https://www.bu.edu/questrom/profile/jay-zagorsky/">professors</a> who study <a href="https://theconversation.com/whens-the-best-time-to-use-frequent-flyer-miles-to-book-flights-two-economists-crunched-the-numbers-on-maximizing-their-dollar-value-194893">rewards</a> <a href="https://theconversation.com/starbucks-fans-are-steamed-the-psychology-behind-why-changes-to-a-rewards-program-are-stirring-up-anger-even-though-many-will-get-grande-benefits-198361">programs</a>. Many people think <a href="https://www.theguardian.com/us-news/2023/jun/12/us-air-travel-workers-passengers">flying is a miserable experience</a>, and having status sometimes makes flights better. So it’s only fair that frequent flyers are asking why it’s seemingly harder to obtain such status.</p>
<h2>Why miles are a multibillion-dollar business</h2>
<p>One big idea to understand is that <a href="https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/the-six-secrets-of-profitable-airlines">airlines don’t earn very much money</a>, if any at all, from ticket sales. This is mainly due to the highly competitive and capital-intensive structure of the airline industry, which often leads to reduced profit margins. Instead, they make their profits from <a href="https://www.bts.gov/topics/airlines-and-airports/baggage-fees-airline-2022">bag fees</a>, <a href="https://www.bts.gov/cancellation-change-fees">ticket change fees</a> and — importantly — <a href="https://www.transportation.gov/individuals/aviation-consumer-protection/frequent-flyer-programs">frequent flyer</a> programs. </p>
<p>On many airlines, there are two ways to earn status. <a href="https://www.washingtonpost.com/opinions/2023/06/23/united-airlines-very-frequent-flyer">One is to fly a lot</a>. But that means spending time in crowded airports. The other way is to <a href="https://www.delta.com/us/en/skymiles/medallion-program/2024-program-updates">spend a lot of money using a rewards credit card</a>.</p>
<p>Frequent flyer programs, coupled with rewards credit cards, are very profitable for airlines. For example, Delta’s <a href="https://s2.q4cdn.com/181345880/files/doc_downloads/2023/02/DAL-12.31.2022-10K-2.10.23.pdf">latest annual report</a> shows last year that the company earned US$5.7 billion from selling credit card miles. Given Delta only made $3.6 billion in profits, this frequent flyer program clearly boosts the bottom line.</p>
<h2>Designing the optimal rewards program</h2>
<p>Many types of businesses, not just airlines, offer <a href="https://www.starbucks.com/rewards">rewards programs</a>. From a company’s perspective, a <a href="https://knowledge.insead.edu/operations/optimal-design-loyalty-programmes">well-designed loyalty program</a> should cost little or nothing, give customers great value and prevent them from using a competitor. </p>
<p>Frequent flyer programs fit this bill: Giving some passengers the ability to board early or access to a lounge costs airlines almost nothing, but many customers desire it. Plus, the chase for status or free flights <a href="https://hbr.org/1995/05/do-rewards-really-create-loyalty">locks people</a> into using only one airline.</p>
<p>Much of the appeal of status programs comes from their exclusivity. This leaves airlines with a problem: where to set the bar. A low bar means nearly everyone gains status. But customers <a href="https://nymag.com/intelligencer/2019/05/heres-why-airplane-boarding-got-so-ridiculous.html">get no value</a> being allowed to board first if almost everyone on the plane can also do it, and <a href="https://www.marketwatch.com/story/why-are-clubs-so-crowded-these-days-airport-lounges-have-lost-their-peaceful-privilege-are-they-worth-it-anymore-54572642">airport lounges aren’t a haven</a> when travelers can’t find empty seats. At the same time, setting the bar too high results in empty lounges and unhappy customers.</p>
<p>Striking the right balance is tough, since the number of flyers is constantly changing due to <a href="http://businessmacroeconomics.com/">economic conditions</a>. When the economy is doing well, <a href="https://www.trade.gov/national-travel-and-tourism-office">people want to travel</a>. This gives airlines an incentive to tighten frequent flyer rules. When the economy is doing poorly, people stay home and airlines relax their rules.</p>
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<figcaption><span class="caption">Delta’s CEO discusses the backlash to recent loyalty program changes on Bloomberg Television on Oct. 25, 2023.</span></figcaption>
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<p>For example, at the height of the COVID-19 pandemic, <a href="https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/taking-stock-of-the-pandemics-impact-on-global-aviation">few people flew</a>, so <a href="https://www.nytimes.com/2021/11/05/travel/airline-loyalty-programs.html">airlines made it easy to earn</a> or keep status. Today, with the economy doing better and flying back to pre-pandemic levels, airlines are making it much tougher.</p>
<p>Many airlines are switching from a frequent flyer status model based on miles traveled to one based on dollars spent. This move aligns with the main design principle of these programs: The benefits a company gives to customers must mirror the value it gets from them.</p>
<h2>Who pays for all those rewards, anyway?</h2>
<p>Rewards programs are very profitable for airlines and their credit card partners. But for cardholders, the value proposition is less clear. These cards promise “free” rewards, but don’t actually deliver anything for free.</p>
<p>First, rewards cards often come with an annual fee. <a href="https://www.forbes.com/advisor/credit-cards/best/airline/">Fees typically range</a> from around $100 per year for a simple airlines reward card to $600 for a card that gives lounge access. Second, since many people don’t pay off their credit card balance each month, these card companies <a href="https://www.consumerfinance.gov/about-us/blog/americans-pay-120-billion-in-credit-card-interest-and-fees-each-year/">make billions of dollars charging</a> people interest.</p>
<p>Credit card companies also charge merchants roughly 2.5% every time a customer swipes a reward card — what’s known as <a href="https://www.usatoday.com/money/blueprint/business/credit-card-processing/interchange-fee/">the interchange fee</a>. The more generous the card, the higher the fee merchants have to pay. In general, when sellers encounter many consumers using reward cards, they <a href="https://luluywang.github.io/PaperRepository/payment_jmp.pdf">raise prices to offset the additional cost</a>.</p>
<p>What do all these fees mean for the typical flyer? People who pay off their reward card balances in full every month get roughly back the extra amount they pay in fees and charges. People who don’t pay off their balances, or who use debit cards or cash, pay more so that reward card holders get “free” travel. The result is that poorer and less financially savvy people <a href="https://www.cnbc.com/2023/05/27/lower-income-americans-pay-for-wealthys-credit-card-rewards-some-economists-say.html">end up subsidizing</a> the flights of richer people.</p>
<h2>A boom time for airlines, less so for passengers</h2>
<p>Since the deregulation of air travel in the 1970s, airlines have <a href="https://www.faa.gov/sites/faa.gov/files/2022-06/Forecast_Highlights.pdf">gone through boom and bust cycles</a>. Right now, it’s a boom for airlines and a bust for people looking for frequent flyer status. There’s no reason for airlines to be as rewarding today as they were in the past. <a href="https://theconversation.com/passport-bottleneck-is-holding-up-international-travel-by-americans-eager-to-see-the-world-as-covid-19-eases-205271">Planes are full</a> of people willing to pay with money. Sometime in the future, however, it will reverse, and it will be a boom time for flyers looking for status when planes begin having empty capacity.</p>
<p>In the meantime, what should you do? Our general advice is that if you are going to use a reward card, choose a card that gives cash back, not one that gives airplane miles. Good old cash is far more useful than miles. <a href="https://www.forbes.com/advisor/credit-cards/travel-rewards/how-to-protect-points/">Miles can be devalued</a> by an airline at any moment. Plus, even the most elite status doesn’t help much when <a href="https://public.tableau.com/app/profile/flightaware/viz/AirlineCancellationDelayUpdate/USAirlineCancellationsDelays">your plane is delayed</a> — and that’s happening more and more these days.</p><img src="https://counter.theconversation.com/content/217231/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Loyalty schemes tend to be the most generous when the economy has hit a patch of turbulence.Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston UniversityH. Sami Karaca, Professor of Business Analytics, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2146872023-10-11T19:32:50Z2023-10-11T19:32:50ZThe rising cost of living is eroding brand loyalty as consumers seek more cost-effective alternatives<figure><img src="https://images.theconversation.com/files/553090/original/file-20231010-26-fam18k.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3829%2C2584&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Cutting back on pricier food items and focusing on more affordable staple foods could help consumers deal with rising food costs, but these strategies affect brand loyalty.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/the-rising-cost-of-living-is-eroding-brand-loyalty-as-consumers-seek-more-cost-effective-alternatives" width="100%" height="400"></iframe>
<p>As Canadians <a href="https://globalnews.ca/news/9985761/food-insecurity-poverty-report-canada">grapple with the rising cost of living</a>, many consumers are reevaluating their daily choices and purchase habits. <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/230718/dq230718a-eng.htm">The cost of groceries</a> is forcing many households to make difficult decisions, like having to choose between food quality and affordability.</p>
<p>Amid these economic pressures, the concept of <a href="https://doi.org/10.1002/9781118785317.weom090154">brand loyalty</a> — the preference consumers have for a particular brand over others — is undergoing a significant shift. Brand loyalty is the result of a mix of factors, including <a href="https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/1721/im_en_2006_02_Matzler.pdf">trust</a>, <a href="https://doi.org/10.3390/foods11070969">habit</a> and <a href="http://dx.doi.org/10.6007/IJARBSS/v8-i2/3885">the perceived value of goods</a>.</p>
<p>Brand loyalty <a href="https://doi.org/10.1362/026725706776861226">significantly benefits retailers by boosting sales</a>. Not only <a href="https://www.forbes.com/sites/forbesagencycouncil/2020/01/29/the-value-of-investing-in-loyal-customers/">do existing customers spend more money than new customers</a>, but brand loyalty also reduces the amount brands need to spend on advertising. Effective loyalty programs increase <a href="https://doi.org/10.1177/22786821211000182">customer retention</a> and result in positive word-of-mouth, meaning companies can <a href="https://www.gsb.stanford.edu/faculty-research/publications/effects-brand-loyalty-competitive-price-promotional-strategies">spend less on marketing</a>.</p>
<p>Losing loyalty, on the other hand, can result in a competitive disadvantage for retailers. It can lead to revenue loss, increased marketing and customer acquisition costs and <a href="https://www.proquest.com/docview/1681254739">negative word-of-mouth</a>. </p>
<p>Once a cornerstone for many food retailers, brand loyalty is eroding as consumers <a href="https://financialpost.com/news/canadians-cutting-back-inflation-not-everything">prioritize immediate cost savings</a> over long-term brand relationships.</p>
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<figcaption><span class="caption">Nearly seven million Canadians are struggling to put food on the table. (Global News)</span></figcaption>
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<h2>Adapting to rising food costs</h2>
<p><a href="https://retail-insider.com/retail-insider/2022/05/consumers-in-canada-changing-spending-patterns-due-to-inflation-study-interview/">Inflation is impacting a wide range of income groups</a>: 81 per cent of lower-income, 50 per cent of middle-income and 35 per cent of high-income earners in Canada are impacted by inflation, spending less on clothing, beauty products and big-ticket items.</p>
<p>Consumers have been adopting various strategies to manage their budgets. <a href="https://canadiangrocer.com/canadians-prefer-eat-home-despite-high-food-prices-survey">Three-quarters of Canadians say they dine out less often</a> because of the rising cost of living, and 70 per cent say inflation has shifted the way they cook.</p>
<p>Despite rising grocery prices, <a href="https://www.forbes.com/advisor/ca/investing/is-inflation-making-restaurants-cheaper-than-groceries-heres-what-the-burrito-test-says/">eating at home is still more budget-friendly</a> than eating out and allows for better control over the cost of ingredients. </p>
<p>Some Canadians <a href="https://www.newfoodmagazine.com/news/169541/why-are-canadians-changing-their-eating-habits/">are also modifying their eating habits</a> by altering portion sizes, cutting back on pricier food items and focusing on more affordable staple foods. While these changes help consumers deal with rising costs, they also come at the expense of brand loyalty.</p>
<p>The digital landscape is also playing a key role in this shift. Consumers are increasingly turning to digital platforms to find economical food options. The convenience of online marketplaces and food delivery services <a href="https://doi.org/10.1108/EJMBE-04-2021-0128">exposes them to a wide array of product choices and competitive pricing</a>. </p>
<p>Consumers also use <a href="https://doi.org/10.1080/00207543.2015.1112443">online tools like coupons and price comparison options</a> to seek discounts. Loyalty programs lose their appeal when consumers prioritize immediate savings.</p>
<p>This transparency and the ease of comparing prices online encourage consumers to explore various brands, making it more challenging for traditional food brands to sustain customer loyalty. </p>
<h2>Changing consumer priorities</h2>
<p>As prices rise and budgets tighten, consumers are more inclined to seek out more cost-effective options, which often means <a href="https://doi.org/10.1509/jmkr.42.2.141.62296">abandoning favourite brands in pursuit of better value</a>.</p>
<p>One report found that <a href="https://www.firstinsight.com/press-coverage/study-heres-how-inflation-is-changing-consumers-shopping-habits">42 per cent of consumers now seek sales or shop clearance</a>, 40 per cent adhere to a budget, 28 per cent buy less overall and 25 per cent prefer bulk stores or warehouse retailers.</p>
<p>In pursuit of cheaper alternatives, consumers become more open to trying <a href="https://brandstrat.co/wp-content/uploads/2022/08/navigating-inflation-in-retail-six-actions-for-retailers-1.pdf">private-label or store-brand products, discounted brands and generic or unbranded options</a>. These alternatives provide shoppers with a practical way to cope with rising prices, allowing them to manage their expenses while maintaining a satisfactory level of product quality.</p>
<p>Inflation also leads to changes in spending habits in a phenomenon known as <a href="https://doi.org/10.1287/mksc.1100.0630">consumption smoothing</a>. This often involves delaying the purchase of durable goods, prioritizing the purchase of necessities and opting for store-brand products.</p>
<p>In essence, consumers shift their priorities toward cost management, which in turn reduces their loyalty to specific brands. Food companies need to adapt to these changing consumer needs by recognizing affordability and value take precedence in an inflationary market.</p>
<h2>What can retailers do?</h2>
<p>The shift away from brand loyalty can pose challenges for business owners and retailers who depend on consumer spending. Aside from the most obvious solution to the issue — lowering prices — there are other things retailers can do to win back customers.</p>
<p>First, retailers can use <a href="https://www.forbes.com/sites/forbestechcouncil/2019/01/08/dynamic-pricing-the-secret-weapon-used-by-the-worlds-most-successful-companies/">dynamic pricing</a>, allowing them to adjust prices based on factors like supply and demand, inventory and competition. This approach enables them to offer competitive prices and discounts <a href="https://doi.org/10.1111/poms.13525">while also minimizing food waste</a>.</p>
<p>Second, retailers can also introduce loyalty programs that go beyond conventional point-based systems. By using personalized data from consumers, <a href="https://doi.org/10.1016/j.jretconser.2022.103088">retailers can tailor rewards and incentives</a> to match individual shopping habits, experiences and preferences. Retailers can also collaborate with other businesses and <a href="https://doi.org/10.1016/j.jbusres.2019.01.031">incorporate gamification elements</a> to further enhance loyalty.</p>
<p>Lastly, retailers should consider using a <a href="https://www.forbes.com/sites/forbesbusinessdevelopmentcouncil/2021/09/09/four-powers-of-value-based-marketing/?sh=374b560d2400">value-oriented marketing</a> approach to elevate consumer experiences. Retailers should <a href="https://doi.org/10.1007/s11747-017-0523-z">communicate the value of their products</a>, emphasizing quality, nutritional benefits and unique features to justify their price points.</p>
<p>Simultaneously, investing in exceptional customer experience, both in-store and online, can foster strong emotional connections between retailers and consumers. When consumers feel valued by brands, they are more likely to stay committed to that brand’s products. By assuring customers of their commitment to value, retailers can play a crucial role in guiding consumers through these challenging times.</p><img src="https://counter.theconversation.com/content/214687/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Once a cornerstone for many food retailers, brand loyalty is eroding as consumers prioritize cost savings over long-term brand relationships.Seung Hwan (Mark) Lee, Professor and Associate Dean of Engagement & Inclusion, Ted Rogers School of Management, Toronto Metropolitan UniversityOmar H. Fares, Lecturer in the Ted Rogers School of Retail Management, Toronto Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1872742022-07-20T20:08:52Z2022-07-20T20:08:52ZWhat do TikTok, Bunnings, eBay and Netflix have in common? They’re all hyper-collectors<figure><img src="https://images.theconversation.com/files/474987/original/file-20220719-6978-2qdmfk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>You walk into a shopping centre to buy some groceries. Without your knowledge, an electronic scan of your face is taken by in-store surveillance cameras and stored in an online database. Each time you return to that store, your “faceprint” is compared with those of people wanted for shoplifting or violence.</p>
<p>This might sound like science fiction but it’s the reality for many of us. By failing to take our digital privacy seriously – as former human rights commissioner Ed Santow has warned – Australia is “<a href="https://www.theage.com.au/national/we-must-not-sleepwalk-into-mass-surveillance-20220630-p5ay0q.html">sleepwalking</a>” its way into mass surveillance.</p>
<h2>Privacy and the digital environment</h2>
<p>Of course, companies have been collecting personal information for decades. If you’ve ever signed up to a loyalty program like FlyBuys then you’ve performed what marketing agencies call a “<a href="https://www.choice.com.au/consumers-and-data/data-collection-and-use/who-has-your-data/articles/loyalty-program-data-collection">value exchange</a>”. In return for benefits from the company (like discounted prices or special offers), you’ve handed over details of who you are, what you buy, and how often you buy it.</p>
<p>Consumer data is big business. In 2019, a <a href="https://www.webfx.com/blog/internet/what-are-data-brokers-and-what-is-your-data-worth-infographic/">report</a> from digital marketers WebFX showed that data from around 1,400 loyalty programs was routinely being traded across the globe as part of an industry <a href="https://clearcode.cc/blog/what-is-data-broker/">worth around US$200 billion</a>. That same year, the Australian Competition and Consumer Commission’s <a href="https://www.accc.gov.au/publications/customer-loyalty-schemes-final-report">review of loyalty schemes</a> revealed how many of these loyalty schemes lacked data transparency and even discriminated against vulnerable customers.</p>
<p>But the digital environment is making data collection even easier. When you <a href="https://onlinemasters.ohio.edu/blog/netflix-data/">watch Netflix</a>, for example, the company knows what you watch, when you watch it, and how long you watch it for. But they go further, also <a href="https://seleritysas.com/blog/2019/04/05/how-netflix-used-big-data-and-analytics-to-generate-billions/">capturing data</a> on which scenes or episodes you watch repeatedly, the ratings of your content, the number of searches you perform and what you search for.</p>
<h2>Hyper-collection: a new challenge to privacy</h2>
<p>Late last year, the controversial tech company ClearView AI was <a href="https://www.oaic.gov.au/updates/news-and-media/clearview-ai-breached-australians-privacy">ordered</a> by the Australian information commissioner to stop “scraping” social media for the pictures it was collecting in its massive facial recognition database. Just this month, the commissioner was investigating several retailers for <a href="https://www.abc.net.au/news/2022-07-13/bunnings-kmart-investigated-over-facial-recognition-technology/101233372">creating facial profiles</a> of the customers in their stores.</p>
<p>This new phenomenon – “hyper-collection” – represents a growing trend by large companies to collect, sort, analyse and use more information than they need, usually in covert or passive ways. In many cases, hyper-collection is not supported by a truly legitimate commercial or legal purpose.</p>
<h2>Digital privacy laws and hyper-collection</h2>
<p>Hyper-collection is a major problem in Australia for three reasons.</p>
<p>First, Australia’s privacy law wasn’t prepared for the likes of Netflix and TikTok. Despite <a href="https://www.oaic.gov.au/privacy/the-privacy-act/history-of-the-privacy-act">numerous amendments</a>, the <a href="https://www.oaic.gov.au/privacy/the-privacy-act">Privacy Act</a> dates back to the late 1980s. Although former Attorney-General Christian Porter <a href="https://www.ag.gov.au/integrity/consultations/review-privacy-act-1988">announced a review</a> of the Act in late 2019, it has been held up by the recent change of government.</p>
<p>Second, Australian privacy laws are unlikely on their own to threaten the profit base of foreign companies, especially those located in China. The Information Commissioner has the power to order companies to take certain actions – like it <a href="https://www.afr.com/policy/foreign-affairs/australia-s-tiktok-data-vulnerable-to-access-by-china-staff-20220712-p5b10f">did with Uber in 2021</a> – and can enforce these through court orders. But the penalties aren’t really big enough to discourage companies with profits in the billions of dollars.</p>
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<a href="https://theconversation.com/83-of-australians-want-tougher-privacy-laws-nows-your-chance-to-tell-the-government-what-you-want-149535">83% of Australians want tougher privacy laws. Now’s your chance to tell the government what you want</a>
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<p>Third, hyper-collection is often enabled by the vague consents we give to get access to the services these companies provide. Bunnings, for example, argued that its collection of your faceprint was allowed because <a href="https://ia.acs.org.au/article/2022/bunnings-doubles-down-on-facial-recognition.html">signs at the entry to their stores</a> told customers facial recognition might be used. Online marketplaces like eBay, Amazon, Kogan and Catch, meanwhile, supply “<a href="https://www.accc.gov.au/media-release/concerning-issues-for-consumers-and-sellers-on-online-marketplaces">bundled consents</a>” – basically, you have to consent to their privacy policies as a condition of using their services. No consent, no access.</p>
<h2>TikTok and hyper-collection</h2>
<p>TikTok (owned by Chinese company ByteDance) has largely replaced YouTube as a way of creating and sharing online videos. The app is powered by an algorithm has already drawn <a href="https://theconversation.com/tiktoks-secret-algorithm-is-its-greatest-strength-and-could-also-be-its-undoing-176605">criticism</a> for routinely collecting data about users, as well as the ByteDance’s secretive approach to <a href="https://www.lowyinstitute.org/the-interpreter/unique-power-tiktok-s-algorithm">content moderation and censorship</a>.</p>
<p>For years, TikTok executives have been telling governments that <a href="https://www.aspistrategist.org.au/its-time-tiktok-australia-came-clean/">data isn’t stored in servers on the Chinese mainland</a>. But these promises might be hollow in the wake of recent allegations.</p>
<p>Cybersecurity experts now claim that not only does the TikTok app <a href="https://www.smartcompany.com.au/technology/tiktok-chinese-servers-aussie-cybersecurity/">routinely connect to Chinese servers</a>, but that users’ data is accessible by ByteDance employees, including the mysterious Beijing-based “Master Admin”, which has <a href="https://www.buzzfeednews.com/article/emilybakerwhite/tiktok-tapes-us-user-data-china-bytedance-access">access to every user’s personal information</a>.</p>
<p>Then, just this week, it was alleged that TikTok (owned by Chinese company ByteDance) can also access <a href="https://www.abc.net.au/news/2022-07-18/tiktok-users-warned-the-platform-is-harvesting-personal-data/13977370">almost all the data</a> contained on the phone it is installed on – including photos, calendars and emails.</p>
<p>Under China’s national security laws, the government can order tech companies to <a href="https://www.sbs.com.au/news/article/so-what-if-china-can-access-your-tiktok-data/mr1anx97k">pass on that information</a> to police or intelligence agencies.</p>
<h2>What options do we have?</h2>
<p>Unlike a physical store, we don’t get a lot of choice about consenting to digital companies’ privacy policies and how they collect our information.</p>
<p>One option – supported by encryption expert Vanessa Teague at ANU – is for consumers simply to delete offending apps until their creators are <a href="https://www.sbs.com.au/news/article/so-what-if-china-can-access-your-tiktok-data/mr1anx97k">willing to submit to greater data transparency</a>. Of course, this means locking ourselves out of those services, and it will only have a big impact in the company if enough Australians join in.</p>
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Read more:
<a href="https://theconversation.com/facial-recognition-is-on-the-rise-but-the-law-is-lagging-a-long-way-behind-185510">Facial recognition is on the rise – but the law is lagging a long way behind</a>
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<p>Another option is “opting-out” of intrusive data collection. We’ve done this before – when My Health records became mandatory in 2019, a record number of us <a href="https://www.yourlifechoices.com.au/health/my-health-record-an-expensive-white-elephant-critics-say/">opted out</a>. Though these opt-outs reduced the usefulness of that <a href="https://www.theguardian.com/commentisfree/2018/jul/20/there-is-no-social-license-for-my-health-record-australians-should-reject-it">digital health record program</a>, they did demonstrate that Australians can take their data privacy seriously. </p>
<p>But how exactly can Australians opt-out of a massive social app like TikTok? Right now, they can’t – perhaps the government needs to explore a solution as part of its review.</p>
<p>A further option being explored by the Privacy Act review is whether to create new laws that would allow individuals to <a href="https://www.ag.gov.au/system/files/2020-10/privacy-act-review-terms-of-reference.pdf">sue companies for damages for breaches of privacy</a>. While lawsuits are expensive and time-consuming, they might just deliver the kind of financial damage to big companies that could change their behaviour.</p>
<p>No matter which option we take, Australians need to start getting more savvy with their data privacy. This might just mean we actually read those terms and conditions before agreeing, and being prepared to “vote with our feet” if companies won’t be honest about what they’re doing with our personal information.</p><img src="https://counter.theconversation.com/content/187274/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Brendan Walker-Munro receives funding from the Australian Government through Trusted Autonomous Systems, a Defence Cooperative Research Centre funded through the Next Generation Technologies Fund. </span></em></p>Australians – and Australian governments – need to get more savvy about data privacyBrendan Walker-Munro, Senior Research Fellow, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1419142020-07-15T13:29:36Z2020-07-15T13:29:36ZTo change coronavirus behaviours, think like a marketer<figure><img src="https://images.theconversation.com/files/346917/original/file-20200710-58-kvfnng.JPG?ixlib=rb-1.1.0&rect=0%2C0%2C2995%2C1944&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">People wear face masks as they gather in a city park on Canada Day in Montréal. Incentives could encourage more Canadians, especially younger Canadians, to embrace COVID-19 safety measures.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Graham Hughes</span></span></figcaption></figure><p>COVID-19 has been a humbling experience. From a frayed pandemic <a href="https://www.cbc.ca/news/politics/covid19-pandemic-early-warning-1.5537925">early-warning</a> system to a <a href="https://globalnews.ca/news/6745915/coronavirus-personal-protective-equipment-needs/">shortage of personal protective equipment for front-line workers</a>, public health experts have been playing catch up. </p>
<p>But it has also been a teachable moment. We now know, for example, that the usual approaches to convince fellow citizens to prioritize societal well-being over personal desires are not working. Rates of COVID-19 infection continue to rise rapidly across the <a href="https://www.nytimes.com/interactive/2020/us/coronavirus-us-cases.html">United States</a>, but also <a href="https://www.canada.ca/content/dam/phac-aspc/documents/services/diseases/2019-novel-coronavirus-infection/surv-covid19-epi-update-eng-20200628.pdf">among Canadians aged 20-29</a>. Public health messaging is <a href="https://www.nytimes.com/2020/07/02/us/coronavirus-bars.html">clearly</a> <a href="https://www.theglobeandmail.com/canada/article-fewer-patients-hospitalized-as-severity-of-coronavirus-cases-lessens">not convincing this age cohort</a> to change behaviours. </p>
<p>This is a call to action for social marketing to evolve and leverage powerful behavioural and technological tools that successfully engage hard-to-reach groups. There is compelling evidence from here in Canada that such an approach can work.</p>
<p><a href="https://venturewell.org/wp-content/uploads/Social-marketing_Andreasen.pdf">Social marketing</a> applies commercial marketing technologies to motivate voluntary social behaviour. These techniques have been used to boost home-based recycling, <a href="https://www.theatlantic.com/ideas/archive/2020/06/dudes-who-wont-wear-masks/613375/">safe sex</a>, to encourage people to quit smoking and use seat belts, among many other behaviours. </p>
<p>Good social marketing is more important than ever, particularly during a pandemic. In general, however, public health officials have been slow to adopt approaches that have been used successfully in the for-profit world.</p>
<h2>The four Ps</h2>
<p>In marketing, the shorthand for selling a product or service is “the four Ps”: <em>product</em>, <em>promotion</em>, <em>price</em> and <em>place</em>. Social marketing takes the perspective that selling an idea can be approached in the same way. This includes aligning and customizing messages to specific audiences, rather than assuming everyone will respond the same way. </p>
<p>In the case of COVID-19, <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7300951/">data suggest</a> that people don’t share the same perceptions of risk, and this can be seen in their individual behaviour and resistance to public health messages. Similarly, there is a mismatch between the audience and medium. The current approach of relying on traditional news outlets and advertising, media releases and news conferences to communicate critical COVID-19 information is not proving effective at <a href="https://winnipeg.ctvnews.ca/less-physical-distancing-younger-canadians-feeling-fatigued-amid-covid-19-survey-1.4985104">reaching younger adults</a>.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/346919/original/file-20200710-46-1capf25.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/346919/original/file-20200710-46-1capf25.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/346919/original/file-20200710-46-1capf25.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/346919/original/file-20200710-46-1capf25.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/346919/original/file-20200710-46-1capf25.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/346919/original/file-20200710-46-1capf25.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/346919/original/file-20200710-46-1capf25.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Chief Public Health Officer of Canada Dr. Theresa Tam is seen at a news conference on the COVID-19 pandemic in Ottawa. These events haven’t worked too well to reach younger Canadians.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Justin Tang</span></span>
</figcaption>
</figure>
<p>Think of the difference among <a href="http://eta.health.usf.edu/publichealth/PHC6411/readings/mod01_Rothschild_1999.pdf">law, public health and marketing</a> as <em>sticks</em>, <em>promises</em> and <em>carrots</em>. During COVID-19, there have been lots of <em><a href="https://www.cbc.ca/news/canada/ottawa/city-ottawa-bylaw-fines-issued-april-covid-19-1.5568279">sticks</a></em> and <em>promises</em> (“stay home, stay safe”) and not much in the way of carrots. But carrots are needed. </p>
<p>Being confined to your home is a fundamentally unpalatable <em>product</em> for people for whom <a href="https://www.vox.com/2020/3/12/21173938/coronavirus-covid-19-social-distancing-elderly-epidemic-isolation-quarantine">isolation is a significant psychological burden</a>. Families with small children that are struggling with working, teaching and general caretaking and <a href="https://thewalrus.ca/my-son-peed-onscreen-in-a-zoom-call-and-other-tales-of-a-working-parent">need specific guidance</a> on how to meet child-care needs safely. Everyone needs access to outdoor space for <a href="https://www.nytimes.com/2020/06/20/opinion/pandemic-automobile-cities.html">transportation and recreation</a>, regardless of preferred activity, especially when those correlate with <a href="https://www.theglobeandmail.com/canada/article-how-class-and-race-are-playing-into-covid-19-restrictions-and-access">income and race</a>. </p>
<p>At the outset, little attention was paid to recognizing and addressing these barriers to compliance with the desired behaviour. Yet we have a Canadian example of how to take a complicated issue and break down barriers, in the context of physical activity.</p>
<h2>Worldwide leader</h2>
<p><a href="https://www.participaction.com/en-ca/blog">ParticipAction</a> has been a worldwide leader for decades in presenting a range of possible activities that people can do in small bursts throughout the day or week to meet recommended guidelines, all without having a gym membership or being part of organized sports. </p>
<p>By recognizing barriers that prevented people from being active, it opened up possibilities to Canadians who considered the <em>product</em> and <em>place</em> of physical activity unattractive. </p>
<p>The social marketing version of <em>price</em> has always been the most challenging of the four Ps to tackle. It is difficult for individuals to change a behaviour they enjoy or one that provides personal benefit, especially when such change may not benefit them directly. </p>
<p>But the behavioural <a href="https://www.economist.com/international/2017/05/18/policymakers-around-the-world-are-embracing-behavioural-science">economic concept of “nudging”</a> that includes small financial incentives has proven to be financially more efficient than expensive advertising campaigns in convincing people to <a href="https://www.bi.team/">change behaviour</a>. </p>
<p>Our research on a now-defunct made-in-Canada mobile app demonstrates the potential for using cutting-edge commercial marketing techniques and technologies to tackle the challenges of social marketing. </p>
<p><a href="https://www.borndigital.com/2016/03/31/carrot-rewards-2016-03-31">Carrot Rewards</a> was a mobile app that gave users points from their loyalty program (such as Aeroplan, Scene and Petro Points) immediately after they completed a health intervention, such as completing an educational quiz, <a href="https://doi.org/10.1016/j.vaccine.2018.04.018">getting information about the flu shot</a> or <a href="https://www.theglobeandmail.com/life/health-and-fitness/article-can-you-put-a-price-on-what-it-takes-to-get-canadians-more-physically/">walking a certain distance or length of time</a>. (Carrot Rewards folded in June 2019 but was purchased later that year by a <a href="https://www.cbc.ca/news/business/carrot-rewards-to-relaunch-1.5416389">technology firm</a> with a plan to relaunch the wellness app.)</p>
<h2>Canadians love their loyalty programs</h2>
<p>Loyalty programs are tremendously popular in Canada. Some <a href="https://yahooadvertisingca.tumblr.com/post/114494275160/new-study-explores-how-loyalty-programs-drive">90 per cent of Canadians</a> are enrolled in at least one program. Studies show that, on average, there are <a href="https://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/the-top-rewards-programs-canadians-are-using/article38318624/">four programs per person and 13 per household</a>. </p>
<figure class="align-center ">
<img alt="A selection of Canadian loyalty cards." src="https://images.theconversation.com/files/346918/original/file-20200710-58-vfhph2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/346918/original/file-20200710-58-vfhph2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=457&fit=crop&dpr=1 600w, https://images.theconversation.com/files/346918/original/file-20200710-58-vfhph2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=457&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/346918/original/file-20200710-58-vfhph2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=457&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/346918/original/file-20200710-58-vfhph2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=574&fit=crop&dpr=1 754w, https://images.theconversation.com/files/346918/original/file-20200710-58-vfhph2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=574&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/346918/original/file-20200710-58-vfhph2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=574&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Canadian retailers spent years encouraging shoppers to sign onto loyalty programs. They’re hugely popular with Canadians.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS</span></span>
</figcaption>
</figure>
<p>Carrot Rewards leveraged the desire for small financial incentives (in the form of reward points for movies, groceries and the like), and attracted an engaged and involved audience. </p>
<p>It employed a digital platform that allowed for customizable content and high message complexity. Using multiple choice “quizzes” of five to seven questions each, it both involved users through gamification as well as provided additional information on the topic in question. </p>
<p>The app was also able to target content to specific audiences based on demographic characteristics and answers to previous quizzes, as well as track physical movement and location via a smart watch or smartphone. </p>
<h2>Engagement stayed high</h2>
<p>With an existing base of 1.1 million users across Ontario, British Columbia and Newfoundland and Labrador — and 500,000 active monthly users — Carrot could have quickly expanded into other provinces as a key component of an integrated federal COVID-19 campaign for education, contact tracing and possibly even symptom tracking. </p>
<p><a href="https://www.jmir.org/front/pdf/16797/1">Our research</a> has demonstrated that Carrot rapidly attracted and enrolled users, and maintained consistently high levels of user engagement over time, even as rewards diminished. That <a href="https://doi.org/10.1186/s12966-020-00926-7">engagement remained high</a> even at a modest average reward per user of 1.5 cents per day. The age and demographics of the users varied by loyalty program, and the app provided a relatively representative cross-section of Canadian society in terms of education, income and urban/rural/suburban locations. </p>
<p>All in all, Carrot showed impressive results. </p>
<p><a href="https://www.theglobeandmail.com/business/article-ottawa-backed-carrot-rewards-app-shutting-down-after-failing-to-find-a/">Financial sustainability</a> challenges aside, policy-makers and public health officials would be wise to consider maintaining this modern, data-driven approach to social marketing in their tool box. It would not only prove tremendously useful in the COVID-19 era, but it would place Canada at the forefront of innovation in social marketing around the world.</p><img src="https://counter.theconversation.com/content/141914/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Monica LaBarge and Jacob Brower have received funding from the Social Sciences and Humanities Research Council for this research.
</span></em></p><p class="fine-print"><em><span>Neither author works for, consults, owns shares in or receives funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment</span></em></p>Policy-makers and public health officials would be wise to consider a modern, data-driven approach and incentives to encourage people to adhere to safety measures in the COVID-19 era.Monica C. LaBarge, Assistant Professor, Marketing, Queen's University, OntarioJacob Brower, Associate Professor and Distinguished Faculty Fellow of Marketing, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1403802020-07-07T13:41:21Z2020-07-07T13:41:21ZAirlines should rethink their refusal to refund passengers during COVID-19<figure><img src="https://images.theconversation.com/files/345780/original/file-20200706-25-16eorf2.jpg?ixlib=rb-1.1.0&rect=0%2C367%2C1920%2C905&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Airlines are risking alienating customers and permanent reputational damage due to their refusal to issue refunds after cancelling flights mid-coronavirus.</span> <span class="attribution"><span class="source">(Pixabay)</span></span></figcaption></figure><p>Despite unrelenting pressures from passenger rights advocates, intense media scrutiny and strident demands from passengers, Canadian airlines have remained <a href="https://www.ctvnews.ca/politics/airline-execs-double-down-on-refund-refusal-amid-parliamentary-grilling-1.4995175">largely immutable</a> in refusing to issue cash refunds for cancelled flights. </p>
<p>Passengers are offered future travel vouchers and options to convert to loyalty air miles. Airlines’ immediate focus is on financial survival, arguing that returning passengers money for cancelled flights would cause a <a href="https://business.financialpost.com/transportation/airlines/airlines-need-aid-or-ability-to-fly-to-escape-catastrophic-territory-air-canada-ceo-says">financial catastophe</a>. </p>
<p>This response is perplexing and unfair to passengers and passenger rights advocates who have mounted a vociferous social media campaign, <a href="https://www.cbc.ca/news/canada/nova-scotia/class-action-launched-after-airlines-give-credits-not-refunds-for-cancelled-flights-1.5516156">class-action lawsuits</a> <a href="https://nationalpost.com/news/politics/growing-number-of-canadians-furious-that-airlines-wont-reimburse-cancelled-travel-due-to-covid-19">and petitions</a>. Yet pressure seems futile as passengers continue to struggle to get cash refunds. You need the money to pay your mortgage? Buy food? Sorry, airlines say they need your money <a href="https://www.cbc.ca/news/politics/transport-minister-airlines-survival-versus-refunds-1.5590392">to survive</a>.</p>
<h2>Unconcerned</h2>
<p>Why are airlines not responding to customer demands for refunds? They seem largely unconcerned about the long-term implications of their stance and the <a href="https://www.bnnbloomberg.ca/why-airlines-don-t-want-to-refund-your-flight-tickets-1.1417842">risk of alienating</a> passengers. Surely they care about their reputation and the trust and loyalty of passengers? Isn’t that why they have airline loyalty plans? </p>
<p>One possible explanation is what’s known as <a href="https://sk.sagepub.com/reference/dictionary-of-strategy/n606.xml">strategic</a> or <a href="https://hbr.org/2007/07/the-cost-of-myopic-management-2">management</a> myopia, where companies and their executives appear to forget the long-term implications of their actions.</p>
<p>This myopia can impede a company’s ability to foresee future challenges because most of their efforts are focused on immediate survival. Businesses may abandon their competitive goals — like growth, capturing a bigger market share, customer loyalty and trust, retention and repeat purchases, all necessary for long-term profitability — in favour of immediate survival at any cost. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/345670/original/file-20200705-33956-jcmn5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/345670/original/file-20200705-33956-jcmn5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=428&fit=crop&dpr=1 600w, https://images.theconversation.com/files/345670/original/file-20200705-33956-jcmn5k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=428&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/345670/original/file-20200705-33956-jcmn5k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=428&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/345670/original/file-20200705-33956-jcmn5k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=538&fit=crop&dpr=1 754w, https://images.theconversation.com/files/345670/original/file-20200705-33956-jcmn5k.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=538&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/345670/original/file-20200705-33956-jcmn5k.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=538&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An airline passenger checks his smartphone at Montréal’s Trudeau International Airport in March 2020.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Graham Hughes</span></span>
</figcaption>
</figure>
<p>Strategic blind spots can cause companies to disregard important information or to disconnect from customers’ needs. A failure to respond to market and consumer shifts can threaten the survival of an otherwise successful company.</p>
<p>Examples include <a href="https://insights.som.yale.edu/insights/what-was-polaroid-thinking">Polaroid</a>, which lost its monopoly on instant photography, <a href="https://www.forbes.com/sites/avidan/2012/01/23/kodak-failed-by-asking-the-wrong-marketing-question/#d6bd25f3d470">and Kodak’s</a> failure to consider the changing demands of customers as digital photography took off.</p>
<p>So what leads to myopia in a successful industry?</p>
<h2>People have no choice</h2>
<p>The Canadian airline marketplace is generally considered <a href="https://www.ctvnews.ca/business/canada-s-airline-duopoly-leaves-low-cost-carriers-and-flyers-feeling-shut-out-1.4844412">a duopoly</a>, with Air Canada and WestJet dominating the marketplace. These two airlines capture much of the market share, leaving consumers with restricted choices.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/345591/original/file-20200703-33913-17379ur.JPG?ixlib=rb-1.1.0&rect=0%2C388%2C3600%2C1729&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/345591/original/file-20200703-33913-17379ur.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=429&fit=crop&dpr=1 600w, https://images.theconversation.com/files/345591/original/file-20200703-33913-17379ur.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=429&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/345591/original/file-20200703-33913-17379ur.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=429&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/345591/original/file-20200703-33913-17379ur.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=539&fit=crop&dpr=1 754w, https://images.theconversation.com/files/345591/original/file-20200703-33913-17379ur.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=539&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/345591/original/file-20200703-33913-17379ur.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=539&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An Air Canada ticketing station is shown at Pearson International Airport in Toronto in April 2020. Air Canada had more customer complaints about refunds to the U.S. Department of Transportation than any foreign airline.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Nathan Denette</span></span>
</figcaption>
</figure>
<p>But market dominance could lead the airlines to become victims of <a href="https://www.theatlantic.com/business/archive/2017/04/why-airlines-can-get-away-with-bad-customer-service/523011/">their own success</a> and cause them to ignore important information, or fail to respond appropriately to market and consumer shifts. Few other industries would be allowed to keep customer deposits for services and products <a href="https://www.thestar.com/opinion/editorials/2020/05/21/canadian-airlines-need-to-stop-treating-their-customers-like-a-bank.html">they are unable to deliver</a>.</p>
<p>Airlines see the future as an opportunity for continued success. According to the airline industry, they are expecting a doubling of global air travellers over next <a href="https://www.iata.org/en/pressroom/pr/2018-10-24-02/">two decades</a>. </p>
<p>While the COVID-19 crisis is likely to impact this projection, airlines are expecting to recover to pre-pandemic levels in <a href="https://www.globenewswire.com/news-release/2020/06/10/2046322/0/en/Post-pandemic-Growth-Opportunity-Analysis-of-the-Global-Airport-Airline-Industry.html">two years</a> and to benefit <a href="https://www.flightglobal.com/strategy/how-the-airline-industry-has-been-hit-by-the-crisis/138554.article">from growth</a> in the future. </p>
<h2>Support from powerful players</h2>
<p>Canadian airlines seem to have backing of the <a href="https://nationalpost.com/news/politics/transport-minister-marc-garneau-defends-decision-not-to-force-airlines-to-offer-covid-19-refunds">Canadian goverment</a> and the <a href="https://business.financialpost.com/transportation/airlines/canadian-airline-passengers-are-entitled-to-vouchers-for-cancelled-flights-from-covid-19-but-what-about-refunds">national transportation agency</a>, which appear to have voiced their support for the airlines’ refusal to refund cancelled flights and issue vouchers instead. </p>
<p>The Canadian Transportation Agency’s <a href="https://otc-cta.gc.ca/eng/statement-vouchers">statement on vouchers</a> indicates: </p>
<blockquote>
<p>“While any specific situation brought before the CTA will be examined on its merits, the CTA believes that, generally speaking, an appropriate approach in the current context could be for airlines to provide affected passengers with vouchers or credits for future travel, as long as these vouchers or credits do not expire in an unreasonably short period of time (24 months would be considered reasonable in most cases).”</p>
</blockquote>
<p>The <a href="https://www.thestar.com/business/2020/05/21/governments-playing-a-cruel-game-with-would-be-travellers-seeking-refunds-for-cancelled-flights-due-to-covid-19.html">federal government</a> appears to sympathize with airlines’ significant drop in revenue due to COVID-19 and the need to use customers’ payments to stay afloat.</p>
<p>The government’s focus on solvency is evident in its intention to provide a bridge <a href="https://www.cbc.ca/news/politics/trudeau-non-committal-on-airline-bailout-1.5573228">credit facility</a> to help them survive.</p>
<p>Airlines, meantime, are mounting corporate citizenship and public relations campaigns to demonstrate how they’re doing their part during the crisis <a href="https://www.cbc.ca/news/business/westjet-flights-monday-1.5506477">through repatriation</a> flights, <a href="https://www.aircanada.com/ca/en/aco/home/about/media/media-features/cargo-lhr-cancer-treatment.html">shipping medical supplies</a> and other corporate citizenship activities. They’re also <a href="https://blog.westjet.com/westjet-aircraft-cleaning-and-sanitization-coronavirus-covid-19/">highlighting their safety measures</a> <a href="https://aircanada.mediaroom.com/2020-06-29-Air-Canada-Further-Refines-Industry-Leading-Bio-Safety-Measures-Re-Introduces-Select-Services-Onboard-Flights">and introducing</a> meal plans and customer care kits. Passengers, however, are pushing back against social media posts with consistent demands for refunds, which can reduce the impact of these PR efforts.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1279156577631703040"}"></div></p>
<p>Passengers facing financial hardships feel they’re being compelled to give <a href="https://www.cbc.ca/news/politics/canadian-airlines-refunds-consumer-complaints-1.5580042">interest-free loans</a> to help airlines survive the pandemic. While business travellers are likely reimbursed for the cost of flights, individual passengers are out of pocket. </p>
<p>Canadian airlines are actively resisting refund requests <a href="https://paxex.aero/2020/06/air-canada-refund-complaint-dot-dispute/">both nationally and internationally</a>, despite <a href="https://www.ctvnews.ca/business/air-canada-racks-up-more-refund-complaints-than-any-foreign-airline-in-u-s-1.5004242">escalating complaints</a>.<br>
But refunding fares for cancelled flights would garner good will. And airlines may soon not have a choice as powerful organizations take up the fight for refunds. The EU Commission, for example, has recently launched <a href="https://www.forbes.com/sites/davekeating/2020/07/02/flight-refunds-eu-launches-legal-action-over-airlines-failure-to-reimburse-covid-cancelled-flights/#79d2b8ddee0f">legal action</a> against 10 countries over the failure of airlines to reimburse customers for cancelled flights. </p>
<h2>Airlines need passenger trust and loyalty</h2>
<p>Passengers need to know they can give their money over to airlines <a href="https://www.businesswire.com/news/home/20200527005016/en/Importance-Trust-Transparency-Airline-Satisfaction-Grows-Industry">and trust</a> they’ll be <a href="https://www.nytimes.com/2020/04/20/business/business-travel-coronavirus.html">safe on board</a>. To recover, airlines will also need the passengers’ loyalty. While there is some understanding that passengers will use airlines for unavoidable travel, loyalty will likely be affected. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/345593/original/file-20200703-33943-1psxwux.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3305%2C1910&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/345593/original/file-20200703-33943-1psxwux.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=362&fit=crop&dpr=1 600w, https://images.theconversation.com/files/345593/original/file-20200703-33943-1psxwux.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=362&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/345593/original/file-20200703-33943-1psxwux.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=362&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/345593/original/file-20200703-33943-1psxwux.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=454&fit=crop&dpr=1 754w, https://images.theconversation.com/files/345593/original/file-20200703-33943-1psxwux.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=454&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/345593/original/file-20200703-33943-1psxwux.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=454&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A plane is silhouetted as it takes off from Vancouver International Airport in Richmond, B.C., in May 2019.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jonathan Hayward</span></span>
</figcaption>
</figure>
<p>Airline loyalty programs not only <a href="https://www.forbes.com/sites/samuelengel1/2020/06/25/with-covid-19-now-is-the-moment-for-airlines-to-rethink-loyalty/#74c53bd29ccc">retain a valuable</a> customer base, they can also be used to provide liquidity during a crisis. </p>
<p>A demonstration of <a href="https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/connecting-with-customers-in-times-of-crisis">customer care</a>, empathy and responsiveness can help build consumer good will, which airlines will need for their post-pandemic recovery.</p><img src="https://counter.theconversation.com/content/140380/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rumina Dhalla does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Airlines seem largely unconcerned about the long-term implications of their refusal to issue refunds to passengers during the COVID-19 pandemic, and risk alienating customers permanently.Rumina Dhalla, Associate Professor, Organizational Studies and Sustainable Commerce, CSR/Sustainability Coordinator and MBA Graduate Coordinator, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1080262018-12-11T23:22:32Z2018-12-11T23:22:32ZRewarding your shopping loyalty with points<figure><img src="https://images.theconversation.com/files/249843/original/file-20181210-76974-1sjhfvs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Many of us collect points via loyalty programs. They're popular, but can cause headaches for the companies who head up loyalty and rewards programs.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>How many “points” have you collected so far this holiday shopping season? </p>
<p>Like millions of consumers, you likely belong to at least one loyalty rewards program. These programs give you “points,” “miles” or some virtual currency when you buy from specified airlines or retailers. You can later redeem your points for rewards that might range from <a href="https://theconversation.com/woolies-new-loyalty-program-offers-a-glimpse-into-the-future-49737">cheaper groceries</a> to exotic vacations.</p>
<p>Of course, such rewards don’t represent corporate generosity. Like <a href="https://theconversation.com/how-brands-turn-customers-into-devoted-followers-78662">inspirational brand reputations</a> and <a href="https://theconversation.com/tailoring-the-customer-experience-boosts-online-sales-84941">slick e-commerce websites</a>, rewards programs encourage you to patronize certain businesses instead of their competitors, although some question how well they work.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/loyalty-marketers-could-be-turning-friends-into-frenemies-19462">Loyalty marketers could be turning friends into frenemies </a>
</strong>
</em>
</p>
<hr>
<p>The programs also gather data about your spending habits. This lets businesses promote their products to the most promising prospects.</p>
<p>Some loyalty programs <a href="https://theconversation.com/inside-the-massive-market-for-loyalty-cards-and-frequent-flyer-miles-51329">are huge</a>. AccorHotels, which operates Novotel, Fairmont and other brands, has <a href="https://www.accorhotels.group/en/group/our-brands-and-services/our-loyalty-program">27 million members</a>. Marriott International has <a href="https://marriott.gcs-web.com/encrypt/files?file=nasdaq_kms/assets/2018/04/04/11-42-13/Marriott_2017_Annual_Report.pdf&file_alias=44526">110 million</a>.</p>
<p>(China could make even those figures look small. Its experimental <a href="https://theconversation.com/chinas-social-credit-system-puts-its-people-under-pressure-to-be-model-citizens-89963">social credit programs</a> might some day cover its entire population. But those reward a different kind of loyalty.)</p>
<p>The most complex programs involve alliances of otherwise unrelated companies. <a href="https://www.cbc.ca/news/canada/nova-scotia/promotion-air-miles-fine-print-1.4651577">Air Miles Canada members</a> can shop at thousands of participating stores. Aeroplan has <a href="http://media.aeroplan.com/our-partners/">partners</a> representing more than 150 brands. And in Europe, <a href="https://www.miles-and-more.com/online/portal/mam/de/general_information?nodeid=72265641&l=en&cid=18002&WT.svl=img2sc_484897711">Miles & More</a> includes 300 businesses.</p>
<p>A “host” company runs each of these programs. It tracks your points while managing interactions among the partnering businesses.</p>
<h2>Hosts handle the details</h2>
<p>For example, suppose you stay overnight at a participating hotel. The host company will subsequently credit points to your account.</p>
<p>But the host also collects revenue from the hotel. In effect, the host sells points to the hotel, which then gives them to you as an incentive for staying there.</p>
<p>Later, you might redeem some points to book a flight. The host reduces your point balance while paying the airline on your behalf for the ticket.</p>
<p>In between accumulation and redemption, the host company tracks your points and holds the cash. To you, the points are an asset. To the host, however, they’re a liability it must some day redeem.</p>
<p>In Canada, the outstanding points balance <a href="https://www.moneysense.ca/spend/unredeemed-loyalty-points/">reportedly approaches CDN$16 billion</a> across all loyalty programs combined. In the U.S., Marriott alone has US$5 billion outstanding.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/249847/original/file-20181210-76974-1j5ji0b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/249847/original/file-20181210-76974-1j5ji0b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/249847/original/file-20181210-76974-1j5ji0b.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/249847/original/file-20181210-76974-1j5ji0b.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/249847/original/file-20181210-76974-1j5ji0b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/249847/original/file-20181210-76974-1j5ji0b.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/249847/original/file-20181210-76974-1j5ji0b.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some points go unredeemed because they expire or the owning members quit.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>Some points go unredeemed because, for example, they expire or the owning members quit. This “spillage” benefits the host company, which keeps the previously collected cash. Consequently, hosts can boost profits by adjusting programs to increase spillage. But such measures can <a href="https://www.cbc.ca/news/business/aimia-aeroplan-points-1.4806060">anger consumers</a>.</p>
<h2>Advance arrangements needed</h2>
<p>Before any transactions can occur, the host company and its partners must negotiate the numbers of points earned per purchase or redeemed per reward. They often also commit to specific numbers of rewards redeemed per year per partner.</p>
<p>Aeroplan, for instance, promised to buy <a href="https://www.aimia.com/wp-content/uploads/2018/04/Aimia-2017-Annual-Report_Final_EN.pdf">$581 million in Air Canada tickets</a> in 2017 for anticipated rewards.</p>
<p>This presents a problem. Host companies must make these arrangements in advance. But only later will they discover how many rewards consumers want from each business.</p>
<p>Of course, hosts can simply pre-arrange for more rewards than they expect to need, to ensure a safety margin. But that’s expensive, as some rewards will go unused.</p>
<p>We worked with doctoral student Yuheng Cao and associate professor <a href="https://www.business.uconn.edu/person/moustapha-diaby/">Moustapha Diaby</a> to study this rewards-supply planning problem. We created mathematical models to simulate point accumulation and redemption in a loyalty program over time. We then used the models to evaluate potential host company decisions.</p>
<h2>Uncertainty hurts performance</h2>
<p><a href="https://doi.org/10.1057/jors.2014.81">One study</a> examined the effects of uncertainty about future demand for rewards. Not surprisingly, higher uncertainty tends to reduce profits for the host company. It becomes more difficult to accurately plan reward needs in advance.</p>
<p>Less obviously, performance also suffers if hosts try to limit their annual rewards budgets or their outstanding points balances. To cap point balances, hosts must purchase more rewards at higher prices. That reduces immediate profitability. Conversely, with restricted budgets, host companies must pay out fewer rewards. That increases their future liabilities.</p>
<p>Both problems worsen as demand uncertainty increases. Hosts increasingly lack enough flexibility to handle demand surprises.</p>
<p>This implies hosts should try to reduce demand uncertainty where possible. They might do this in advance through improved forecasting. </p>
<p>Or as the year unfolds they could offer discounts on underused rewards. For example, suppose an airline normally charges 25,000 points per ticket. It might temporarily cut that to 15,000 for flights on unpopular days.</p>
<h2>Options could compensate</h2>
<p>Alternatively, hosts could include “options” clauses in their agreements with their loyalty program partners. With this strategy, host companies would still agree to buy a set number of rewards from each partner. But the contract would also give hosts the option to buy more rewards later if demand ends up being higher. Hosts would pay extra for that privilege.</p>
<p>This approach would mean loyalty program partners absorb more of the program’s risks. In exchange, they’d get more of the program’s revenue.</p>
<p>We explored this option contract concept in <a href="https://doi.org/10.1080/00207543.2015.1059519">another modelling study</a>. Our results suggest options contracts should indeed perform better overall than traditional fixed-size contracts.</p>
<p>Options are particularly valuable in large loyalty programs facing high demand uncertainty. They let host companies spread their greater risks across many redemption partners.</p>
<p>By comparison, the common practice of prearranging extra rewards is less effective in those cases. It leaves many rewards sitting unused at many partners.</p>
<p>Overall, our research suggests that reducing uncertainty about redemption demand, and using reward supply option contracts, would both benefit hosts. They could increase their profitability while controlling their rewards budgets and accumulated points liabilities.</p><img src="https://counter.theconversation.com/content/108026/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Aaron Luntala Nsakanda receives funding from Natural Sciences and Engineering Research Council of Canada (NSERC). </span></em></p><p class="fine-print"><em><span>Michael J. Armstrong does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The companies that head up loyalty rewards programs must compensate for their uncertainty about your reward preferences.Michael J. Armstrong, Associate professor of operations research, Goodman School of Business, Brock UniversityAaron Luntala Nsakanda, Associate Professor of Management Science and Supply Chain Management, Sprott School of Business, Carleton UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/953552018-04-23T22:33:17Z2018-04-23T22:33:17ZAeroplan’s troublesome ‘purity of the country’ survey is nothing new<figure><img src="https://images.theconversation.com/files/215989/original/file-20180423-94115-i5g2zd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Aeroplan's recent survey on consumer habits became a scandal for the company after people complained the questions normalized intolerant attitudes about immigration and male dominance over women.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Aeroplan, a popular Canadian loyalty program, <a href="https://www.huffingtonpost.ca/2018/04/02/aeroplan-survey-national-purity-male-dominance_a_23401048/">found itself in hot water recently</a> after launching a survey that asked participants about contentious issues, such as whether immigration “threatens the purity of the country” or whether men have a “natural superiority over women.”</p>
<p>CROP, the marketing research company that designed the survey for Aeroplan, <a href="https://www.crop.ca/en/blog/2018/228/">defended the practice</a>, stating that learning about consumers’ values can help companies predict their preferences and choices. </p>
<p>The loyalty program apologized and <a href="http://www.cbc.ca/news/business/aeroplan-survey-crop-immigration-1.4599686">announced it was deleting all the data</a> collected through the survey. But the move is not likely to placate consumers who are already angry with the company.</p>
<p>As a marketing professor who teaches consumer behaviour and researches loyalty programs, I believe consumers perceived the survey to be backwards on several distinct levels. </p>
<p>First, the scope of the questions seemed out of line with the mission of a travel rewards program. </p>
<p>Second, the questions were offensive to many respondents because they appeared to normalize intolerant views. </p>
<p>And third, there is the concern that simply asking such charged questions can change respondents’ attitudes and render them more xenophobic, prejudiced and sexist.</p>
<h2>All information is precious</h2>
<p>To many, these questions seemed completely irrelevant to Aeroplan’s mission and business model. </p>
<p>As a coalition reward program, Aeroplan sells its miles to a very diverse set of partners like Costco, Esso and TD. The partners hand out the points to their customers as a token of appreciation for their business and as an incentive to remain loyal. </p>
<p>Finally, the customers swap the miles they have accumulated for rewards offered by Aeroplan, like vacation packages or merchandise, thus closing the loop.</p>
<p>Consumer research has a long tradition of using rich, varied information that’s not limited only to dry demographic data to understand customers and their needs and preferences. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/215990/original/file-20180423-94126-1x71cfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/215990/original/file-20180423-94126-1x71cfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/215990/original/file-20180423-94126-1x71cfu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/215990/original/file-20180423-94126-1x71cfu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/215990/original/file-20180423-94126-1x71cfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/215990/original/file-20180423-94126-1x71cfu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/215990/original/file-20180423-94126-1x71cfu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Hemmorhoid problems could say something about your taste in beer? Apparently so, according to market research in the 1960s.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Back in the 1960s, researchers would use information <a href="http://www.jstor.org/stable/1249408?origin=crossref&seq=1#page_scan_tab_contents">ranging from the number of airplane trips one took to whether customers used hemorrhoid remedies</a> to build consumer profiles for two competing beer brands. </p>
<p>Some of the apparently irrelevant characteristics turned out to distinguish between consumers with different types of lifestyles — somebody who spends a lot of time outdoors, for example, versus somebody who travels abroad frequently. </p>
<p>Furthermore, a consumer’s lifestyle was correlated with their propensity to drink one of the two beers — hence the relevance of the questions that seemed to have nothing at all to do with the product.</p>
<p>Different lifestyles, values, attitudes, interests and preferences tend to be clustered together — for example, <a href="https://www.emeraldinsight.com/doi/pdfplus/10.1108/00070701111116437">Swiss consumers who are price-insensitive to wine</a> tend to be older, well-informed, live in a single household and are more likely to prefer both Italian and German wines than other consumers. </p>
<p>The fact that different lifestyles are associated with clusters of attitudes and consumption patterns means that seemingly irrelevant details about a person can be diagnostic of their preferences in a wide variety of contexts. No surprise, then, that <a href="https://www.theguardian.com/technology/2018/mar/17/facebook-cambridge-analytica-kogan-data-algorithm">Cambridge Analytica was so keen on gathering apparently benign and trivial information</a>, such as one’s Facebook likes. </p>
<p>In the era of machine learning, marketing researchers not only need more data, but they need <a href="https://hbr.org/2018/04/if-your-data-is-bad-your-machine-learning-tools-are-useless">more diverse, comprehensive data</a> that contain new, non-redundant information. The contentious questions in CROP’s survey were precisely designed to tap into a fresh pool of insights.</p>
<h2>No question is neutral</h2>
<p>The contentious questions were framed in the affirmative, asking respondents about the extent to which they agreed with the statements. They could have just as easily been presented in the negative — for example, “immigration does not threaten the purity of the country.” </p>
<p>It may seem a superficial difference, but research shows that people are prone to <a href="http://journals.sagepub.com/doi/pdf/10.1177/0049124192021001003">acquiescence bias</a>. That is, they tend to agree, rather than disagree, with statements presented in surveys. So the framing of the question will impact the way people respond to it. </p>
<p>Furthermore, respondents expect that <a href="https://www.tandfonline.com/doi/pdf/10.1080/00223980.1954.9712954">“agree” is the correct answer</a>, the one that questionnaire’s designers expected. Applying this logic to Aareoplan’s case, it appears that the company is implicitly backing the statements and thus legitimizing them.</p>
<p>We also know that measurement tools like surveys or interviews that are commonly used in social sciences can <a href="http://dx.doi.org/10.1037/0021-9010.73.3.421">interfere with and change the attitudes that we are trying to measure</a>. The concern here is that by floating these statements, the company may actually contribute to the creation and proliferation of bigoted and narrow viewpoints. </p>
<h2>Humans like consistency</h2>
<p>For example, if someone has no clear attitudes towards immigration, they might be more likely to agree with the statement that immigration threatens “the purity of the country” due to the way the question was framed and to acquiescence bias. </p>
<p>Since humans also like to maintain a consistency across time, the tiny act of having answered in the affirmative to this question may lead them to perceive themselves as the type of person who disagrees with immigration-friendly policies. </p>
<p>Of course, the chain of events I just described is probabilistic — based on a theory of probability and so subject to chance. But applied to a large number of respondents, the effects may still be material.</p>
<p>In the era of artificial intelligence, companies can capitalize on any type of information they gather on their customers or prospective customers. At the same time, consumers are becoming more sensitive about the data they share with merchants and also to the specific questions they are being asked. </p>
<p>It’s not a zero-sum game: Sometimes consumers can benefit by letting companies know more about what they really want. But finding that sweet spot where companies can learn about consumers without invading their privacy or offending them is not easy.</p><img src="https://counter.theconversation.com/content/95355/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alina Nastasoiu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The recent Aeroplan survey offended many consumers with questions they felt normalized intolerant views. But consumer research has a long history of learning about customers’ values.Alina Nastasoiu, Assistant Professor, McMaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/513292015-11-26T15:55:43Z2015-11-26T15:55:43ZInside the massive market for loyalty cards and frequent flyer miles<figure><img src="https://images.theconversation.com/files/103328/original/image-20151126-28287-iuos7m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Moonshot. Enough reward points to take a longer trip?</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/philopp/2485622929/in/photolist-4MDt6K-np3SxN-amEnCi-fV3Zgx-4sPzEa-jH6s7f-xhrkPJ-fV3j69-fV3jVL-np3Uh9-dbZR7m-9JpQm5-np3U4y-jH5WzC-9rCA6s-amEmrX-f4HS38-5RyYVA-jH6gwh-nqMeXk-amEsbD-amHmam-noJdQY-cPgmEy-aAyJYp-pztJFX-7WjLnu-amHkNS-7WjD2q-7Wgj4H-7WgrwV-7WgmbP-noJdqj-amH8ZJ-7WjDjQ-PSGNn-7WjGkN-7WgpEr-7WjKUQ-7vRMek-wigaf9-7WjKr9-7WjA5Y-655Ada-7Wgske-6dvWoy-6dvXr1-7WENo4-p4Ly71-a3bhYf">Ting Chen</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>The rewards business has turned into its own multi-national industry. When a Chinese billionaire reportedly bagged a lifetime of free first-class flights by using his credit card to buy a single (admittedly expensive) piece of art recently, it acted as a reminder that millions of us are underwriting loyalty schemes such as this. But we’re not all benefiting quite as much as certain comfortably-off art collectors. </p>
<p>Liu Yiqian Liu – who went from <a href="http://www.ft.com/cms/s/0/88ea9dec-8a1d-11e5-9f8c-a8d619fa707c.html#slide0">handbag sales, to taxi-driving,</a> to making a stock market fortune – is reported to have put the $170m purchase of Amedeo Modigliani’s Reclining Nude on his exclusive American Express card, likely accruing <a href="http://www.theguardian.com/world/2015/nov/24/billionaire-earns-first-class-travel-for-life-by-putting-modigliani-nude-on-amex">almost limitless frequent flyer miles</a> in the process. So how big is this rewards industry? And what are the rest of us really getting from it?</p>
<h2>Data mine</h2>
<p>Reward is a truly vast marketplace. In the UK alone, 40 mainstream schemes cover 92% of the UK adult population, each of us holding on average three memberships. We dutifully swipe in our data – as members, of course, we are also sharing details of our shopping habits with the retailers – but leave <a href="http://www.telegraph.co.uk/finance/personalfinance/money-saving-tips/11912823/Shoppers-waste-6bn-of-loyalty-reward-points.html">up to £6 billion</a> in unclaimed rewards. </p>
<p>UK reward schemes are dominated by retailers, airlines and hotels, as <a href="http://www.telegraph.co.uk/finance/personalfinance/money-saving-tips/11912823/Shoppers-waste-6bn-of-loyalty-reward-points.html">we can see from the membership rankings</a>. The Nectar card, backed by supermarket Sainsburys has 19m users, the scheme run by High Street chemist Boots has just 1m fewer. Supermarkets Tesco and Morrisons are next on the list with 16m and 7m members respectively, followed by a trio of airlines and two hotel chains.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/103330/original/image-20151126-28272-1n7268x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/103330/original/image-20151126-28272-1n7268x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/103330/original/image-20151126-28272-1n7268x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=421&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103330/original/image-20151126-28272-1n7268x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=421&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103330/original/image-20151126-28272-1n7268x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=421&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103330/original/image-20151126-28272-1n7268x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=529&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103330/original/image-20151126-28272-1n7268x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=529&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103330/original/image-20151126-28272-1n7268x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=529&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Loyalty, or enticement?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/jonathanrolande/15480338290/in/photolist-pzWMfj-spFVsH-d6gJUy-snoLRw-GNoMF-jLYUoG-bicZGc-kHmSEn-kHmSGg-kHmSDa-kHmjRK-kHorAS-kHmmpe-kHmU32-kHotmf-kHmmrt-25wTqj-59Cecj-kHot9w-kHmTAk-pKeNBG-46MADV-dyng3B-51QYx-kHmUi2-kHmmfB-kHmmee-kHosNS-kHosFN-kHosNG-kHotsh-kHmmt2-kHosF7-kHmUqB-kHmUqX-9YjiyJ">Jonathan Rolande</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>The cards are often mistakenly synonymous with loyalty, but that doesn’t seem to come into it. In fact, <a href="http://dx.doi.org/10.1108/10878570810888777">research shows that up to 85%</a> of purportedly “loyal” customers are willing to shop elsewhere, given the appropriate enticement. </p>
<h2>Valuations</h2>
<p>British Airways founded its reward currency AirMiles in 1988, partnering with leading brands such as American Express, Lloyds Bank, TSB, Tesco and Shell. Its current manifestation, <a href="https://www.avios.com/gb/en_gb/about-us/our-company/about-avios">Avios</a>, boasts a 5.5m strong active membership. Grocery retailer Tesco launched its sector-leading Clubcard in 1995, introducing a personalised data-mining marketing proposition that predated big data by nearly two decades. It is now looking to sell off its customer analytics arm <a href="http://www.computing.co.uk/ctg/feature/2390197/what-does-tescos-sale-of-dunnhumby-mean-for-its-data-strategy">Dunnhumby, perhaps optimistically, for £2bn.</a></p>
<p>US rewards are <a href="http://onemileatatime.boardingarea.com/value-miles-points/">valued at a cent or two per point</a> but with an estimated <a href="http://greenandgold.uaa.alaska.edu/images/weekly/20120516-Accounting-for-Airline-FFP.pdf">15 trillion airmiles outstanding</a> in the US, that is theoretically a colossal liability. </p>
<p>Promotional kick backs are, of course, built in to sales and marketing costs, however. There is no such thing as a free lunch and everyone ends up paying more to cover them. </p>
<p>Half of US households participate in frequent-flyer reward progams and about 40m “free” tickets are issued annually. Startlingly, about a quarter of respondents freely admit to taking unnecessary trips to earn points, again pushing up demand, and therefore costs, for <a href="http://www.huffingtonpost.com/blake-fleetwood/frequentflier-programs-ar_b_856623.html">everyone else</a>.</p>
<p>It’s not even like we’re unaware of this wrinkle in the industry. A <a href="http://www.huffingtonpost.com/blake-fleetwood/frequentflier-programs-ar_b_856623.html">Frequent Flyer Magazine</a> poll revealed that among those benefiting from a reward programme, more than a third saw them as unethical. </p>
<h2>Out of love with loyalty</h2>
<p>Consumer activism might yet turn on the reward industry. Socially-minded UK supermarket Waitrose already offers shoppers altruistic rewards instead, green token ‘votes’ which shoppers can use to indicate which local charities the retailer should support. Perhaps customer attitudes will encourage other retailers to do likewise.</p>
<p>The rewards industry is indisputably substantial, but it could be heading for a fall. Consumers also may well be tempted away by simpler online <a href="http://www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/10027048/Best-cashback-credit-card-deals.html">cash back schemes</a> and transparent and unbundled pricing propositions, but perhaps <em>sotto voce</em> and more importantly, because the foundations of the reward industry are ethically dubious. Simply put, should we be subsidising free flights for the biggest spenders?</p>
<p>And that isn’t the only challenge schemes face. <a href="http://onemileatatime.boardingarea.com/">One–mile-at-a-time blogger Ben Schlappig</a> claims to be airborne six hours a day <a href="http://www.rollingstone.com/culture/features/ben-schlappig-airlines-fly-free-20150720">thanks to reward schemes</a>. He is a flamboyant hobbyist whose gaming of the rewards industry affords him virtually free and unlimited travel, using aeroplane cabins and hotels as his bedroom, office and playroom. Numerous dubious <a href="http://www.psmag.com/business-economics/scamming-airline-miles-isnt-scam-68745">mileage accrual schemes</a> are publicised on the web, including back-to-back <a href="http://www.businessinsider.com/economist-cant-figure-out-air-miles-2012-11?IR=T">mileage run trips</a> taken merely to <a href="http://thepointsguy.com/2011/10/attaining-airline-elite-status-series-the-basics-and-why-people-mileage-run/">trigger higher reward status levels</a>. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/103336/original/image-20151126-28295-qua0zx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/103336/original/image-20151126-28295-qua0zx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/103336/original/image-20151126-28295-qua0zx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=359&fit=crop&dpr=1 600w, https://images.theconversation.com/files/103336/original/image-20151126-28295-qua0zx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=359&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/103336/original/image-20151126-28295-qua0zx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=359&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/103336/original/image-20151126-28295-qua0zx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=451&fit=crop&dpr=1 754w, https://images.theconversation.com/files/103336/original/image-20151126-28295-qua0zx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=451&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/103336/original/image-20151126-28295-qua0zx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=451&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">George Clooney in a publicity still from</span>
<span class="attribution"><span class="source">AP Photo/Paramount Pictures, Dale Robinette</span></span>
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</figure>
<p>Anecdotally, serious business traveller mileage millionaires who I know, not unlike George Clooney’s character in the <a href="http://www.imdb.com/title/tt1193138/quotes">movie Up in the Air</a>, often struggle to spend their reward mountains. Instead, they glean social status by gloating about unspendable points hordes. </p>
<h2>Reputations at risk?</h2>
<p>Few of us, however, have the time, motivation, or initial capital to exploit the system with quite such elan. We could however, detach from the system entirely, cashing in our points as we depart.</p>
<p>But even a redemption rush of <a href="http://www.theguardian.com/money/shortcuts/2015/oct/06/are-you-sitting-on-a-goldmine-of-unclaimed-loyalty-card-points">the UK’s £6 billion</a> of unspent rewards is unlikely to see systemic confidence undermined. Average UK member scheme credit with supermarkets runs to £20, and it’s at around £300 in airline schemes. It is hardly likely that everyone would simultaneously rush to cash in their stash. </p>
<p>More likely is a scenario where competitive pressure on increasingly transparent business models sees schemes devalue point rewards. Banking industry regulation has already been cited as the cause of <a href="http://www.express.co.uk/finance/personalfinance/602739/Tesco-customers-supermarket-slashes-Clubcard-points-rewards">Tesco halving the value of their incentive currency</a>. And cunningly, many hotels seem to have already <a href="http://www.independenttraveler.com/travel-tips/travelers-ed/the-trouble-with-hotel-reward-programs">limited points accrual</a> to direct sales only; your comparison website booking may not get you the expected reward. You see, not only have rewards turned into a global industry, they are also part of a maturing business, with all the problems of growth and innovation that brings.</p><img src="https://counter.theconversation.com/content/51329/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Justin O'Brien has had/has reward memberships with Tesco, Nectar, Boots, Starwood, Marriott, although is no longer consciously collecting reward points. He is a former British Airways employee and will draw a pension from them on retirement. </span></em></p>It’s a collosal business. But who gets the most out of ‘rewards’? And what if we all used ours at once?Professor Justin O'Brien, MBA Programme Director, Royal Holloway University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/497372015-10-27T01:55:36Z2015-10-27T01:55:36ZWoolies’ new loyalty program offers a glimpse into the future<p>Woolworths is set to launch its new loyalty program, Woolworths Rewards, claiming that the new scheme will enable shoppers to redeem cash discounts off their shopping basket, much faster than ever before. </p>
<p>It is estimated shoppers will <a href="http://www.smh.com.au/business/retail/woolies-junks-frequent-flyer-points-for-discount-dollars-in-new-scheme-20151023-gkh7t4.html">acquire the necessary points</a> to save $10 automatically of their grocery bill within seven weeks. </p>
<p>Resembling the model used by UK retailer <a href="http://www.telegraph.co.uk/finance/personalfinance/household-bills/11913949/How-Morrisons-is-changing-its-Match-and-More-loyalty-scheme.html">Morrisons</a>, the new Woolworths Rewards program is a smart move for the retailer hoping to claw back some market share and curtail operational costs. However, there is no such thing as a free lunch.</p>
<p>While it will remove the costs of maintaining the Qantas-Woolworths relationship, <a href="http://www.smh.com.au/business/retail/woolworths-poised-to-launch-new-rewards-program-20151022-gkft7l.html">estimated to be around AUS$80 million a year</a> and allow them to re-invest at least AUS$65 million into stores, it may force shoppers into “brand switching” behaviour. </p>
<p>Interestingly, shoppers will only accrue points toward their $10 savings on selected ticketed items. Hence, the cost of maintaining the program will be met by suppliers who elect to have their brands featured with the big orange ticket. This is simply a way of moving supplier funded promotional allowances into a loyalty program, rather than a direct price discount. </p>
<p>Commentators have often <a href="https://www.choice.com.au/shopping/everyday-shopping/supermarkets/articles/choice-supermarket-special">voiced concern</a> about the power of our supermarkets in encouraging us to purchase one brand, over another brand. When faced with the prospect of purchasing Brand A which attracts “Woolworths Dollars” versus Brand B, that doesn’t, it’s most likely shoppers will purchase Brand A. It is expected that shoppers may be critical of being forced into a brand switching situation to attain “Woolworths Dollars”.</p>
<h2>Customers tiring of points loyalty programs</h2>
<p>The larger issue facing Woolworths and others is there is no exclusivity when every supermarket, department store, dress shop and coffee cart offers you a membership card. As a result, shoppers grown tired of endlessly collecting points to eventually redeem on gifts, discounts or possibly a flight. Studies show that a third of members <a href="http://blogs.gartner.com/richard-fouts/2014/06/19/what-can-retailers-do-about-loyalty-fatigue/">never redeem points</a>. </p>
<p>Retailers imbedded loyalty programs to encourage repeat shopping, protect themselves from price wars and most importantly collect valuable shopping data. The first retailer in Australia to offer a loyalty program was Fly Buys, a joint venture between Coles Myer (now Wesfarmers) and Loyalty Pacific, 20 years ago. </p>
<p>Then, shoppers were quick to sign up, with the promise of “free” flights in return for their loyalty and of course their valuable <a href="https://www.marketingmag.com.au/hubs-c/ideal-loyalty-program-data/">personal shopping data</a>, which included brands purchased, location, frequency and demographics. </p>
<p>Back then, the only way retailers could accurately track and target shoppers was through loyalty card usage, and while this still happens today, retailers have other more efficient channels, such as <a href="http://www.wmwoolworthsmoneycreditcard.com.au/hundreds">linked credit cards</a>, like Coles Credit Card (Mastercard) and Woolworths Money (Visa). </p>
<p>As shoppers are more frequently “tapping and going”, retailers can now access a wider range of data, outside of simply their <a href="http://www.dailymail.co.uk/sciencetech/article-2219069/Mastercard-tracking-purchases-sell-advertisers.html">loyalty program members</a>. Such programs also allowed retailers to distract shoppers from <a href="https://hbr.org/2000/03/how-to-fight-a-price-war">focusing on price</a> by simply getting shoppers to focus on the ‘prize’ than the price. </p>
<h2>Need for speed</h2>
<p>Points fatigue occurs when shoppers are faced with months, if not years, of collecting points to ultimately redeem on a desired item or reach that elusive gold or platinum level. Today, shoppers are seeking <a href="http://www.ifeelgoods.com/instant-rewards/">immediacy and customisation</a>. </p>
<p>Recently, Morrisons moved away from its complex “price match” loyalty scheme to a more simplified program where shoppers now earn <a href="http://www.telegraph.co.uk/finance/personalfinance/household-bills/11913949/How-Morrisons-is-changing-its-Match-and-More-loyalty-scheme.html">five loyalty points for every £1 they spend</a>. </p>
<p>Once a shopper earns 5,000 points they immediately to receive a £5 voucher. Other retailers are also moving away from long-term points accruing programs to deliver instant and non-monetary rewards to shoppers, such as free newspapers or coffee. </p>
<p>The UK’s Waitrose recently re-launched their loyalty program of “pick your own offers”, where shoppers can choose from a list of 1000 <a href="http://www.theguardian.com/money/2015/jun/19/how-to-make-most-waitrose-pick-your-own-offers">relevant products and immediately save 20%</a>. Over time, the list changes, and shoppers get to select new products. The scheme has seen more than <a href="http://www.essentialretail.com/news/article/5620c0064fb3a-waitrose-says-loyalty-scheme-is-driving-sales">850,000 shoppers sign up</a>. </p>
<h2>Non-monetary loyalty</h2>
<p>The other problem with existing loyalty programs is that retailers have confused <a href="http://www.crmsearch.com/loyalty-risks.php#sthash.cbvrcvat.dpuf">“loyalty” with “rewards”</a>. Loyal shoppers will always consider their favourite brands and stores first and frequent them consistently. True loyalty programs should also strengthen the relationship between the retailer and customer. </p>
<p>UK retailer Marks and Spencer recently moved away from their strictly points-based shopping frequency scheme to reward shoppers for other positive behaviours, such as completing online surveys, writing online reviews or <a href="http://apparelaccessoriesluxurygoods.retail-business-review.com/news/marks-spencers-rewards-customer-loyalty-with-sparks-membership-program-4694552">referring friends</a>. </p>
<p>The program of “non-monetary” rewards - such as invitations to exclusive food and drink master-classes or fashion parades - demonstrates shoppers are seeking more than just generic deals and discounts. The program also allows M&S to demonstrate its corporate social responsibility credentials, with shoppers earning “sparks” points for donating unused clothing when purchasing new outfits, termed <a href="http://www.theguardian.com/money/2012/apr/26/marks-spencer-shwopping-scheme">“shwopping”</a>.</p>
<h2>The future: Big brother is watching</h2>
<p>What is the future of loyalty? While we see retailers around the world actively move away from long-term, points based schemes to programs that offer immediate gratification and non-monetary rewards, the next frontier will be instant customised offers. </p>
<p>Already, French retailer<a href="http://www.ledsmagazine.com/articles/2015/05/philips-lighting-deploys-led-based-indoor-positioning-in-carrefour-hypermarket.html"> Carrefour</a> and US retailer Macys have begun using <a href="http://www.zdnet.com/article/macys-rolls-out-retails-largest-beacon-installation/">Near Frequency Communications (CFC)</a>, which “pushes” targeted offers to their shoppers while they are in-store, or nearby. </p>
<p>It is expected that the opt-in technology would be the natural evolution of loyalty programs, where members receive immediate and customised offers based on where they are standing and what they are looking at within a store.</p><img src="https://counter.theconversation.com/content/49737/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gary Mortimer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Woolworths’ new loyalty program is following the international trend away from old-fashioned points-based systems.Gary Mortimer, Senior Lecturer, QUT Business School, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/194622013-10-28T03:19:04Z2013-10-28T03:19:04ZLoyalty marketers could be turning friends into frenemies<figure><img src="https://images.theconversation.com/files/33895/original/hr44342x-1382924350.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Research shows loyalty doesn't come cheap, despite the proliferation of loyalty clubs.</span> <span class="attribution"><span class="source">Nick J Webb/Flickr</span></span></figcaption></figure><p>Retail pharmacy chain Priceline recently <a href="http://www.smh.com.au/business/priceline-to-get-more-than-loyalty-for-insurance-20131020-2vuvc.html">signed</a> a deal to sell ACE insurance products to members of its loyalty program, The Sister Club.</p>
<p>It’s a well-trodden path in the UK where retail chain Tesco has been selling insurance, banking and other services to its Clubcard customers for many years. </p>
<p>In Canada, the Real Canadian Superstore has been offering travel services, banking and insurance products to its customers for at least a decade. Likewise, France’s Carrefour has been doing similar cross selling for years. </p>
<p>In Australia Coles and Woolworths have been mimicking this tactic by offering a number of co-branded services to the customers enrolled in their loyalty programs. Coles and Woolworth’s home and content insurances are good examples. </p>
<p>Some have questioned if the Priceline plan could breach data privacy and whether it will erode customer loyalty.</p>
<p>Most people don’t like their email inboxes being filled with advertising, but as long as the customer has given permission for their data to be shared with other companies (which usually involves ticking a box on an application form), it is legal under data protection laws to share such information. While it may annoy us, whether such activity will erode customer loyalty is less clear.</p>
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<img alt="" src="https://images.theconversation.com/files/33899/original/tbm6k79x-1382927205.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/33899/original/tbm6k79x-1382927205.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/33899/original/tbm6k79x-1382927205.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/33899/original/tbm6k79x-1382927205.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/33899/original/tbm6k79x-1382927205.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/33899/original/tbm6k79x-1382927205.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/33899/original/tbm6k79x-1382927205.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Not all brands attract the type of loyalty they desire.</span>
<span class="attribution"><span class="source">That Girl Crystal/Flickr</span></span>
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<p>Building on <a href="http://anzmac.info/conference/2012/papers/361ANZMACFINAL.pdf">research presented</a> at last year’s Australian and New Zealand Marketing Academy Conference, we are currently looking at customer purchasing patterns across pharmacy retailers in Australia, using data from the Roy Morgan Single Source Survey. In this analysis, we have found Priceline actually shares more customers with other brands than it should for a brand of its size. </p>
<p>Contrary to the claims of Priceline parent Australian Pharmaceutical Industries that its Sister Club is a brand differentiator, our research suggests Priceline’s loyalty program has virtually no demonstrable positive effect on customer loyalty whatsoever.</p>
<p>Unfortunately for our inboxes, much of the relationship marketing literature argues strongly for cross-selling and bundling products. Loyalty programs are often set up with this objective in mind across a range of brands and all too often without considering the possibility of “over-marketing” to customers.</p>
<p>Priceline and ACE plan to promote their insurance products through direct mail and email campaigns and so run the risk of “over-marketing”. In addition to success measures such as click through, Priceline will also need to consider metrics such as spam complaints, unsubscribe and bounce rates. </p>
<p>While customers may be unhappy with excessive email contact they may not unsubscribe, but simply ignore the email. In this case, metrics such as average revenue per order, as well as average revenue per campaign, will be useful. A decline in these may be an indication of subscriber dissatisfaction and potentially the further eroding of loyalty to the brand.</p>
<p>While loyalty is usually treated as an important marketing construct, Priceline also needs to remember that it is competing in a repertoire market. </p>
<p>In a repertoire market consumers buy from within a number of competing brands, so switching is not a useful metric of loyalty, as a “switch” can be for one or two purchases, with a consumer returning on a third purchase occasion as part of their natural repertoire buying behaviour. </p>
<p>Within a repertoire market “share of category requirements” is a useful measure, but it also needs to take into account brand size. Because Priceline is the largest brand of pharmacies in the category, it benefits from the “Double Jeopardy” effect, in that through a natural selection effect it will achieve more purchases from more consumers because it has more mind share and more distribution outlets. </p>
<p><a href="http://www.ingentaconnect.com/content/routledg/jmm/2006/00000022/00000001/art00004">Research</a> suggests that despite their large cost, retailer loyalty programs have little effect on loyalty to retail brands outside what would have been expected for the size of the brand, in that larger brands get slightly more loyalty to their brands, known as the Double Jeopardy Law.</p>
<p>Testing that already tenuous loyalty with promotions for third-party products could be the trigger that turns a customer into a critic.</p><img src="https://counter.theconversation.com/content/19462/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Retail pharmacy chain Priceline recently signed a deal to sell ACE insurance products to members of its loyalty program, The Sister Club. It’s a well-trodden path in the UK where retail chain Tesco has…Associate Professor Maxwell Winchester, Discipline Leader, Marketing , Victoria UniversityGavin Lees, Lecturer, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/66402012-04-24T00:24:09Z2012-04-24T00:24:09ZCan Coles (Fly) buy shopper loyalty?<figure><img src="https://images.theconversation.com/files/9872/original/4whkpysf-1335225796.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Coles has revamped its loyalty rewards program in an attempt to win over shoppers from Woolworths.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>Consumers are becoming less loyal as they put more focus on getting the best possible deal, and become more willing to shop around to get it. In response, retailers have turned to loyalty programs in an attempt to encourage consumers to shop exclusively at their stores, with the <a href="http://www.smh.com.au/business/millions-targeted-in-coles-relaunch-of-flybuys-scheme-20120419-1xa58.html">revitalisation of FlyBuys</a> the most recent example. At their core, loyalty programs have two benefits to retailers: encouraging greater customer loyalty, and gathering customer data. Given that groceries account for a large share of household expenditure and the relatively homogeneous product offerings, the groceries category is very susceptible to disloyal behaviour. This has resulted in a battle between the two heavyweights – Coles and Woolworths - and Coles is hoping the revamped FlyBuys program will gain the favour of shoppers. </p>
<p>A less visible benefit to Coles is the data they can gather from FlyBuys members, although it remains unclear how sophisticated this data collection is. At its simplest level, loyalty data such as email and home addresses can be used for direct marketing activities, such as sending out catalogues and promotions. </p>
<p>At its most sophisticated level, data from loyalty programs can be used to identify purchasing behaviours of the overall membership base, such as products commonly purchased together (such as pasta and pasta sauce) and the impact of promotions. It is this data that will be of most use to Coles, allowing the supermarket giant to formulate strategic and promotional decisions that suit the largest number of shoppers, rather than specific individuals. That said, it is relatively unlikely that any detailed information about individual members will be gathered or used in any meaningful way. </p>
<p>One of the most ingenious elements of the FlyBuys program is that 16 million cards have been sent out to 8 million households. This mail-out solves one of the major challenges of any loyalty program: getting people to sign up for a card. </p>
<p>In most other instances, loyalty programs require a pamphlet to be filled out in-store or at home, and then often activated online before a card is issued. This creates problems for the retailer, with staff having to ask shoppers if they would like to sign up for the program, which can be a time-consuming and inconvenient task. In contrast, for the FlyBuys program, 8 million households will shortly have two cards, and many who don’t receive a card will want to find out what they are missing out on and sign up themselves. </p>
<p>But for retailers, loyalty does not come for free; Coles has been putting a lot of focus on promoting the range of benefits consumers will receive in exchange for such loyalty. One of the main focuses of this promotion has been on the new 1 point for $1 element, replacing the previous 1 point for $2 calculation. </p>
<p>A consideration of the new rewards list, which became available yesterday, shows that the points required to redeem products have been increased accordingly, but not to the same extent. For example, a 16GB iPad 2 with Wi-Fi and 3G would require 69,300 points under the old scheme, while now it will require 110,800, a roughly 60% increase compared to a 100% increase in points per dollar. </p>
<p>Previous members have also been considered, with Coles increasing current point balances accordingly. The fact that the rise in points per dollar exceeds the rise in points per product suggests that Coles have been truthful in their claim to have added value to the program. </p>
<p>In the short term, though, the greatest value of the program will come to those FlyBuys users who regularly make large grocery purchases. They can reach the $50 discount minimum, and allocate their My5 - which allows shoppers to choose five products to receive a 10% discount when they spend $50 or more in-store - to big-ticket, frequently purchased items. Getting 10c off a weekly $1 loaf of bread is not going to generate a lot of savings, but higher priced items such as meat and dairy will generate more significant savings. </p>
<p>These benefits will be relatively short-lived, however, with the My5 program currently set to finish on 31 October. The supermarket will be hoping that, by then, shoppers will have experienced enough discounts that they have developed a positive feeling towards shopping at Coles, and remain loyal despite no longer receiving the My5 offer.</p>
<p>This end date (almost exactly six months following the program’s launch) provides Coles with a test window and a chance to review or update the program depending on whether it has had the desired effect, and most likely to tailor a response to Woolworth’s inevitable retaliation. </p>
<p>Overall, Coles have clearly tried to appeal to the value-conscious consumer with their revitalised program. The amount of interest and discussion already generated could be called a success from a promotional standpoint, and will certainly bring customers into Coles in the short term - out of curiosity, if nothing else. </p>
<p>The My5 scheme will appeal to a lot of families looking to save on their most regularly purchased items, but could backfire if these discounts are no longer available after October, and a suitable replacement scheme is not offered.
By responding to Woolworths’ Everyday Rewards card in such a big way, Coles has taken back the upper-hand - at least for the time being - by getting people talking about their brand and their new program while families receive their new cards, which are ready to use. </p>
<p>The long-term benefits this provides Coles will only become apparent following the inevitable retaliation from Woolworths. Either way, smart consumers should be able to find themselves some useful benefits and savings from the new FlyBuys program. In exchange for a little loyalty, of course. </p><img src="https://counter.theconversation.com/content/6640/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jason Pallant does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Consumers are becoming less loyal as they put more focus on getting the best possible deal, and become more willing to shop around to get it. In response, retailers have turned to loyalty programs in an…Jason Pallant, Research Fellow at the Australian Centre for Retail Studies, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.