Differentiate or Imitate? Rewards Programs in Aussie Marketing Strategy

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Rewards programs are everywhere and you’re likely to be a member of at least one. Maybe more.

Whether it’s to differentiate on product or compete with rival programs, today’s marketers need to consider these programs within their marketing strategy mix.

Why Rewards?

We are taking on more of these programs each year with a whopping 71% of the Australian population now being members of at least one program (Roy Morgan).

The latest research reveals Woolworths Rewards as the most popular program with 49% of the population being apart of their membership base. Retail giant Myer also stands as a significant rewards player with more than one in every five Australians existing on their database.

So who’s driving this desire for points?

Nielsen’s Global Loyalty Sentiment Survey reveals that younger demographics are leading this surge with Millennials demanding more rewards than their predecessors, the Baby Boomers. 81% of Millennials want opportunities to earn rewards by doing some specific activity and 69% want a tiered program with exclusive rewards. Compared to 65% and 45% for the Baby Boomers.

Rewards to Differentiate

Taking a look at some traditional strategy lessons, we learn that these rewards programs can fulfil many requirements of business literature.

As per Porter’s Generic Strategies Theory, brands can lead markets by taking one of three different approaches; cost leadership, differentiation and focus.

Brands wanting to implement a differentiation approach can target one or many attributes that consumers perceive as important and focus on this. This unique approach can help brands in competitive market places gain market share.

Rewards programs offer a compelling argument for brands wanting to adopt this strategy. We know consumers are demanding rewards more and more, so why not offer unique value to customers via a program that incentives them for their repeat purchase?

ASX-listed health insurance provider Medibank agrees.

The industry they operate in is highly competitive, they’re all virtually selling the same product with a different logo and price wrapped around it.

Insurers can find it challenging to differentiate themselves to consumers as they often have little interaction with them.

Medibank announced in February 2018 that they will be giving back $20 million to customers this year as a one-off loyalty bonus whilst also launching a new loyalty program.

Imitation Game

Let’s consider another traditional strategy tool – the SWOT Analysis.

The model of evaluating the strengths, weaknesses, opportunities and threats of a business has been used for decades.

New market players entering competitive industries such as banking and online wagering will have to consider competitors rewards programs as a serious threat within this analysis.

The purpose of identifying these threats is to turn them into opportunities. But how can we do that?

Take a leaf from the Treacy and Wiersema’s strategic approach and focus on product leadership. Think Apple, BMW, Mont Blanc – “we’re the best in the business”.

Rewards in these industries are becoming synonymous with product. By becoming a market leader on product (rewards), this allows new players to dominate the rewards angle.

Emerging Markets Taking on Rewards Programs

Online wagering has been one of the fastest growing industries in Australia over the last 10 years with 1.4 billion is gambled online each year and the existing growth rate at 15% per annum.

In such a competitive market place, rewards are playing their part in marketing strategies to acquire new and retain existing customers by some of the markets major players.

Crownbet, William Hill, TAB and Ubet have all implemented rewards programs over the last two years. Originally a differentiation strategy to stand out in an incredibly overcrowded market place, now rewards are becoming a part of the standard online wagering experience.

Emerging online wagering providers in Australia such as Neds (launched November 2017) and PointsBet (launched February 2017) face the threat now of falling behind on product as their competitors continue to develop their existing rewards experiences.

Mature Rewarding Industries

The big four are at the mature end of their rewards journey with ANZ, Westpac, CommBank and NAB all competing for the strongest rewards offering.

Savvy consumers now expect rewards and the big four adjust points, promotions and rewards products in order to compete in the rewards space.

This obsessions for rewards amongst the banks is also rife amongst a lot of the smaller players. Bendigo Bank, Bankwest, Virgin Money, Bank Australia and many more all have rewards features attached to their premium credit cards.

So what does this industry tell us about rewards?

As highly competitive markets mature, rewards programs become an important aspect of marketing strategy. Something that was once unique to a few players, has become a fundamental requirement throughout the entire industry.

Get Thinking Marketers

The consumer data and industry examples paint a convincing picture.

Marketers operating in highly competitive market places must consider a rewards program either now, or in the very near future.

If you don’t, your competitors will.

Michael Shea

About Michael Shea

General Manager Sales Development at Carrots+

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