Loyalty’s next battle: Forget swollen member databases, active attention is the prize as broken data, generic rewards and AI personalisation collide

Loyalty’s next contest is not to enrol more customers, but to earn active attention through visible value, reliable data and personalisation that remains useful without becoming intrusive. That’s the view of Ben Goodale, the CEO of Quantum Jump, a New Zealand creative agency in the midst of an Australian expansion, led by local GM, Rachel Wintle.

Their view is that years of aggressive sign-up campaigns have left brands with sprawling membership databases that can disguise a harder commercial reality: Many registered customers are inactive, poorly understood or motivated only by the discount that persuaded them to join.

And the data seems to back them up. Adam Posner’s influential For Love or Money survey this year revealed Australians belong to more loyalty programs than ever – 93 per cent are members of at least one – but consumers are actively trimming participation, with average memberships falling to their lowest level in a decade. It is especially notable that Gen Z is disengaging the fastest, with average memberships dropping from 5.0 to 3.5 programs since 2022. 

Posner also found loyalty operators are failing to convert rich customer data into meaningful personalisation. According to the For Love or Money study, almost two-thirds of members believe brands already have enough data, but only 40 per cent regularly receive relevant offers.

With Quantum Jump planning its own loyalty survey for later in the year, Goodale contended that as consumers become more selective about the programs they use, marketers will need to distinguish membership from meaningful loyalty.

He gave the example of a pen retailer he visited in Sydney just before our interview, who asked if he wanted to join the store’s loyalty program. The pay off: Members get a 10 per cent discount. “Of course I’m going to join. It feels like nearly every retailer you go to has a program, but most of them are very cookie-cutter and [not] differentiated. The interesting thing is how brands use programs to really support differentiation,” he told Mi3. 

That requires loyalty teams to measure active participation, redemption, incremental spending, retention and share of wallet rather than treating database growth as evidence that a program is changing behaviour.

Wintle said the position of loyalty within a company varies sharply. For some major retailers, it has become part of the commercial machinery, influencing customer recognition, pricing and communications. 

“There are some brands where it’s actually part of their legacy, or there are others like Woolworths, where it’s really part of the engine of commerce,” Wintle said.

Elsewhere, programs remain an attachment built around birthday offers, standard points and introductory discounts that are “sort of tacked on”. Those mechanics can generate enrolments, but they give customers little reason to keep paying attention when similar offers are available across the market, the Quantum Jump team argued. 

Goodale said the challenge is particularly acute for retailers whose products are bought infrequently. Grocery businesses have repeated opportunities to demonstrate value, collect transaction data and bring customers back into the program. A specialist retailer selling pens, notebooks or occasional purchases has fewer moments in which to establish a habit.

The changing consumer environment does not necessarily suggest people have rejected loyalty programs. Instead, customers facing cost-of-living pressure may be concentrating their attention on a smaller number of programs that produce practical benefits. Wintle said Quantum Jump’s New Zealand research showed positive sentiment toward loyalty among millennials and Generation Z, even as Posner’s study of Australian consumers suggested younger consumers were reducing the number of programs they used.

“My hypothesis there is that they’re both right,” Wintle said. “People are just selective, so they’ll actually engage with fewer because they’re providing that tangible value.”

Programs need to deliver “money in people’s pockets,” she said, rather than relying on arbitrary points that may eventually be useful.

Financial rewards alone will not secure long-term preference. According to Wintle, “People are just selective, so they’ll actually engage with fewer [programs] because they’re providing that tangible value. Brands need to make sure that it’s money at you know in people’s pockets, not just arbitrary points that might be used at some point in the future.

“But then there’s the emotion piece as well. That’s not to discount the importance of still showing up as a brand with a tone of voice, whatever that may be, to be memorable, to stand out, and to make sure we’re choosing you again and again. It’s about staying between visits as well, so emotion, experience, and all that lovely brand stuff are still incredibly important once you’re delivering that tangible value.”

Marketers, they say, need to define what an active member looks like before using membership growth as a performance target. Media teams may also need to stop spending against customers who remain persistently disengaged and focus acquisition on people whose behaviour indicates a realistic prospect of continued use.

The bigger issue: Connecting data dots

The larger obstacle to better loyalty may sit beneath the marketing strategy. Brands often possess years of transaction records while remaining unable to identify basic customer behaviour because their point-of-sale systems, product codes, identity records and CRM platforms do not connect reliably.

Goodale cited Quantum Jump’s work with Subway and its Subcard loyalty program, which the brand subsequently closed. A customer’s purchasing history should theoretically allow brands to better target consumers. But it doesn’t always work out that way.

“You would think we would know who all the vegetarians are, and then we would only market vegetarian stuff to vegetarians. Different franchise stores used different point-of-sale systems and product codes, leaving the central business without a consistent record of what customers had bought,” Goodale said.

He offers the example to show how personalisation can fail long before an agency begins developing the creative. A message driven by incomplete or inaccurate data remains unreliable regardless of how sophisticated the copy, image or delivery technology may be.

And the agency leadership duo believe that generative AI could magnify the problem by making it cheaper to analyse customer information, create audience segments and produce large numbers of tailored messages.

Goodale said many consumer brands had historically been limited by a shortage of resources rather than a desire to exploit every piece of customer information. Businesses may lack analysts, consistent systems or the people required to turn data into usable communications.

“AI will solve a lot of problems about resources for analysts because AI is a giant analyst in one machine,” he said. “It still has to be harnessed, but we may find relatively quickly that marketers suddenly really do a lot more with their data than ever before.”

That capability creates an opportunity for brands to extract more value from information they already hold instead of continually asking customers to provide more. It also removes an accidental form of restraint. AI can scale useful offers, but it can just as readily multiply incorrect inferences, excessively specific targeting and messages that reveal more customer knowledge than the context justifies.

Per Goodale: “I think increasingly we will be blowing out campaigns using AI to extrapolate stuff, and it will allow for hyperpersonal. We’ve talked about hyper-personalisation for years. This is just a new level of hyper-personalisation, and I think it will be down to the networks to be able to deliver that level of precision targeting.”

Wintle also cautioned brands should apply a “creep test” to their data practices by considering how they would feel if their own information were used in the same way without full transparency.

“Brands just need to be transparent about that. As a marketer and as a brand, don’t be a creep about it. Give people offers that are relevant to them,” she advised. “How would you feel as a marketer if your data were being used in such a way without full transparency?”