Skip to main content

Deep Dive

Aggravated loyalty, Ehrenberg-Bass pushback: Put all the light buyers in one basket to earn "ten times" ROI, reckons Cashrewards CEO

By Paul McIntyre - Executive Editor

5 October 2020 5min read

Bernard wilson, Cashrewards CEO: “We see generally greater than ten times return on adspend, which can be double or triple that of other performance marketing channels that are more focused on conversion alone.”

By Paul McIntyre - Executive Editor

5 October 2020 5min read

Professor Byron Sharp may think loyalty programmes deliver scant return, but Cashrewards CEO Bernard Wilson aims to prove the esteemed Ehrenberg-Bass marketing academic wrong. The former Woolworths, Quantium and Myer loyalty specialist is taking Cashrewards to IPO. It has 1,400 brand partners onboard, some 800,000 regular shoppers in Australia and Wilson thinks the post-Covid world will be hungrier than ever to be rewarded in cold, hard cash in return for their purchases - and their fully-opted in data. 

Check out this week's podcast with Cashrewards CEO Bernard Wilson:

 

You need to know this:

  • Ehrenberg-Bass Institute director Prof. Byron Sharp has described deep customer loyalty to a product as “hokum ... we’re polygamous when it comes to loyalty,” he states.
  • Sharp’s research suggests that loyalty programmes can work a little, but he thinks marketers should instead spend more time and budget finding new customers: the rewards are greater because light buyers drive much more growth
  • But Cashrewards CEO Bernard Wilson says properly executed loyalty programmes deliver both brand and performance, a renewed post-Covid gateway to e-commerce – and returns of “ten times ad spend”
  • He predicts sharper digitally-driven growth in a post-Covid society – a boom time for loyalty schemes that offer something simple and tangible to customers, i.e. cash
  • Even Apple, a rare discounter, is using the platform, which aims to IPO before the year end
  • Ahead of that, Cashrewards is stepping up marketing – “getting in people’s faces” through traditional brand building to take its database into the millions - it's already up 40% through Covid 
  • Meanwhile, Wilson sees sharper data regulation as a good thing - especially for platforms where customers have expressly opted-in to earn a reward

 

“It's not just about driving loyalty or customer lifetime value. In retail, a customer can turn left to you, or right to a competitor. Used cleverly, a loyalty program can help you to get a customer to turn left more often than not.”

- Bernard Wilson, CEO Cashrewards

Giving it back to Byron Sharp

Byron Sharp and Ehrenberg-Bass have suggested that loyalty programmes can end up delivering little return – because they skew to heavy buyers, those who buy anyway. Sharp’s argument is that light buyers deliver far more growth for brands.

But Cashrewards CEO, Bernard Wilson, is a former investment banker and M&A lawyer; a man well versed in making money and putting together deals.

While Prof. Sharp may have a well-evidenced point, Wilson thinks loyalty programmes have moved beyond some of the aspects and outcomes measured in older studies. He suggests he and Ehrenberg-Bass are “aligned” that in a digital age, brand salience, or the degree to which your brand factors in a purchase decision, "requires your brand to be in more places than ever before” in order to get noticed and drive sales. In other words, cash-back is the digital version of the in-store discount, both in the aisles and just before the till.

As such, he touts the ability to deliver “mouthwatering” rewards to both brand and performance marketers, claiming 10x return on ad spend.

As well as pricking up the ears of finance and marketing chiefs, that kind of talk should whet appetites ahead of Cashreward’s anticipated IPO. A three-way win, as Wilson likes to say. But he’s had three chances at loyalty schemes for Woolworths (twice) and Myer, in order to reach this point.

Now, however, Wilson thinks a post-Covid Australia makes round three more likely to succeed first time. Some 1,400 retail partners appear to agree.

The proposition is simple: Brands partner with the platform (which claims some 800,000 Australian active shoppers); they offer cash-back on purchases which Cashrewards promotes to members; these are paid into members accounts. According to Wilson, the average member earns $300 cashback per annum, but can earn as much as $500 in a single transaction.

In a world where consumer data is becoming increasingly regulated, Wilson says the platform facilitates fair value exchange, while tying together brand and performance to close the loop, with some attribution in between.

THE PULSE

Quick question: Byron or Bernard: Does loyalty move the needle more in a post-Covid world?

Choices
Aggregate the light buyers

“Loyalty programmes are in need of a rebrand, because they are not just about loyalty these days, if they ever were,” says Wilson in response to Prof. Sharp’s views that loyalty programmes don’t move the needle.

“It's not just about driving loyalty or customer lifetime value. In retail, a customer can turn left to you, or right to a competitor. Used cleverly, a loyalty program can help you to get a customer to turn left more often than not,” says Wilson. “So it doesn't matter whether the customer is loyal in the purest sense or not. What matters is that they're turning left.”

Moreover, as shopping formats and buying cycles change, he thinks the modern definition of a loyalty programme is something that helps to “facilitate both salience and penetration via more of a direct customer connection.”

In other words, incentivising lots of light buyers for lots of different brands by paying the discount to them directly increases a retailer's appeal over its competitor.  As Wilson puts it, “why would you not take advantage of additional savings?”

Apple appears to agree. It has offered 7% cashback via the platform. Booking.com has offered 12%.

Wilson thinks a collective loyalty approach may be more viable than “every brand and its dog” trying to launch their own schemes. He would say that as Cashrewards aims to scale its roster of partners. But Wilson also has plenty of lessons in loyalty to draw upon.

“It's a bit of a dubious honour to have on your CV that you relaunched the same program twice. The strategy for Woolworths Rewards 1.0 was great. But I learned that strategy isn't everything. You can have the best idea in the world, but the idea itself isn't important - execution on it is.”

- Bernard Wilson, CEO, Cashrewards

Lessons in loyalty: execution trumps idea

Wilson helped to shape the development of Woolworth’s rewards scheme initially from late 2015, and then its second iteration the following year.

“It's a bit of a dubious honour to have on your CV that you relaunched the same program twice,” admits Wilson.

But it taught him some valuable lessons.

“I still believe that the strategy for Woolworths Rewards 1.0 was great. But through that [experience] I learned that strategy isn't everything. It was a really important life lesson for me: You can have the best idea in the world, but the idea itself isn't important - execution on it is,” says Wilson.

“You need to set yourself and the business up for success to execute. At the time, we were trying to launch a pretty novel proposition, but the business had so much on its plate with other initiatives - all high priority. It just couldn't successfully execute against the customer value proposition. And that ultimately turned customers off.”

By flipping from offering frequent flyer points to ‘Woolworth dollars’ for everyday shopping, some customers gained a benefit. But a very vocal component also missed out. With social media ablaze and CEO Brad Banducci’s inbox filling up, “the positive side was that we learned to listen to our customers in real time,” suggests Wilson. “As a business, we probably learned the value of reacting at light speed to solve the problem.”

Relaunching the loyalty programme within nine months “was no mean feat,” adds Wilson. He says the key insight is to keep the programmes simple: “You earn on your shopping and don’t need to change your behaviour… Rather than going down the path of onboarding a bunch of different partners and offering the customers the chance to redeem with those different partners.”

“We see generally greater than ten times return on adspend, which can be double or triple that of other performance marketing channels that are more focused on conversion alone.”

- Bernard Wilson, CEO, Cashrewards

Brand, performance and 10xROI?

“Businesses that forego investment in brand awareness do so at their peril,” suggests Wilson.

That said, CMOs are under greater pressure than ever to demonstrate return on investment (ROI).

“A lot of retailers are facing into headwinds, their CFOs are looking at their marketing budgets quite closely, and it’s really hard to show ROI on brand investment because it's embedded in the baseline.”

Yet one of the key aspects that drew Wilson to Cashrewards is the ability to serve both performance and brand.

“Regardless of whether the CMO is using us to drive brand awareness or conversion, they only really pay when performance is achieved,” he says.

He claims that combination delivers “mouthwatering returns” for partners.

“We see generally greater than ten times return on adspend, which can be double or triple that of other performance marketing channels that are more focused on conversion alone,” claims Wilson.

 

Marketing blitz to go beyond discounters

For now, Cashrewards members tend to be value-driven “bargain centric customers,” Wilson admits. But he sees big scope beyond that cohort.

In some markets, “cash-back verticals have twenty to twenty five per cent of the population. In Australia it has three to four per cent”.

While he won’t be drawn on growth targets pre-IPO, Wilson thinks there is “massive under-penetration” in Australia.

To tap that market, the firm will use some of the proceeds from a recent pre-IPO funding round to launch a marketing blitz that leans heavily on traditional media to get “in the customer's face to explain the value of the proposition”, according to Wilson.

“I don’t think data regulation is a risk. Firstly, the regulation is good. Businesses need to be challenged  to ensure they're seeking the right consent and using the data in a way that the customers expect - and ultimately that that they're giving relative value back.”

- Bernard Wilson, CEO, Cashrewards

Data regulation: Friend not foe

While the ACCC is shaking up data regulation across the board, Wilson believes tighter regulation holds nothing to fear.

“I don’t think it is a risk. Firstly, the regulation is good. Businesses need to be challenged  to ensure they're seeking the right consent and using the data in a way that the customers expect - and ultimately that that they're giving relative value back,” says Wilson.

“It is quid pro quo. You need to be giving customers value in exchange for the data that they give you.”

As such, tightening rules around consent and usage presents an opportunity rather than a threat as far as Cashrewards is concerned.

“The reality is … members have specifically opted-in to allow us to connect them to brands and show them offers they might be interested in. And in exchange for that, we give them something of value. We give them a significant cash-back benefit over time,” he adds. “So I think we are well placed.”

 

Post-Covid points: Back to Byron

“Some of the projections of the death of physical retail are hugely overblown,” says Wilson. Nevertheless, “the data that we're seeing suggests that we're experiencing a structural shift to online. I think marketers need to really reflect on that.”

Which brings Wilson back to Prof. Sharp.

“One of the tenets of Byron Sharp, as I understand it, is not to interrupt buying patterns. But if we think about where we are at the moment, it's the first time in living memory where a huge part of the population has had their buying pattern completely disrupted.

“This means that marketers need to reflect that change in their strategies. They need to be more thoughtful around how they're executing in a vastly changing market with vastly changing customer expectations.”

Giving customers a relatively small amount of cash in exchange for buying goods is a not exactly a tectonic shift. But it is a starting point for the “future of loyalty marketing,” Wilson suggests. “A future of companies, brands and customers that that all benefit together.”

Cashrewards’ IPO will provide some indication of whether the market buys into that vision.

In the meantime, Wilson is keen to engage with Prof. Sharp and the Ehrenberg-Bass Institute on the future of loyalty programmes via the Mi3 podcast. The offer is there for the taking.

 

Check out this week's podcast with Cashrewards CEO Bernard Wilson:
Let's go. Click here to comment.

By Paul McIntyre - Executive Editor

5 October 2020 5min read

Market Voice

Putting the aah into ooh: How programmatic is dialling up Outdoor’s wow factor

Next year programmatic outdoor will disrupt the way marketers plan, buy and optimise out of home media. VMO believes its automated trading solution, underpinned by robust third-party verified impression data, will drive double digit growth and enable marketers to bring digital measurement, and budgets, to the real world in real time.

Go deeper 2min read

Braden Clarke

Director - Programmatic Outdoor, VMO

Val Morgan Outdoor

19 October 2020 2min read

Putting the aah into ooh: How programmatic is dialling up Outdoor’s wow factor

Next year programmatic outdoor will disrupt the way marketers plan, buy and optimise out of home media. VMO believes its automated trading solution, underpinned by robust third-party verified impression data, will drive double digit growth and enable marketers to bring digital measurement, and budgets, to the real world in real time.

Go deeper 2min read

By Braden Clarke - Director - Programmatic Outdoor, VMO