The Impact of Customer Retention Programs on Individuals and an Adaptation of the Technology Acceptance Model
The purpose of this report is to provide insight into the customer loyalty program, Flybuys, and to evaluate the impact it has had on individuals in terms of the function of its business model, its integration into society, and its innovation. The scope and limitations of the technology acceptance model (TAM) is explored, as well as the relevance of customer retention programs, such as Flybuys, to individuals in the customer loyalty marketplace. A proposal for the integration of additional elements into TAM for improved accuracy and predictability is also presented.
Product Background
Flybuys is a customer loyalty service owned by the coles division of Wesfarmers limited, which is known to be one of the most prevalently traded public companies in Australia. Flybuys was developed as a collaborative effort between Shell, NAB and Wesfarmers predecessor, Coles Myer, in an overwhelmingly successful attempt to gain public interest in their services to boost customer loyalty and ultimately increase profitable revenue.
Product Background
Flybuys is a customer loyalty service owned by the coles division of Wesfarmers limited, which is known to be one of the most prevalently traded public companies in Australia. Flybuys was developed as a collaborative effort between Shell, NAB and Wesfarmers predecessor, Coles Myer, in an overwhelmingly successful attempt to gain public interest in their services to boost customer loyalty and ultimately increase profitable revenue.
Customer loyalty programs are not particularly new though. Examples date as far back (and possibly much further) as the 1700s in America when copper tokens were awarded to customers of many general stores, which could then be collected and redeemed for products. A similar example slightly closer to the present would be the Brisbane City Council waste voucher system, which help convince people to utilise the service, keeping workers busy and streets clean. As many companies, past and present, make use of similar models, it is near impossible to trace the history of loyalty marketing techniques to a single creator or developer. It is more likely that this form of marketing was born out of the necessity for customer retention due to cultural and industrial challenges, such as the transition from small scale community driven cottage industries to a large scale industrial revolution, when customer retention was necessary for the survival of competing growing companies within communities experiencing exponential population growth.
Flybuys, like many other customer reward programs, rely on a centralised one-directional flow of income. This is to say that tokens, points, or vouchers are not usually redeemable for cash, but instead can only be spent on certain promotional products as set buy the companies providing the service. Basically, this allows the company/collaboration themselves to be in control of the monetary value of their point system. Point acquisition rates are generally around one point per dollar spent, while point values fluctuate depending on the value of the promotional items being offered, which are usually picked either because of their relatively cheap costs and high sales (to attract customers), or general lack of sales (to minimise financial loss on difficult to sell items).
Impact analysis
To put this into perspective, if an individual spends $50 per week at Flybuys associated businesses, then they will earn approximately 2500 points each year. If we generously double that figure due to seasonal and other temporary promotions, we stand at around 5000 points earned annually. So, even including a generous doubling of points, it would still take over 2 years to gain enough points to buy a shampoo/conditioner twin pack valued at $40, or 3 years to attain a one day pass to SeaWorld. On the more extreme side of things, it would take about 6 years to earn the points for one night of accommodation in the smallest type of room at an average hotel in Parramatta. All these examples are current, as of the date of this report, and are advertised on the Flybuys website (although the actual value of promotional items is often difficult to attain when they are of low value to the consumer).
Another way the Flybuys model restricts financial risk, affecting consumers, is by setting the acquisition rate of points to a crawl while simultaneously writing into their terms and conditions that accumulated points will be cleared if not spent in a year. In some individual cases, a year’s worth of purchases will not net them enough rewards to earn them a single item. Also, promotional items that are offered in exchange for Flybuys points only remain available for limited periods of time, often less than a year. All of these aspects reduce the likelihood that people will actually end up spending points or gain enough to make a worthwhile purchase within the time limit, wasting collected points. This further reduces risk of financial loss to the company at the expense of the end-user, while still retaining their long term business.
When logically examining the Flybuys business model, it is apparent that it uses seductive advertising and borderline deceptive techniques and conditions to persuade potential long term consumers into business they might have otherwise avoided, primarily benefiting the company at the expense of its own client base. On the other hand, the individual impact of brand loyalty marketing, including Flybuys, shows a very different story.
Flybuys, like many other customer reward programs, rely on a centralised one-directional flow of income. This is to say that tokens, points, or vouchers are not usually redeemable for cash, but instead can only be spent on certain promotional products as set buy the companies providing the service. Basically, this allows the company/collaboration themselves to be in control of the monetary value of their point system. Point acquisition rates are generally around one point per dollar spent, while point values fluctuate depending on the value of the promotional items being offered, which are usually picked either because of their relatively cheap costs and high sales (to attract customers), or general lack of sales (to minimise financial loss on difficult to sell items).
Impact analysis
To put this into perspective, if an individual spends $50 per week at Flybuys associated businesses, then they will earn approximately 2500 points each year. If we generously double that figure due to seasonal and other temporary promotions, we stand at around 5000 points earned annually. So, even including a generous doubling of points, it would still take over 2 years to gain enough points to buy a shampoo/conditioner twin pack valued at $40, or 3 years to attain a one day pass to SeaWorld. On the more extreme side of things, it would take about 6 years to earn the points for one night of accommodation in the smallest type of room at an average hotel in Parramatta. All these examples are current, as of the date of this report, and are advertised on the Flybuys website (although the actual value of promotional items is often difficult to attain when they are of low value to the consumer).
Another way the Flybuys model restricts financial risk, affecting consumers, is by setting the acquisition rate of points to a crawl while simultaneously writing into their terms and conditions that accumulated points will be cleared if not spent in a year. In some individual cases, a year’s worth of purchases will not net them enough rewards to earn them a single item. Also, promotional items that are offered in exchange for Flybuys points only remain available for limited periods of time, often less than a year. All of these aspects reduce the likelihood that people will actually end up spending points or gain enough to make a worthwhile purchase within the time limit, wasting collected points. This further reduces risk of financial loss to the company at the expense of the end-user, while still retaining their long term business.
When logically examining the Flybuys business model, it is apparent that it uses seductive advertising and borderline deceptive techniques and conditions to persuade potential long term consumers into business they might have otherwise avoided, primarily benefiting the company at the expense of its own client base. On the other hand, the individual impact of brand loyalty marketing, including Flybuys, shows a very different story.
As its entire business model is based on a consumer driven marketplace, the financial impact on individuals is relatively low. This is because the consumer has the individual power to choose his preferred products and services, creating a competitive market and driving prices to accommodate to the consumer. Essentially, customer reward services like Flybuys, while on one account are attempting to profit from the masses, are also carefully accommodating for the needs of the masses. The dual nature of this feature of the integration of customer retention programs into society also helps to highlight the idea that it was not necessarily invented, but had gradually evolved, simultaneously with industrial and societal change. That it was naturally integrated into society out of necessity.
It is quite difficult to analyse exactly how the customer loyalty program, Flybuys, managed to gain so much early momentum and continued success, for a few major reasons. Firstly, the definition of a loyal customer can alter from study to study due to a large number of differences in classification. For example, is it reasonable to label a customer as being loyal if their motives are purely financially based, as opposed to those who purchase based on personal preference or are simply habitual repeat purchasers? Secondly, it is often in dispute how regular and how substantial purchases need to be in or to be considered a loyalty purchase. There are also, of course, innumerable variables as to why certain demographics may or may not accept a piece of technology or product, such as financial dependence, class, disability, age, gender, etc. Therefore, attempting to understand the acceptance of a piece of technology can be problematic, especially before official release.
Theory Justification
The technology acceptance model (TAM) can be of great use in determining the acceptance and impact of aspects of design and technology based on people’s perceptions, instead of focusing on the hardware or designed system in question. As an alternative to attempting to understand consumer actions based on financial or societal differences, particular pieces of hardware, or design, it is possible to evaluate the acceptance of a piece of technology based on its perceived usefulness and its perceived ease of use, leading to quite a different examination of the acceptance of technology. There are many advantages in analysing the acceptance of technology in this manner, such as entirely removing the necessity for the complexity of demographic and technology specific classification during analysis, creating an easy to use, useful acceptance model. Another advantage is that focusing on customers perceptions of marketable products in a consumer driven market place can help to further strengthen buyer/seller relations through the inadvertent accommodation for consumer’s needs, similarly to the outcome of the Flybuys reward system.
It is understood that Flybuys is dependent upon public perception of usefulness and ease of use. It is clear then, that Flybuys’ dependence on these aspects of technology has affected it’s market practices, mainly in the realm of public product perception through advertising. It is also understood that the technology acceptance model facilitates for public perception of usefulness and ease of use, but not the perception towards the brand or advertising material; perhaps Flybuys was successful due to its ease of use and usability, or perhaps due to its marketing techniques. This indicates that a large external factor, the intention and perception of advertising materials, has been ignored during product analysis using the TAM method.
Innovators and early adopters, as defined by the diffusion of innovations theory, are among the first groups of consumers who accept a product or technology. Therefore, customer perceptions of a product or brand rely directly on initial advertising, either during the pre-release or release phases of public marketing. Advertising is simply the consumers first and foremost point of information when forming a valid opinion about a product’s ease of use or usefulness, hence directly affecting their acceptance. An adaption of the technology acceptance model is proposed in Fig 2 on page 4, representing a possible incorporation of perception of advertising into the model.
Basically, the proposal assumes that the true mediator of product acceptance is the end user’s attitude towards the brand and it’s advertising, which is heavily influenced by three major factors. Initially by exposure to advertising, and secondarily to beliefs about product attributes and affective reactions to advertised material. Incorporating these particular variables concerning the attitude towards a particular brand, while slightly increasing the complexity of the model, also include the potential to greatly improve the accuracy of analysis by accommodating for early, correlated factors which vastly affect the precision of the final outcome. TAM cannot be used to predict future acceptance outcomes due to it being such a general theory with such a large chance of error based on highly variable external factors. Increasing the accuracy of the model, in turn, also increases the predictability of the model, allowing designers, advertisers, and businesses to appropriate known successful designs or technologies with greater precision during future product proposals. This also allows businesses to better target selected demographics, improving consumer relations, which directly affects individual loyalty through consumer perception of guarantee, personal identification, social identification and status. Fig 3 on page 4 represents the fundamental constituents making up the addition; the components necessary to evaluate the attitude towards the brand and its advertising, which can then be incorporated into TAM. Notice that the attitude towards brand and advertising can directly affect, and be affected by, perceived usefulness and perceived ease of use.
Conclusion
In conclusion, by incorporating a further understanding of consumer acceptance into the technology acceptance model by the classification of further external variables, it is not only possible to attain a more accurate representation of the correlative elements of consumer acceptance, but it also allows the opportunity to account for aspects of advertising during the analysis of the product. This kind of marketing accountability also helps to combat the currently overwhelming lack of responsibility advertisers adopt with regards to the seductive and borderline deceptive marketing techniques used in both regular advertising materials, and customer retention programs, such as Flybuys. By incorporating these extra elements, the impact of consumer retention programs, including Flybuys, can be made clearer to individuals so that they can make informed decisions on the practicality and simplicity of consumer products, further tightening mutual and productive economic relations between businesses and individuals.
It is quite difficult to analyse exactly how the customer loyalty program, Flybuys, managed to gain so much early momentum and continued success, for a few major reasons. Firstly, the definition of a loyal customer can alter from study to study due to a large number of differences in classification. For example, is it reasonable to label a customer as being loyal if their motives are purely financially based, as opposed to those who purchase based on personal preference or are simply habitual repeat purchasers? Secondly, it is often in dispute how regular and how substantial purchases need to be in or to be considered a loyalty purchase. There are also, of course, innumerable variables as to why certain demographics may or may not accept a piece of technology or product, such as financial dependence, class, disability, age, gender, etc. Therefore, attempting to understand the acceptance of a piece of technology can be problematic, especially before official release.
Theory Justification
The technology acceptance model (TAM) can be of great use in determining the acceptance and impact of aspects of design and technology based on people’s perceptions, instead of focusing on the hardware or designed system in question. As an alternative to attempting to understand consumer actions based on financial or societal differences, particular pieces of hardware, or design, it is possible to evaluate the acceptance of a piece of technology based on its perceived usefulness and its perceived ease of use, leading to quite a different examination of the acceptance of technology. There are many advantages in analysing the acceptance of technology in this manner, such as entirely removing the necessity for the complexity of demographic and technology specific classification during analysis, creating an easy to use, useful acceptance model. Another advantage is that focusing on customers perceptions of marketable products in a consumer driven market place can help to further strengthen buyer/seller relations through the inadvertent accommodation for consumer’s needs, similarly to the outcome of the Flybuys reward system.
It is understood that Flybuys is dependent upon public perception of usefulness and ease of use. It is clear then, that Flybuys’ dependence on these aspects of technology has affected it’s market practices, mainly in the realm of public product perception through advertising. It is also understood that the technology acceptance model facilitates for public perception of usefulness and ease of use, but not the perception towards the brand or advertising material; perhaps Flybuys was successful due to its ease of use and usability, or perhaps due to its marketing techniques. This indicates that a large external factor, the intention and perception of advertising materials, has been ignored during product analysis using the TAM method.
Innovators and early adopters, as defined by the diffusion of innovations theory, are among the first groups of consumers who accept a product or technology. Therefore, customer perceptions of a product or brand rely directly on initial advertising, either during the pre-release or release phases of public marketing. Advertising is simply the consumers first and foremost point of information when forming a valid opinion about a product’s ease of use or usefulness, hence directly affecting their acceptance. An adaption of the technology acceptance model is proposed in Fig 2 on page 4, representing a possible incorporation of perception of advertising into the model.
Basically, the proposal assumes that the true mediator of product acceptance is the end user’s attitude towards the brand and it’s advertising, which is heavily influenced by three major factors. Initially by exposure to advertising, and secondarily to beliefs about product attributes and affective reactions to advertised material. Incorporating these particular variables concerning the attitude towards a particular brand, while slightly increasing the complexity of the model, also include the potential to greatly improve the accuracy of analysis by accommodating for early, correlated factors which vastly affect the precision of the final outcome. TAM cannot be used to predict future acceptance outcomes due to it being such a general theory with such a large chance of error based on highly variable external factors. Increasing the accuracy of the model, in turn, also increases the predictability of the model, allowing designers, advertisers, and businesses to appropriate known successful designs or technologies with greater precision during future product proposals. This also allows businesses to better target selected demographics, improving consumer relations, which directly affects individual loyalty through consumer perception of guarantee, personal identification, social identification and status. Fig 3 on page 4 represents the fundamental constituents making up the addition; the components necessary to evaluate the attitude towards the brand and its advertising, which can then be incorporated into TAM. Notice that the attitude towards brand and advertising can directly affect, and be affected by, perceived usefulness and perceived ease of use.
Conclusion
In conclusion, by incorporating a further understanding of consumer acceptance into the technology acceptance model by the classification of further external variables, it is not only possible to attain a more accurate representation of the correlative elements of consumer acceptance, but it also allows the opportunity to account for aspects of advertising during the analysis of the product. This kind of marketing accountability also helps to combat the currently overwhelming lack of responsibility advertisers adopt with regards to the seductive and borderline deceptive marketing techniques used in both regular advertising materials, and customer retention programs, such as Flybuys. By incorporating these extra elements, the impact of consumer retention programs, including Flybuys, can be made clearer to individuals so that they can make informed decisions on the practicality and simplicity of consumer products, further tightening mutual and productive economic relations between businesses and individuals.
Figures
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