BORN THIS WAY: THE NEW ZEALAND MILLENNIAL LOYALTY SURVEY. How Generation Y Will Reshape Customer Loyalty

Transcription

1 BORN THIS WAY: THE NEW ZEALAND MILLENNIAL LOYALTY SURVEY How Generation Y Will Reshape Customer Loyalty Rick Ferguson Vice President, Knowledge Development Simon Rowles Managing Director, New Zealand

2 01 / New Zealand Millennial Loyalty Survey YOUR BUSINESS RESULTS DELIVERED OUR INSIGHT aimia.com

3 New Zealand Millennial Loyalty Survey / 1 SUMMARY In 2012, Aimia commissioned research firm Harris Interactive to investigate consumer attitudes of Australians and New Zealanders aged between 19 and 29 otherwise known as Millennials. Similar research had already been carried out in Canada, the United Kingdom, and the United States, the results of which can be found in our Knowledge Center at aimia.com. The survey focused on brand loyalty, data privacy, mobile and social media marketing, and rewards program participation, and comparing Millennial attitudes and behaviours with those of non-millennials. Among our high-level findings among New Zealand Millennials: > More than 85 percent say they participate in loyalty and reward programs. This is more than in any of the other four markets studied, indicating a mature, nearly saturated market for New Zealand loyalty programs. > Eighty percent are more likely to prefer a brand that offers a loyalty or rewards program to one that doesn t. > Sixty percent agree or strongly agree that loyalty rewards and incentives would make them more likely to share personal information with marketers a higher percentage than older consumers (51%) and the highest rate of agreement among Millennials in all the markets surveyed. > Just over half are willing to promote products or brands through social media in exchange for rewards a significantly higher percentage than non-millennials (33%). > Thirty percent are interested in using a mobile device as a substitute for plastic loyalty cards, more than double the percentage of non-millennials (13%). > They are less concerned than non-millennials about data privacy and security. Loyalty and reward programs are perceived as the most privacy-friendly marketing channels by Millennials: Only 17 percent are concerned about sharing personal information with loyalty programs they belong to. > Seventy percent rate the ability to earn a common currency as the top benefit meaning that most of the programs they re engaging with are not providing enough value on their own and must either ramp up the value they provide or find partners that they can do this with. Table of Contents 2 Introduction 4 Methodology 6 Generation Why 8 Millennial Brand Loyalty 10 The Millennial Loyalty Challenge 12 Millennials and Technology: All Marketing is Mobile 14 Millennials and Privacy: The Value Exchange 16 Millennials and Rewards: Playing The Game 18 Participation in Key New Zealand Programs 20 Conclusions: Answering Generation Why 22 Survey Questions 23 About the Authors

4 2 / New Zealand Millennial Loyalty Survey INTRODUCTION According to New Zealand business magazine Idealog, Millennials aka Generation Y is hard to pin down, fitting such contradictory descriptions as extremely self reliant/having a high sense of self-worth and needing constant recognition and attention/high parental attachment. Either way, it s generally agreed that the Millennial generation includes anyone born between the early 1980s and the mid-1990s. According to Statistics New Zealand, it accounts for more than 14 percent of the country s 4.4 million population, making it the next great engine of the New Zealand consumer economy. In its 2011 Proprietary Millennial Study, the Omnicom Group noted the financial struggles of New Zealand Millennials, pointing out that while 65 percent enjoyed shopping, nearly half disagreed with the statement If I see something I like, I typically buy it immediately. With many New Zealand Millennials still in school (42%) or living with their parents (43%), value is a major consideration. Those struggles are intensified by the impact of the aging Baby Boom generation on the world economy. A 2008 McKinsey Global Institute study predicts that the retirement of Baby Boomers will siphon roughly $400 billion annually from the US economy. New Zealand and the rest of the developed world can expect a similar impact. This will leave Millennials to pick up the slack in consumer spending. That s no easy task: The unemployment rate among Millennials is higher than among older populations in most developed economies (including New Zealand, where it hovered above 6 percent at the time of our survey). Thanks to high education costs, many Millennials are deep in debt. Others depend on financial support from their families, or have moved back in with their parents. Coming of age during the Great Recession has also instilled in them a healthy economic conservatism. Given their importance to New Zealand s economy, it s imperative that marketers develop sustainable, reciprocal, value-added relationships with Millennials based on deep insight into their behaviour. That s where Aimia can help. In partnership with Harris Interactive, we surveyed 1,125 New Zealand consumers including more than 500 Millennials to help you understand their attitudes and behaviours toward customer loyalty and reward initiatives. In particular, we focused on their attitudes toward: > Loyalty: What makes a Millennial loyal to a consumer brand? What aspects of consumer-brand relationships drive their loyalty? How do these attitudes differ from those of previous generations? > Technology: Everyone assumes that Millennials avoid , tweet everything, and only respond to marketing messages forwarded by their peers via smartphones. Are these assumptions true? Or is Millennials relationship to marketing technologies more complex than we think? > Privacy: Facebook CEO Mark Zuckerberg (age 29) famously declared that the age of privacy is over. Do his fellow Millennials feel the same way? How important is online privacy and data security to this generation? What perks and benefits must marketers offer to persuade them to share personal information that improves marketing ROI? > Rewards: The modern loyalty marketing industry was built on Baby Boomers preference for travel and merchandise rewards fuelled by credit card spend. Will Millennial business travelers and heads of households mimic that behaviour? Or will they rewrite the rules of reward program engagement? While our survey results provide powerful insights into typical New Zealand Millennial behaviour, lasting, loyal relationships are never with groups, but individuals. That s where loyalty management can help. No other marketing discipline is better equipped to help you build profitable relationships with individual Millennial consumers based on value, trust and information. We hope this research will help you get started.

5 New Zealand Millennial Loyalty Survey / 3 Technology is a huge part of my life. From the moment I wake up to when I go to bed, I have my phone on me. I m on my computer multiple times a day, working, sending s. Adam, 21

6 4 / New Zealand Millennial Loyalty Survey METHODOLOGY > Aimia commissioned research firm Harris Interactive to survey the attitudes and opinions of Millennials (age 19-29) compared to non-millennials (age 30+) in New Zealand, Australia, Canada, the United Kingdom, and the United States. The survey covered technology use, reward program participation, mobile marketing, privacy preferences, and brand loyalty. > This portion of the study was conducted online in New Zealand in > Qualified respondents were age 19 or older and resided in New Zealand. > Individual interviews averaged 17 minutes in length. > The data was weighted by age, gender, and geographical region to be representative of the general population (not just the online population) of age 19+ respondents in New Zealand. > Due to rounding, some survey question responses may not add up to 100 percent. The infographics in this paper include the survey question numbers; the actual survey questions can be found on page 22.

7 New Zealand Millennial Loyalty Survey / 5 If a reward program is good, loyalty is the word that comes to mind. Because if the program provides good service, then I ll continue to use it. But if there are stipulations behind it, like having to use your points in a certain time frame, then I won t use it. Torin, 26

8 6 / New Zealand Millennial Loyalty Survey GENERATION WHY Generation Y has been called optimistic (Generation Next), selfish (Generation Me), immature (the Peter Pan generation), and an updated version of previous generations (Echo Boomers/the Boomerang Generation. Note, too, its immediate predecessor was called Generation X). We prefer the term Millennial as the most neutral descriptor. After all, the one thing we can all agree on is that it is the first generation to come of age in the 21st Century and that alone makes these consumers special. Today s Millennial learners are the Net generation native speakers of a digital language, said Trae Stewart, an associate professor at the University of Central Florida, in They value intelligence, are fascinated by new technologies, and multitask easily, he added, while the ability to connect with others through a couple of computer clicks has resulted in a new attitude to problem solving. Compare that view with Jean Twenge s, author of the 2007 book Generation Me, which describes a cohort rife with entitlement, crippled by narcissism, and wholly rejecting social conventions. Then we have historians William Strauss and Neil Howe, who describe in their 2000 book, Millennials Rising a cohort destined to become the next Hero Generation, more akin to its Greatest Generation grandparents and great-grandparents than its parents. Rather than add to those generalizations, we will focus solely on the demographic data supplied by our survey and extensive secondary research, which leads to the following (supportable!) conclusions about New Zealand Millennials: > They re better educated. Nearly one quarter have already earned a bachelor s degree or higher. This outstanding rate is significantly higher than that of the Gen X-ers and Baby Boomers. Another 48 percent have already attained some form of higher school or vocational qualification and may yet be headed for a bachelor s degree. Given their educational attainment, Millennials are more likely to be skeptical of social and economic constructs especially marketing. > They earn more. Over 15 percent already claim earnings of more than $40,000. And with almost half still in school at the time of our study, and the balance just beginning their careers, their income levels should rise. The natural correlation between educational and income levels will likely carry the Millennials much farther than previous generations, putting them on the brink of becoming the most important target market in New Zealand. > They re wired. New Zealand Millennials are much more likely to be heavy internet users than members of previous generations. Our survey reveals an average of over 23 hours of internet usage a week. More than one-third of Millennials exceed this average, far more than older consumers. The implications for marketers are everywhere such as in campaign development, analytics, communications, advertising, and social media. Marketers face a generation willing to engage in relationships with its favourite brands, but reluctant to spend without a clear promise of value. The question loyalty marketers will need to answer for this group is not How or What, but Why? Why should a Millennial consumer ask to be identified through your loyalty or reward initiative? Why should she download your smartphone app? Why should she respond to your location-based offer? What s in it for her? In short, don t think of Millennials as Generation Y. Think of them as Generation Why.

9 New Zealand Millennial Loyalty Survey / 7 GENERATION WHY New Zealand Millennial consumers are better educated and more likely to be heavy internet users, while the majority occupy lower income brackets (many are students and/or people with no income). MILLENNIAL RESPONDENT DEMOGRAPHICS: SURVEY RESPONDENT EDUCATION: % % Sixth form qualification or less Higher school qualification Secondary school qualification Basic intermediate vocational Advanced vocational Bachelor s Degree or Higher THE AGGREGATE SPENDING POWER OF NEW ZEALAND S MILLENNIALS IS STILL MUCH LOWER THAN NON-MILLENNIALS AND THEY RE MORE WIRED AND HEAVIER USERS OF THE INTERNET. 8% % % % Light (0-7 (0-7 hours) Medium (8-21 (8-21 hours) Heavy (22+ (22+ hours) 1.7 Billion Estimated number of Millennials worldwide 620,000 Estimated number of New Zealand Millennials 14.1% Percentage of Millennials in the New Zealand population

10 8 / New Zealand Millennial Loyalty Survey MILLENNIAL BRAND LOYALTY Loyalty marketers understand the difference between customer loyalty and customer relationships. Loyalty is fuelled by product and service drivers, while relationships are fuelled by trust, commitment, and reciprocity. We wanted to know if Millennials viewed brand loyalty and relationships any differently than older consumers so we asked them. Customer loyalty is created by the drivers first articulated by McDonald s CEO Ray Kroc: > Quality: The quality of your products and services in contrast to your competition s. > Service: The responsiveness and training of your frontline staff, and the ease of use of your virtual tools. > Cleanliness: That is, your customers experience while doing business in your physical or virtual locations. Sometimes simply labelled Experience. > Value: The prices of your products and services, which must be in line with your competitors prices and with your delivery of the other three drivers. Customer relationships, in contrast, are a byproduct of customer loyalty and are defined by the reciprocal added value exchanged between brands and their customers. They are defined by two variables: value and length. You create loyal customers by delivering on Ray Kroc s loyalty drivers, and you keep them loyal by building relationships based on these three principles: > Trust: Relationship value increases as trust increases between loyal customers and the brand. Trust increases when you deliver on your brand promise, use customer data responsibly, and deliver relevance through marketing insights. > Commitment: For a brand to sustain a relationship with a loyal customer, it must demonstrate commitment to the relationship by executing on the fundamental drivers of loyalty. > Reciprocity: Relationship value increases as information exchanged between the brand and its loyal customers increases. Information fuels recognition and rewards, which increases the flow of information from loyal customers and creates a positive feedback loop. Marketers forge customer relationships with the tools of loyalty management. We asked our respondents to articulate the importance of different elements of loyal relationships to them. Here are the top-level findings (also summarized on page 9): > Loyalty is driven by quality and value. Contrary to their stereotype as perpetual adolescents shaped by overbearing parents, Millennials are a self-serve generation that accesses information online to make purchase decisions based on quality and value. While the recession has made them more price sensitive than their parents, they value quality above all. > Loyalty programs are a differentiator. When Millennials see parity between products or services, they ll choose brand relationships based on rewards and incentives. Eighty percent rate loyalty and reward programs as very or somewhat likely to make a difference in their purchase decisions. > Trust is enhanced by rewards. Building trust is crucial for marketers hoping to gain personal information from Millennials. Millennials identify reward incentives as the top factor fuelling their trust in far greater numbers than their older counterparts. They also expect brands to secure their personal data and use it ethically, but are less concerned about privacy than non-millennials. > Loyal Millennials will share more. Over two-thirds of Millennials are likely to purchase more from, feel more loyal to, and tell their networks about brands that offer reward incentives rates that are higher than for older generations. What makes Millennials even more valuable is their willingness to promote products and services in exchange for rewards. They understand the importance of customer word-of-mouth and for the right incentives, they ll become brand advocates.

11 New Zealand Millennial Loyalty Survey / 9 MILLENNIAL BRAND LOYALTY Consumers allow marketers to build relationships with them based on TRUST, COMMITMENT, and RECIPROCITY. New Zealand Millennials are no different from other groups in this regard and the tools of loyalty management are essential to building profitable relationships with them. TRUST: Trust is a crucial step for marketers hoping to collect personal information from Millennials. New Zealand Millennials identify rewards and incentives, data security, and ethical use of data as their top requirements for brands that wish to collect and use customer data for marketing. Q. What value would you need in order to share personal information with marketers? 29% 20% Millennials Non-Millennials Price/Value COMMITMENT: Brands demonstrate commitment to consumers by observing the fundamental drivers of loyalty. New Zealand Millennials value quality above all other loyalty drivers, but are more price conscious than older consumers. Meanwhile, three-quarters of Millennials actively seek out loyalty programs. Q. What factors make you loyal to a brand? (percent ranked #1) Q. How likely is a loyalty program to make you choose company A over company B? 37% 53% 80% Very/Somewhat likely (41%/36%) Neither likely nor unlikely Somewhat unlikely Not at all likely RECIPROCITY: In exchange for a positive loyalty program experience, the vast majority of New Zealand Millennials will do more future business with you and feel more loyal to your brand and they re more likely to promote your brand to their social networks than non-millennials. Q. When participating in a loyalty program, how likely are you to: Likely Net Neutral Not Likely Tell friends about positive reward experiences? 76% % Do more business with a brand after earning a reward? 72% % 22 8 Be or feel more loyal to a brand after earning a reward? 70% % 22 9 Promote products or brands through social media in exchange for rewards? 51% % 27 40

12 10 / New Zealand Millennial Loyalty Survey THE MILLENNIAL LOYALTY CHALLENGE New Zealand Millennials share most loyalty drivers with older generations, including a preference for brands that offer loyalty and reward programs. But there are also key differences. For example, the recession has made them more price conscious than their parents (who still value quality the most), and they re more willing to act on your behalf by spreading the good news about your brand provided you first put some value on the table. This is good news: We know that loyalty management works, and we know that Millennials will respond to it. But one distinction highlights the unique relationship between Millennials and brands and it lies at the intersection of loyalty and technology. As the illustration on page 11 shows, smartphone technology means Millennials have far more information at their fingertips to help them make and share purchase decisions and this information is entirely beyond your control. Brands once enjoyed a captive audience: The only way customers could compare prices and service was in person. Word of mouth spread slow and straight, like molasses but it now spreads quickly and widely, like a virus. Given this, it s imperative that marketers use loyalty management to pierce through the information overload and deliver relationship value to the individual. Here are a few ways that mobile technology influences Millennial relationships: > Price is transparent. Forty nine percent of Millennials use their mobile devices to compare prices in store. Compare this with older consumers, who tend to take price claims at face value. And remember, low prices are the most significant loyalty driver among Millennials. > Quality is now determined by consensus. Quality is also a key driver of Millennial loyalty. But far from being determined by individuals, it is now determined by social contact nearly half of all Millennials (47%) read product reviews on their mobile devices in store. While older consumers can still be swayed by marketing messages, Millennials will often ignore those messages in favour of group consensus. > Social networks may be less influential than we think. Most of us assume that recommendations by members of a Millennial s inner circle trump all other factors leading to a purchase decision. But our survey reveals that social networks are not the decisive influence. That said, 38 percent of Millennials do check Facebook and Twitter for recommendations a rate significantly higher than older consumers. How can marketers build relationships with Millennials strong enough to withstand this sea of external information? They must add value and clarity using loyalty management tools that deliver immediate, targeted value. Millennials are more than willing to engage in a deeper conversation with you but you have to tell them why they should.

13 New Zealand Millennial Loyalty Survey / 11 THE MILLENNIAL LOYALTY CHALLENGE The most significant difference between New Zealand Millennials and older consumers is that Millennials actively seek information within and outside of their social networks. This information exists outside of your control. Q. Do you ever use your mobile device to: Yes No 49% 47% 38% 28% 31% 14% 84% Percentage of Millennials who use Facebook often or very often 11% Percentage of Millennials who use Twitter often or very often

14 12 / New Zealand Millennial Loyalty Survey MILLENNIALS AND TECHNOLOGY: ALL MARKETING IS MOBILE As we said earlier, Millennials are often described as digital natives who came of age in a wired world. In fact, younger Millennials have lived their entire lives online. Therefore, we tend to assume that they reject as something only their parents use, and communicate primarily by text and are only interested in messages delivered via Facebook, Twitter, or smartphone. We assume they ll eagerly make the leap to mobile payments and banking, that they ll love location-based offers, and that they ll eagerly participate in mobile-based reward programs. But are these assumptions true? We asked New Zealand Millennials, and several answers surprised us. Contrary to conventional wisdom, use of mobile devices as marketing and payment channels is driven more by the functionality of the device or app than by the age of the user. In other words, don t expect Millennials to flock to your app just because it s mobile. They ll first want evidence that it adds value to their lives. Here are some other key insights: > Online behaviour is migrating to mobile devices. Millennials are hastening the death of the desktop, with 87 percent owning a laptop, compared with 58 percent who own a desktop PC. Although a modest 17 percent, tablet penetration is still ahead of the 13 percent rate for older consumers. Meanwhile, nearly half of all Millennials (49%) own smartphones, compared with just 32 percent of older consumers. > Texting and social media are not replacements for . The popular belief that Millennials ignore in favour of texting and Facebook is not supported by our results. A healthy 93 percent still use regularly, especially via their mobile devices even if just for work or school, or to check in with their parents. But conventional wisdom is right on one count: Millennials do text and access social media platforms, especially Facebook, in far greater numbers than their older counterparts. > Mobile business app usage is not driven by age. Smartphone users in both Millennial and older age groups use brand apps to similar degrees. Purchase behaviour via apps is also similar. But as for reward program apps, only 26 percent of Millennials use them regularly which means loyalty marketers have a lot of work to do on the mobile front. > Don t take daily deals and location-based offers for granted. Millennials are only slightly more likely than older consumers to respond to Groupon-style daily deals (43% vs. 29%). Both groups exhibit low response rates to location-based offers. Even text offers hold no more appeal to Millennials in fact, older consumers are much more likely to respond to one. > The death of plastic has been greatly exaggerated. Issuers, payment networks, and startups may be racing to support mobile phones as payment, loyalty ID, and banking devices, but penetration among Millennials remains low. While Millennials are more likely than non-millennials to show interest in mobile payments and banking, the numbers are still low enough to suggest that advocates face an uphill battle in driving adoption and usage. The bright spot? Thirty percent of Millennials are excited about trading in their plastic reward cards for mobile apps, more than double the interest level among older New Zealanders. > Ease and value will drive adoption of reward program apps. Few major differences exist between Millennials and older consumers in their desire for reward program app functions and features. All age groups favour downloading coupons and exclusive offers and redeeming points via smartphones. Older consumers also favour apps for tracking points and accessing rewards accounts. While more Millennials than older consumers own smartphones, and spend more time tethered to their devices, their desire to engage brands via mobile platforms is not markedly greater. Technology is leading us to an all marketing is mobile mindset. But once again, the winners will be marketers who answer the essential question for Millennials: Why?

15 New Zealand Millennial Loyalty Survey / 13 MILLENNIAL TECHNOLOGY When asked to define themselves as a generation, New Zealand Millennials overwhelmingly point to their relationship with technology. But our survey shows that mass adoption of mobile marketing will be primarily driven by functionality, not age. Q. What do you own? Millennials Non-Millennials 87% 65% 58% 71% 17% 13% 49% 32% COMMUNICATIONS: The demise of has been greatly exaggerated; however, texting and social media do play the major role in Millennial communication. Q. How often do you (percent saying very often/often) 93% 97% 81% 80% 84% 54% Millennials 11% 3% Non-Millennials MOBILE OFFERS: With the exception of reward program apps and daily deal offers, Millennials are no more likely, and in some cases are less likely, than older consumers to connect with brands and marketers via their smartphones. Q. Do you (percent saying yes) Millennials Non-Millennials 36% 38% 38% 36% 26% 14% 43% 29% 17% 17% 46% 58% MOBILE WALLET: Millennials are more interested than older consumers in mobile wallet applications, but significant numbers in both groups show little interest in any one application. High Interest Some Interest Little Interest Q. Would you like to... 30% 30% 13% 13% % REWARD PROGRAM APPS: Ease and value drive usage for all generations. Millennials Q. Top requested features for reward program apps: Non-Millennials 63% 63% 55% 55% 55% 36% 36% % 15% 15% % % 65% 61% 61% 61% 28% 28% % % 14% 14% % 11% 11% % % % 62% 54% 54%

16 14 / New Zealand Millennial Loyalty Survey MILLENNIALS AND PRIVACY: THE VALUE EXCHANGE Loyalty management revolves around the Value Exchange. To build relationship value, marketers need their best customers to share transaction data and personal information. How? By delivering extra value in the form of rewards and recognition. This is the central activity that enables relationships that benefit both the customer and the brand. The Value Exchange often happens within a loyalty or reward program. For it to work, customers must be confident that their personal information will not be stolen, misused, or shared without their permission. Unlike targeted online advertising or location-based tracking, loyalty programs make the exchange of value for information both explicit and transparent. So we wondered: Do Millennial consumers understand the Value Exchange? If so, how does this influence their feelings about data privacy and sharing personal information? What offers do we need to put on the table to facilitate the exchange? Here are a few key insights from the survey (see page 15 for a visual summary): > Millennials are less concerned about data privacy and security than older consumers. In particular, they are significantly less concerned about overall data security, data theft, targeted online advertisements, location tracking, and search engine tracking. > However, Millennials and older age groups are equally concerned about Facebook. A warning for Mark Zuckerberg: Millennials are as wary of Facebook s ever-evolving privacy settings as older consumers are in each segment, more than 40 percent voice concern. > Loyalty programs are seen as havens of privacy. Only 17 percent of Millennial loyalty program members are concerned about their personal information being abused, as opposed to 25 percent of older members. In addition, 60 percent of Millennials are more likely to share personal information with brands that offer reward incentives, a higher proportion than older New Zealanders. > New Zealand consumers expect to opt in. Despite less concern for privacy, more than three-quarters of Millennials agree that opt in permission is a prerequisite for any brand that collects personal data or tracks behaviour. Millennials expect the Value Exchange to be transparent and permission based; older New Zealanders are even more adamant. > Millennials will grant trust up to a point. A key difference between Millennials and older consumers is that Millennials are more likely to enter into a brand relationship with a default expectation of trust. Sixty percent of Millennials agree or strongly agree that they would be more likely to share personal data with a brand that offers a reward program, as opposed to 51 percent of older consumers. Nearly half of that group (48%) will provide personal information to join a new reward program. > Loyalty program offers must be relevant. Millennials are less likely than older consumers to respond to marketing messages sent online, participate in online surveys, or respond to direct mail. Not even Facebook offers hold much interest for Millennials only 25 percent are interested in them. Additionally, Millennials are no more willing than older consumers to respond to loyalty program offers. Notable exceptions occur in mobile and social environments where Millennial engagement is higher. This suggests that loyalty marketers should build value and relevance into their program offers using digital mobile platforms. So when it comes to Millennials and data privacy, Zuckerberg is both right and wrong. He s right that Millennials are less concerned about privacy and security. He s wrong, however, if he assumes that Millennials are more forgiving than older consumers when marketers use their personal information without their express permission. Millennials are willing to grant you a measure of trust but will quickly end the relationship if you violate it. Millennials also understand the Value Exchange. They re willing to open up to marketers, but they expect to be rewarded for it. That value comes in two flavours: The value of rewards earned and status granted as a result of program participation; and the value that comes from relevant, personalized offers. The tools of loyalty management will help you answer the inevitable Why? that Millennials will ask before opening up.

17 New Zealand Millennial Loyalty Survey / 15 MILLENNIALS AND PRIVACY How do Millennials perceptions of data security and privacy colour their perceptions of the loyalty Value Exchange. Are Millennials more or less comfortable than other groups with sharing personal information with marketers? THE VALUE EXCHANGE: Profitable customer relationships are built on an exchange of information for value. New Zealand Millennials understand this transaction, and are more likely to share personal information. Q. How likely are you to (very/somewhat likely) Millennials Non-Millennials 36% 33% 60% 52% (Q911, (Q910, 916) 915) New Zealand Millennials are less concerned about privacy overall Q. How concerned are you about (extremely/very concerned) Hackers? Facebook privacy? 58% Millennials Non-Millennials 44% 73% 42% Targeted web ads? Location tracking? 39% 28% 55% 39% Search engine tracking? Reward program tracking? 34% 17% 44% 25% (Q901) (Q900) But they share concerns about control of their personal data. Q. It is important for me to (strongly agree/agree) Millennials Non-Millennials Know what data you re collecting. 78% 90% Opt in to online tracking. 77% 85% Be able to create a portable privacy profile. 78% 89% Opt in to location tracking. 65% 80% Be rewarded for sharing personal data. 60% 51% (Q906) (Q905)

18 16 / New Zealand Millennial Loyalty Survey MILLENNIALS AND REWARDS: PLAYING THE GAME More than 85 percent of Millennials participate in loyalty programs, compared with 92 percent of older consumers. This near parity indicates how entrenched loyalty programs have become in New Zealand. In fact, Millennial participation is higher in New Zealand than in any of the four other countries Aimia has studied. Millennials are slightly more patient than older consumers when it comes to being rewarded up to a point. A higher percentage of older consumers seek a reward within their first month of participation. That said, Millennial patience only lasts so long: A higher percentage of Millennials expect rewards within three months. Other differences include: > Older consumers still drive traditional loyalty sectors. Boomers and Gen Xers make up the bulk of membership in travel, retail, and financial services programs and are significantly more likely to carry rewards credit and debit cards. The grocery and petrol sectors also boast higher Boomer and Generation X membership rates. > Millennials drive participation in non-traditional sectors. While member numbers are smaller, non-traditional categories such as entertainment, video game, restaurant, and e-commerce contain higher percentages of Millennials than older consumers. These programs focus on engagement, game mechanics, and ease of participation; practices that loyalty marketers in traditional sectors will need to adopt if they want to attract Millennial members. Millennials and older consumers participate equally in proprietary retail programs, suggesting that coalitions like Fly Buys, which are currently favoured by older consumers, may need to add Millennial-focused merchants and brands to their program mix. > Value expectations are increasing. Coming into our survey, we assumed Millennials would be attracted to exclusive access, experiential rewards, and other soft benefits. But Millennials are more interested in transparent economic value (e.g., no joining fees). Like older consumers, Millennials identify cash, discounts, and gift cards as their most preferred reward choice, though at a lower rate of preference. They are more likely than older consumers to prefer home electronics, fashion, movie and concert tickets, entertainment, music, and VIP access as reward choices. > Instant gratification is the new norm. Millennials are far more demanding than older consumers in terms of speed to reward. Seventy-one percent expect to earn a reward within the first three months of participation, with 32 percent expecting a payout within the first month. While 40 percent of older consumers want a reward within the first month, only 57 percent expect a goodie anytime within the first three months. > Millennials crave soft benefits once they know about them. Loyalty marketers know a combination of hard economic benefits and soft recognition benefits provides the strongest loyalty value proposition. New Zealand loyalty programs typically focus on hard benefits at the expense of soft ones which means consumers have low expectations for soft benefits. Even so, Millennials are more interested in soft benefits such as special privileges than older consumers. We anticipate this expectation will increase. One intriguing question for loyalty marketers is how much Millennial reactions are driven by age, income, and sector participation (all temporary), and how much are driven by behaviours that will persist into their 30s and 40s? Will Millennials continue to demand free programs that demonstrate instant value? Or, as they settle into careers and begin to build households with more earning power, will they begin to mimic their parents behaviour and start saving up equity for free trips and big-ticket experiences? Will their coalition participation continue to grow? We know Millennials crave loyal relationships with their favourite brands. But economic uncertainty means they look for immediate value in every interaction. Loyalty marketers will need to demonstrate that value at every touch point, through every offer, and at all stages of the customer lifecycle. Millennials may not rewrite the rules of engagement, but they ll certainly help them to evolve.

19 New Zealand Millennial Loyalty Survey / 17 MILLENNIALS AND REWARDS The key difference between Millennial loyalty program participation and participation by older consumers: Millennials expect immediate gratification and obvious value from your program. These expectations will require marketers to reinvent programs in traditional sectors. PLAYING THE GAME: Millennials play the loyalty game to win Q. Are you a member of a loyalty program? (yes) Millennials Non-Millennials Q. How long should it take to earn a reward? 85% 92% 39% % So they expect programs to be free, fast, and relevant with exciting rewards like trips. Q. Top reasons to join a reward program: Millennials Non-Millennials 82% 37% 37% 37% 41% 49% 46% 16% 55% 55% 8% 25% 5% 49% Q. Top program sectors: Millennials Non-Millennials $ Fly Buys 83% 91% 39% 40% 53% 57% 24% 38% 29% 12% 25% 15% 14% 17% 13% 9% And they re more open to non-traditional and lifestyle rewards in entertainment, fashion and VIP access. Q. Preferred reward categories: Millennials Non-Millennials Gift Cards 60% 64% 79% 73% Cash Back Discount Coupons 35% 48% 22% 38% 27% 20% 32% 21% Travel Entertainment Home Electronics 12% 8% 4% 9% 15% 8% VIP Access Music Fashion 10% 10% 4% 2% Charity Mobile Downloads

20 18 / New Zealand Millennial Loyalty Survey PARTICIPATION IN KEY NEW ZEALAND PROGRAMS Fly Buys is the most popular loyalty program in New Zealand, with more than half of both Millennials and non-millennials claiming to have used it within the past week. It is, after all, the coalition program with the highest national penetration rate in the world. The AA Smartfuel coalition program has almost half of both Millennials and non-millennials using it weekly and ranks as the second most-frequently used loyalty program in our study. More than 20 percent of New Zealand Millennials used each of the market s two major airline loyalty programs (Qantas Frequent Flyer and Air New Zealand Airpoints), within the last week. This is an unexpected finding given that Air New Zealand has more flights, more credit card, and more retail (through Fly Buys) partners than Qantas. In the non-millennial group, though, Air New Zealand Airpoints is five times more likely to have been used in the last week. New Zealanders show similar use of grocery loyalty programs to the United Kingdom with Millennials, at 53 percent, slightly less likely to use them than non-millennials (57%). These are both roughly double the rate we found in Australia. Fly Buys, the coalition program with the highest penetration rate of any national program in the world (52.8% of New Zealand s population), may be the foundation on which this usage is built. New Zealanders use of credit card loyalty programs match those found in Australia and the United Kingdom, which are all roughly half of the rate we found in the United States and Canada. Non-Millennials in New Zealand, Australia, and the United Kingdom are 50 percent more likely to be participating in these programs than Millennials. New Zealanders and Australians show similar rates of adoption of travel loyalty programs, although their use rates trail those of Americans the biggest users of travel loyalty programs. Older New Zealanders are more likely to use retail loyalty programs than their Millennial counterparts. Canada was the only other country surveyed where we observed this. Everywhere else, Millennials use retail loyalty programs more than non-millennials. The level of adoption of retail loyalty programs matches, once again, Australia and the United Kingdom, with Canada and the United States slightly higher. The entertainment loyalty program category is the only one in which Millennial adoption comprehensively outweighs non-millennial adoption in every one of our surveyed countries. Millennials are twice as likely to use these programs in all markets (three times as likely in Canada). Definition of participation: Participation is defined as earning, redeeming or communicating/interacting with the program. Q. Which of these programs did you participate in in the last week? Millennials Non-Millennials 51% 71% 40% 48% 23% 22% 21% 5% Fly Buys AA Smartfuel Air New Zealand Airpoints Qantas Frequent Flyer

21 New Zealand Millennial Loyalty Survey / 19 MILLENNIAL PROGRAM PARTICIPATION In all five of the key categories we surveyed, grocery, credit card, travel, retail, and entertainment, New Zealanders showed very similar rates of loyalty program usage to our other surveyed countries. LOYALTY PROGRAM PENETRATION: In all of these countries (New Zealand, Canada, Australia, United Kingdom, and the United States): non-millennials were far more likely to participate in credit card loyalty programs than Millennials. Non-Millennials Millennials 24% Credit Card 38% New Zealand 22% 37% Australia 17% 28% 45% United Kingdom 55% 45% United States 46% Canada Millennials were as likely as non-millennials to be participating in grocery, travel and retail loyalty programs. Non-Millennials Millennials 53% Grocery New Zealand 14% Travel 17% New Zealand 39% Retail 57% 40% New Zealand 25% 31% Australia 17% 33% Australia 56% 59% United Kingdom 11% 16% Australia 40% 54% 39% United States 25% 16% 50% 40% United Kingdom 49% Canada 45% 18% United States United Kingdom 44% 69% 21% Canada 44% 48% United States 51% Canada Millennials were far more likely to be participating in entertainment loyalty programs. Non-Millennials Millennials 29% Entertainment 12% New Zealand 22% 10% Australia 25% 8% United Kingdom 26% 37% 18% United States 12% Canada (Q720) Q. In what types of programs do you participate? Fly Buys Grocery store program 83% 91% Retail store program Online shopping program Travel/Hospitality program: Either hotel, airline... Credit card or financial services program 20% 32% Qantas Frequent Flyer 25% 15% 29% 12% 29% 42% Air New Zealand Airpoints 39% 40% 53% 57% Entertainment program: Video game retailer, movie... AA Smartfuel Non-Millennials Millennials 24% 38% 14% 17% 13% 9% (Q715) Restaurant program 7% 13%

22 20 / New Zealand Millennial Loyalty Survey CONCLUSIONS: ANSWERING GENERATION WHY So who s right about Millennials: Jean Twenge, who sees a generation hobbled by narcissism and entitlement, or Strauss and Howe, who believe they will emerge from the Great Recession ready to change the world? Were Millennials really born this way, or will they continually redefine themselves as the Baby Boom generation did before them? To complement this online survey, we conducted 30 one-on-one interviews with Millennial consumers in several markets, including New Zealand. The overwhelming majority said they define themselves by their relationship with technology, which allows them to access and share nearly any information quickly and easily. So, if they feel entitled and impatient, perhaps it is because they rarely have to wait everything they need is available to them instantly. Their parents once shopped at record stores for albums and CDs; Millennials can listen to anything they want whenever they want, often without paying for it. Research for school term papers once required treks to the library to rifle through card catalogues and microfiche; today, Millennials have Wikipedia and Google Books. Instead of talking to one friend at a time on a landline telephone, they can communicate by group text or via a status update to hundreds of friends on Facebook or Twitter. For Millennials, the world is shrinking. That means when you ask Millennials to respond to offers, to consolidate their spending, and to tell their friends about your brand, the first and only question they ll ask is, Why? With so much information at my fingertips, why should I give you a second thought? What s in it for me? That s where loyalty management can make the difference. By facilitating the value exchange through targeted rewards and recognition, you ll gain powerful insights into Millennials as individuals and begin delivering offers that they want. Result? Increased loyalty, profitable behaviour, and word-of-mouth advocacy that spreads at the speed of light. Based on the results of our New Zealand survey, we suggest the following four principles 1. Demonstrate immediate value. Millennials expect benefits from loyalty programs quickly. You have about 30 days to demonstrate your program is worth their time before you ll most likely lose their attention. 2. Extract maximum efficiency from your program. New Zealand Millennials are value conscious and globally connected. You ll need to offer proper funding rates, deliver rewards rapidly, and deploy partner and rewards optimization tools, dynamic segmentation techniques, and focused attrition models if you want your rewards program to be profitable. 3. Seek new definitions of customer value. For the next few years, Millennials potential may exceed their actual spend, but their incomes will rapidly increase. Can you capture their voice as well as their dollars? Can you identify the real influencers in your customer file and reward them for their influence? Can you develop new segmentations based on mobile or social usage? If you can create customer value unique to your brand, your competition will fall that much further behind. 4. Technology is a means, not an end. Don t expect Millennials to leap toward mobile payments, loyalty applications, and location-based offers just because they have iphones glued to their hands. To Millennials, mobile and social platforms are tools, not dumb terminals waiting for your marketing messages. Figure out what customer behaviour you re trying to change, and the proper technology platform will become clear. We ll present more detailed findings from our global surveys over the coming months, and further explore Millennial consumers relationship to technology, data privacy, and rewards. We promise to keep learning, and to keep sharing our knowledge with you. Millennials will expect nothing less of us.

23 New Zealand Millennial Loyalty Survey / 21 Positive words I would use to describe rewards programs would be convenient, money-saving, and effective to build a company s name. But they can be annoying if you have to jump through a few too many hoops to get those rewards. Melody, 24

24 22 / New Zealand Millennial Loyalty Survey SURVEY QUESTIONS Chart page 7: BASE: ALL RESPONDENTS (Millennials n=619, non-millennials n=631) Demographic questions Chart page 9: BASE: ALL RESPONDENTS (Millennials n=619, non-millennials n=631) Q1100 Please rank the factors that make you loyal to a brand. Which factors are most important to you? Rate these factors from most important to least important. Q1115 What value would a company need to provide to you for you to share personal information about your purchases, lifestyle, age, income, personal preferences and other information? BASE: ALL RESPONDENTS (Millennials n=619, non-millennials n = 631) Q1105 If company A and company B offered the same prices, service and products, and company A offered a reward program and company B did not, how likely are you to choose company A over company B? BASE: REWARD PROGRAM MEMBERS (Millennials n=528, non-millennials n=562) Q1011 When participating in loyalty and reward programs, how likely are you to engage in the following behaviours? Chart page 11: BASE: SMARTPHONE OWNERS (Millennials n=503, non-millennials n=309) Q850 Do you ever use your mobile device to perform price comparisons before making a purchase in a store? Q855 Do you ever use your mobile device to seek out user reviews before you make a purchase? Q860 Do you ever use your mobile device to seek out opinions from your social networks before making a purchase? Chart page 13: BASE: ALL RESPONDENTS (Millennials n=619, non-millennials n=631) Q700 Do you own any of the following devices? Q705 How often do you? Q800 What sort of mobile device do you own? Q865 How interested are you in using a mobile device to? BASE: SMARTPHONE OWNERS (Millennials n=503, non-millennials n=309) Q835 Have you ever responded to an offer from a website or app on your mobile phone that offers daily deals or discounts such as Groupon, Living Social, etc? Q840 Have you ever responded to a marketing offer from an app based on your current physical location? Q845 Have you ever received text-messaging marketing offers on your phone? BASE: HAVE DOWNLOADED APP (Millennials n=471, non-millennials n=235) Q810 Do you use apps created by any brands with which you do business? Q815 Excluding music and ringtone downloads, do you make purchases through any apps? BASE: REWARDS PROGRAM MEMBERS AND USE SMARTPHONE (Millennials n=433, non-millennials n=284). Q820 Do you use any reward program apps on your phone? BASE: NO REWARD PROGRAM ON PHONE (Millennials n=348, non-millennials n=233) Q830 What features would make you want to use a reward program app? Rank the following options from most desirable to least desirable (percent ranked top 3). Chart page 15: BASE: ALL RESPONDENTS (Millennials n=562, non-millennials n=563) Q910 Please tell us about your on-line behaviour and how likely you are to engage in the following activities: BASE: REWARDS MEMBERS (Millennials n=514, non-millennials n=531) Q915 Please tell us how likely you are to engage in the following activities tied to loyalty and reward programs in which you actively participate BASE: ALL RESPONDENTS (Millennials n=562, non-millennials n=563) Q900 Please rate your level of concern for your personal data privacy in the following Q905 Please tell us how strongly you agree with the following statements related to personal information privacy: Chart page 17: BASE: ALL RESPONDENTS (Millennials n=619, non-millennials n=631) Q710 Are you a member of any loyalty or rewards program? BASE: REWARDS PROGRAM MEMBERS (Millennials n=528, non-millennials n=562) Q715 In what types of programs do you participate? Q1000 When earning rewards in a loyalty or reward program, which category of rewards is most appealing to you? Please rank from most appealing to least appealing. Q1005 How long do you think it should take to earn enough points in a rewards program so that you can redeem some or all of the points for a reward? BASE: NON-MEMBERS AWARE OF REWARDS PROGRAMS (Millennials n=73, non-millennials n=62) Q730 Please rank the following factors that might make you consider joining a reward program from most important to least important (percent ranked top 3). Chart page 19: BASE: REWARDS PROGRAM MEMBERS (Millennials n=528, non-millennials n=562) Q720 How recently was your latest participation in (this) these program(s)? BASE: PARTICIPATION IN LOYALTY REWARDS (Millennials n=514, non-millennials n=531) Q715 In what types of programs do you participate?