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Inside Australia’s loyalty industry: what the ACCC report revealed

17 January 2025
Georgette Mikhael
Guides

Did you know that 57% of consumers spend more on brands they’re loyal to? However, many fast-food lovers miss out on free food and exclusive deals simply because they haven’t joined their favorite restaurant’s rewards program.

As loyalty program experts, we’ve analyzed dozens of restaurant reward programs, and Hardee’s My Rewards stands out for its simplicity and value. One immediate benefit is that new members can claim a free sandwich just for signing up.

The program demonstrates several strengths that have contributed to its recent recognition as “Best Food and Beverage Loyalty Program” by Newsweek Magazine in 20249.

Whether you’re a regular at Hardee’s or just love scoring free food, this comprehensive guide will walk you through everything you need to know about maximizing your rewards. We’ll cover how to earn Stars, redeem them for tasty treats, and make the most of your membership benefits.

How Hardee’s My Rewards program works

Hardee’s My Rewards transforms your regular restaurant visits into a rewarding experience. Since its launch in March 20223, we’ve seen this program emerge as a standout digital loyalty initiative in the fast-food industry.

Program overview and structure

My Rewards members earn 10 Stars for every dollar spent18 at participating Hardee’s locations. The program operates entirely through the Hardee’s app, making it convenient to track your progress and redeem rewards.

Membership tiers explained

A three-tier reward structure, offers achievable milestones for members:

Each tier unlocks different menu items, specifically designed to span across various dayparts19. These thresholds are intentionally set to be attainable, encouraging regular engagement with the brand.

Key program benefits

The program has a comprehensive benefits package. Upon joining, members receive:

  • A free sandwich with minimum $1 purchase2
  • Exclusive mobile offers and promotions
  • Access to bonus Star events
  • Early access to new menu items
  • Special birthday rewards2

The program stands out for its digital integration. Members can place orders through the app or website, with Stars automatically credited to their accounts2. 

Stars to remain valid for 365 days after earning2. Members can also participate in seasonal promotions and double Star events, accelerating their progress toward rewards.

Getting started with My Rewards

Downloading the app

Head to your device’s app store to download the Hardee’s app. This serves as your digital gateway to earning and managing rewards.

Creating your account

To join My Rewards, we’ll need to provide:

  • Full name and email address
  • Phone number and zip code
  • Secure password4

Linking payment methods

After creating your account, we recommend adding your preferred payment method to streamline future purchases.

Claiming your free sandwich

Undoubtedly, one of the best perks is the welcome offer. New members can choose a free Famous Star, Hand-Breaded Chicken Sandwich, Frisco Burger, Bacon Egg & Cheese Biscuit, or Frisco Breakfast Sandwich with a minimum $1 purchase6. Essentially, buying a drink or fries qualifies you for this offer.

How Stars are calculated

Earn 10 Stars for every $1 spent2 through a variety of ways:

  1. Order through the app while logged in
  2. Place orders via the website
  3. Scan your member code during in-store checkout
  4. Enter receipt barcodes within 72 hours of purchase3

Eligible purchases

There’s a maximum limit of 1,000 Stars per transaction4. Stars are calculated on the subtotal before taxes, fees, discounts, and tips [4]. Delivery orders earn Stars only when placed directly through Hardee’s platforms, not third-party services2.

Points expiration rules

Stars remain valid for 365 days from the earning date2. To maximize rewards, we recommend tracking expiration dates and redeeming Stars before they expire. The system automatically uses your oldest Stars first when redeeming rewards.

Earning Stars through purchases

There are various ways to earn Stars through your purchases at Hardee’s.

In-store ordering process

When dining in or visiting a Hardee’s location, we recommend having your member code ready before placing your order. You’ll need to scan your unique QR code at checkout to ensure your Stars are credited4. If you forget to scan, there’s still a way to earn your Stars through receipt submission.

Mobile app ordering

The most seamless way to earn Stars is through the Hardee’s app. Here’s our recommended process:

  1. Log into your rewards account
  2. Customize your order
  3. Select payment method
  4. Choose pickup time
  5. Complete purchase

Likewise, ordering through the website while logged into your account automatically credits Stars to your balance2. One crucial detail to note: delivery orders earn Stars only when placed directly through Hardee’s platforms, not through third-party services like UberEats or DoorDash2.

Receipt code entry method

If you’re making an in-store purchase, we can still earn Stars through receipt submission. Here are the key requirements:

  • Locate the 13-digit code on your receipt barcode
  • Enter the code in the app within 72 hours of purchase
  • Ensure the restaurant participates in My Rewards3

We suggest checking if your local Hardee’s participates in the program before ordering. If your receipt doesn’t display a barcode at the bottom, that location isn’t participating in My Rewards2. In such cases, we recommend using the mobile app for ordering to ensure you never miss out on earning Stars.

Redeeming your Stars

Once we’ve accumulated Stars in our Hardee’s My Rewards account, redeeming them becomes an exciting opportunity to enjoy free menu items.

Available reward options

The reward structure offers various menu items across three distinct tiers:

These rewards can be redeemed for individual items without requiring additional purchases4. The menu items available for redemption vary by location and time of day. For instance, breakfast rewards cannot be claimed during dinner hours4.

Redemption process

To redeem our Stars through the Hardee’s app or website, we follow these steps:

  1. Log into the My Rewards account
  2. Add eligible menu items to cart
  3. Select desired reward in cart
  4. Complete checkout process2

The system automatically uses our oldest Stars first during redemption4. This helps ensure we don’t lose Stars to expiration (stars remain valid for 365 days from their earning date2.

Combining with other offers

There are important limitations when redeeming rewards. Most notably, we can only use one reward OR one offer per transaction2. This means we cannot combine multiple rewards or stack them with other promotional offers1.

Some additional redemption rules to keep in mind:

  • Rewards must be redeemed at participating locations
  • Menu item availability varies by restaurant
  • Rewards cannot be transferred between accounts
  • Digital orders must be placed through official Hardee’s platforms4

In situations where a specific menu item is unavailable, the restaurant may allow us to redeem our reward for an alternate item of equal or lesser value4. This flexibility ensures we can still enjoy our earned rewards even when our first choice isn’t available.

Using the Hardee’s rewards app

The Hardee’s app serves as our central hub for managing rewards, placing orders, and accessing exclusive offers.

App features overview

The app combines ordering convenience with reward tracking in one unified platform. Key features include:

  • Real-time Star balance tracking
  • Mobile ordering with customization options
  • Exclusive member-only offers
  • Digital payment integration
  • Receipt barcode scanning capability
  • Push notifications for special promotions

Order tracking

Primarily, the app provides comprehensive order monitoring capabilities. Once we place an order, the system updates our Star balance within approximately 60 minutes, although it may occasionally take up to 24 hours3. Notably, this tracking feature ensures we never miss earning Stars on eligible purchases.

Managing your account

Managing our My Rewards account through the app is straightforward and user-friendly. Essentially, the app offers several customization options for our preferences:

  1. Communication Settings
    • In-app messaging (automatic)
    • Email notifications (optional)
    • SMS text alerts (optional)
    • Push notifications (adjustable)

The app notably allows us to update our contact information, manage payment methods, and track Star expiration dates. For security purposes, we maintain complete control over our notification preferences4.

To optimize our experience, the app provides personalized recommendations based on our ordering history. Plus, we can easily access our QR code for in-store purchases, ensuring seamless Star earnings regardless of how we choose to order.

One feature we particularly value is the ability to scan receipt barcodes within 72 hours of purchase2. This flexibility ensures we never miss earning Stars, even if we forget to scan our member code during checkout.

The app has earned recognition for its user-friendly interface, ultimately contributing to its designation as “Best Food and Beverage Loyalty Program” by Newsweek Magazine in 20249. This achievement reflects the continuous improvements CKE Restaurants implements to enhance our digital experience.

Special promotions and bonus opportunities

Beyond basic Star earnings, savvy members can maximize their rewards through various promotional opportunities. As loyalty experts, we’ve identified the most valuable ways to boost your earnings through the Hardee’s app.

Seasonal promotions

Throughout the year, we see exciting limited-time offers that enhance our rewards experience. Currently, members can enjoy these seasonal specials:

  • Candied Bacon promotions with 25% off combo meals
  • Holiday BOGO deals exclusively for members
  • Special menu items available only through the app10
  • Limited-time Cinnamon ‘N’ Raisin Biscuits10

Double stars events

Accelerated earning periods help us reach rewards faster. Double Stars events typically offer 20 Stars per dollar instead of the standard 10 Stars3. To participate effectively, we recommend:

  1. Enabling push notifications
  2. Checking the app regularly
  3. Planning larger purchases during these events
  4. Watching for seasonal bonus opportunities

Birthday rewards

Birthday celebrations at Hardee’s last an entire month. During our birthday month, we receive a special offer for a free Super Bacon Biscuit or Super Sausage Biscuit with a minimum $1 purchase11.

To ensure we don’t miss any promotional opportunities, the following requirements are essential:

  • Complete member profile
  • Opt-in to notifications
  • Enable location services
  • Maintain active app status4

Plus, these member benefits often include exclusive access to:

  • Early previews of new menu items
  • Member-only mobile offers
  • Special bonus Star events
  • Personalized promotions4

Common issues and solutions

Technical hiccups can occasionally disrupt your rewards experience. Common issues are detailed below.

Missing Stars troubleshooting

Stars should appear in your account within 60 minutes after purchase, though sometimes it may take up to 24 hours2. If your Stars haven’t shown up, try these steps:

  1. Log out and log back into your account
  2. Check your purchase history for eligible transactions
  3. Verify the receipt has a barcode (for in-store purchases)
  4. Ensure you’re within the 72-hour window for receipt submission2
  5. Confirm the order wasn’t placed through third-party delivery services

Account access problems

Notably, account access issues often stem from outdated contact information or password complications. To maintain secure access:

Contact support options

Plus, when you need additional assistance, Hardee’s offers multiple support channels. The Guest Relations team stands ready to help through:

  • Official feedback portal: contactus.ckefeedback.com12
  • Corporate office communication
  • Email support for specific concerns
  • In-app help features

For optimal support response, we recommend:

  • Providing your order details
  • Including your My Rewards account information
  • Explaining the issue clearly
  • Attaching relevant screenshots or receipts

Most Star-related issues resolve automatically within 24 hours2. Yet, if problems persist, don’t hesitate to reach out through official channels. The support team can investigate missing Stars, verify account status, and address technical difficulties.

Remember that your account security matters – you’re responsible for maintaining accurate information4. Ultimately, the program offers protection against unauthorized use, with investigation options available for compromised accounts4.

What do members say?

Reviews reveal both enthusiastic supporters and those facing challenges with the program.

Positive feedback

Some users highlighted increased visits due to the loyalty program: “I eat at Hardee’s a lot more now since having the app and the rewards program”7.

Negative feedback

Members are more likely to provide feedback when dissatisfied, which is certainly the case for Hardee’s My Rewards.

Some members report technical difficulties: “I downloaded the app and create an account I’m entitled to one free sandwich. I did what the app asked and I never received my offer”5.

Others face redemption challenges: “No, i did as you said, and it doesnt move, nor is there a Coupon for my free burger there either”5.

Location issues also emerge: “Specials are hard to find and also some aren’t even on the app for instance a special at the restaurant won’t even appear in the app”7.

How does Hardee’s My Rewards program rate against Loyalty & Reward Co’s Essential Eight® Principles?

As a global loyalty consulting company, Loyalty & Reward Co have developed the Essential Eight® Principles. These are elements which appear in all best-practice loyalty programs. We use them to guide the program design or audit process to identify areas for improvement.

How does My Reward rate against the principles?

1. Is it Simple?

Hardee’s My Rewards excels in simplicity, making it easy for customers to join and engage. The program requires minimal information during registration, such as name, email address, phone number, and zip code, ensuring a frictionless sign-up process. This approach aligns with best practices that emphasize eliminating barriers to entry. The program is entirely app-based, consolidating all functionality into a single platform, which simplifies Star earning, tracking, and reward redemption. Members earn 10 Stars for every dollar spent, and Stars are valid for 365 days—an intuitive and straightforward system that minimizes confusion.

The app’s design facilitates seamless engagement. Features like receipt barcode scanning, automatic Star tracking for app and website orders, and real-time updates on Star balances make interactions effortless. Members can also redeem rewards through a simple, step-by-step process directly in the app. The clear tiered rewards system—offering items at 150, 300, and 500 Stars—is easy to understand and motivates consistent participation. This clarity ensures that members, regardless of technological literacy, can maximize their benefits without needing extensive guidance.

By focusing on ease of access and engagement, Hardee’s My Rewards addresses one of the most significant challenges in loyalty programs: complexity. Its simple structure encourages frequent usage and minimizes the cognitive load on members, promoting sustained engagement.

2. Is it Valuable?

The Hardee’s My Rewards program delivers significant value, both tangible and perceived, to its members. Upon joining, members receive an immediate reward: a free sandwich with a $1 purchase. This welcome bonus provides an instant return on minimal investment, reinforcing the program’s appeal. Additionally, members enjoy a variety of ongoing benefits, including exclusive mobile offers, bonus Star events, and birthday rewards.

The tiered reward structure adds depth to the program’s value proposition. Members can redeem 150 Stars for entry-level items like cookies and biscuits, 300 Stars for breakfast and lunch items, and 500 Stars for premium menu options like Angus burgers. These tiers cater to different spending levels and preferences, ensuring that all members find value irrespective of their dining frequency.

Seasonal promotions and double Star events amplify perceived value by allowing members to accelerate their Star accumulation. This dynamic incentivizes participation during promotional periods and enhances engagement. Furthermore, the 365-day expiration policy for Stars provides members ample time to redeem rewards, reducing the risk of losing earned benefits.

By offering consistent opportunities to earn and redeem rewards, the program ensures that members feel they are getting meaningful returns on their spending. This perceived value fosters customer loyalty and encourages repeat visits, driving long-term engagement.

3. Is it Stimulating?

Hardee’s My Rewards incorporates various features designed to stimulate member engagement and maintain enthusiasm. The program’s tiered rewards structure inherently motivates members by creating achievable milestones. For instance, members earn 10 Stars per dollar spent, with clear progress toward redeeming rewards at 150, 300, and 500 Stars. This transparency provides a sense of progression and encourages continued participation.

Limited-time offers, such as seasonal promotions and double Star events, are key stimulants that add excitement and urgency. These events double the earning rate to 20 Stars per dollar spent, incentivizing larger purchases or more frequent visits during promotional periods. Additionally, early access to new menu items and exclusive offers creates a sense of exclusivity, further motivating members to engage with the program.

Gamification elements, like progress trackers within the app, visually represent members’ Star accumulation, enhancing motivation through the goal-gradient effect. Members can see how close they are to their next reward, which psychologically encourages more spending as they approach redemption milestones.

By integrating these stimulating features, Hardee’s My Rewards ensures that members remain actively engaged, transforming routine dining into a rewarding and interactive experience. This approach not only enhances member satisfaction but also fosters brand loyalty.

4. Is it Emotional?

Hardee’s My Rewards effectively fosters an emotional connection with its members, a crucial factor in driving long-term loyalty. Personal touches, such as birthday rewards, create a sense of belonging and appreciation. Members receive special offers during their birthday month, such as a complimentary Super Bacon Biscuit with a $1 purchase. These personalized gestures build goodwill and deepen the emotional bond between the customer and the brand.

The program’s exclusivity also plays a significant role in emotional engagement. Members gain early access to new menu items and enjoy exclusive promotions available only through the app. This sense of privilege reinforces feelings of importance and fosters a unique identity as a valued Hardee’s customer.

Community-building is another aspect of emotional engagement. The program’s design encourages frequent interactions through app notifications and tailored offers, creating a consistent presence in members’ lives. These touchpoints keep the brand top-of-mind and cultivate a sense of connection beyond transactional relationships.

By prioritizing emotional elements like personalization, exclusivity, and consistent communication, Hardee’s My Rewards strengthens its members’ affinity for the brand. This emotional loyalty translates to increased advocacy, higher spending, and a reduced likelihood of switching to competitors.

5. Is it Complementary?

The Hardee’s My Rewards program aligns seamlessly with the brand’s core identity, enhancing its relevance and appeal. The rewards system complements Hardee’s positioning as a provider of satisfying meals across various dayparts. For example, the tiered rewards structure includes items that cater to breakfast, lunch, and dinner preferences, ensuring that members find value regardless of when they dine.

The program’s benefits—such as free sandwiches, exclusive offers, and early access to new items—reinforce Hardee’s reputation for quality and innovation. Seasonal promotions and bonus events are thoughtfully aligned with the brand’s promotional calendar, further integrating the loyalty program into Hardee’s overall marketing strategy.

Moreover, the app’s user-friendly interface supports the brand’s commitment to convenience and customer satisfaction. Features like mobile ordering, payment integration, and receipt scanning enhance the overall dining experience, making the program an essential extension of Hardee’s service offering.

By designing the My Rewards program to complement its brand values and customer expectations, Hardee’s ensures that the loyalty initiative feels like a natural and valuable part of its overall proposition. This coherence strengthens customer trust and loyalty, driving sustained engagement.

6. Is it Differentiating?

Hardee’s My Rewards stands out in the competitive fast-food loyalty landscape through its innovative features and strategic positioning. Unlike generic loyalty programs, My Rewards offers a unique combination of simplicity, exclusivity, and value. Winning the “Best Food and Beverage Loyalty Program” award by Newsweek Magazine highlights its differentiation and effectiveness.

The program’s digital-first approach is a significant differentiator. By centralizing all functionalities within the app, Hardee’s caters to tech-savvy consumers who prioritize convenience. Features like progress trackers, personalized recommendations, and seamless reward redemption further enhance the program’s distinctiveness.

Hardee’s also differentiates itself through its tiered rewards system, which caters to diverse customer needs and encourages incremental spending. Seasonal promotions, such as limited-time menu items and double Star events, add layers of excitement that set the program apart from competitors.

By focusing on unique offerings and leveraging technology, Hardee’s My Rewards avoids the pitfalls of commoditization. Its distinctive features not only attract new members but also retain existing ones, providing a sustainable competitive advantage in a saturated market.

7. Is it Cost-effective?

The My Rewards program is designed to balance value for members with operational efficiency, ensuring cost-effectiveness. The app-based structure minimizes costs associated with physical loyalty cards and paper-based systems. By automating processes like Star tracking, reward redemption, and promotional notifications, Hardee’s reduces administrative expenses while enhancing user experience.

The tiered reward system is also economically strategic. By offering high-perceived-value rewards, such as premium menu items, the program maximizes member satisfaction while keeping actual costs manageable. Seasonal promotions and double Star events drive short-term sales boosts without imposing unsustainable long-term expenses.

Furthermore, the program’s 365-day expiration policy for Stars encourages timely redemption, preventing the buildup of unused liabilities. This approach optimizes financial outcomes by maintaining a predictable cost structure while incentivizing frequent member engagement.

By focusing on digital efficiency, strategic reward structuring, and liability management, Hardee’s My Rewards ensures a positive return on investment. This cost-effectiveness supports the program’s sustainability and continued evolution.

8. Is it Evolving?

Hardee’s My Rewards demonstrates a commitment to continuous improvement, ensuring it remains relevant in a dynamic market. The program regularly introduces new features, such as seasonal promotions, double Star events, and early access to menu innovations. These updates not only enhance the member experience but also reflect a proactive approach to meeting customer needs.

The program’s app-based platform facilitates ongoing evolution. By leveraging data analytics, Hardee’s can track member behavior, identify trends, and implement targeted improvements. Personalized recommendations and tailored promotions demonstrate the program’s ability to adapt to individual preferences, increasing engagement and satisfaction.

Hardee’s also shows a willingness to innovate. For example, incorporating gamification elements and expanding reward options could further enhance the program’s appeal. Additionally, feedback mechanisms within the app ensure that member input shapes future developments, fostering a sense of collaboration and loyalty.

By prioritizing adaptability and member-centric enhancements, Hardee’s My Rewards positions itself as a forward-thinking loyalty program. This evolutionary approach ensures long-term relevance and continued success in driving customer loyalty and brand growth.

Conclusion

Hardee’s My Rewards stands out as a straightforward yet valuable loyalty program for fast-food enthusiasts. Members earn 10 Stars per dollar spent while enjoying exclusive perks like birthday rewards, seasonal promotions, and convenient mobile ordering.

The program’s three-tier reward structure makes earning free menu items achievable, with Stars remaining valid for 365 days. Additionally, the digital-first approach through the Hardee’s app streamlines ordering, tracking, and reward redemption processes.

Above all, the program’s recent recognition as “Best Food and Beverage Loyalty Program” by Newsweek Magazine validates its effectiveness. Member feedback suggests strong satisfaction with the earning structure and mobile features, though some users request expanded redemption options.

We recommend downloading the Hardee’s app today to start earning Stars on your purchases. Regular app checks will help you catch double Star events and special promotions, maximizing your rewards potential. Certainly, joining Hardee’s My Rewards transforms routine fast-food visits into a more rewarding dining experience.

Loyalty & Reward Co’s Essential Eight® Principles

Want to know more about the Essential Eight®? Read our whitepaper.

Do Loyalty Programs Work?

Looking for examples of best-practice loyalty programs from around the world that have delivered outstanding results? Check out our ‘Do Loyalty Programs Work?’ series.

References

[1] – https://www.hardees.com/terms-and-conditions
[2] – https://www.hardees.com/myrewards
[3] – https://www.soloyal.co/hardees-my-rewards-infopage
[4] – https://www.hardees.com/myrewards-terms
[5] – https://www.reddit.com/r/Hardees/comments/127pu8v/new_loyalty_membership_free_sandwich/
[6] – https://www.maximizingmoney.com/shopping-rewards/hardees-restaurant/
[7] – https://apps.apple.com/us/app/hardees-mobile-ordering/id1577790947
[8] – https://www.nrn.com/quick-service/cke-restaurants-parent-carl-s-jr-and-hardee-s-launches-loyalty-program
[9] – https://www.hardees.com/hardee-s-my-rewards-program-named-best
[10] – https://www.hardees.com/
[11] – https://deal.town/hardees/happy-birthday-month-hardees-PKV3TCUR3JO
[12] – https://www.hardees.com/contact-us
[13] – https://www.mashed.com/808913/heres-how-hardees-new-loyalty-app-works-for-customers/
[14] – https://www.tripadvisor.com/Restaurant_Review-g54955-d4640189-Reviews-Hardee_s-Clarksville_Tennessee.html
[15] – https://hardees.pissedconsumer.com/review.html
[16] – https://business.stampix.com/the-undeniable-advantages-of-emotional-rewards/
[17] – https://www.restaurantdive.com/news/cke-launches-loyalty-program-across-hardees-carls-jr/620822/
[18] – https://www.prnewswire.com/news-releases/hardees-and-carls-jr-on-a-mission-to-feed-your-happy-with-all-new-my-rewards-loyalty-program-301508437.html
[19] – https://www.qsrmagazine.com/exclusives/hardees-carls-jr-retool-digital-presence-post-covid-success/

ACCC logo

Drawn from the report Loyalty & Reward Co produced for the Australian Competition and Consumer Commission, June 2019.

Almost 80 per cent of Australians belong to at least one loyalty program. That figure, from Mastercard research,1 shows how deeply loyalty programs are woven into Australian consumer life. It does not tell you how much value members actually receive, how the largest programs earn their profits, or what the design choices behind the points mean for competition. Those questions are harder to answer, and until 2019 no one had answered them in public.

In 2019, the Australian Competition and Consumer Commission (ACCC) commissioned Loyalty & Reward Co to produce the first comprehensive, publicly available report on the Australian loyalty industry. The report examined the major programs with more than one million active members, most of them coalition programs, and set out how they are designed, how they are monetised, how they use member data, and what effect they have on competition and on consumers. You can read the full report on the ACCC website. The findings remain a useful reference for anyone designing or operating a program today.

This article summarises what the report found, and what each finding means for program operators.

A market that reaches into almost every industry

Loyalty programs have operated in Australia for several decades and now appear across almost every consumer industry. Estimates of how many programs the average Australian belongs to range from four (Adam Posner, For Love or Money 2018)2 to 6.1 (Mastercard).1 The report concentrated on the four largest coalition programs, Qantas Frequent Flyer, Woolworths Rewards, Velocity Frequent Flyer, and flybuys, because their scale and partner networks give them influence over a large share of Australian spending. A coalition program is one run by a central operator, where a network of partners rewards members with a common currency such as points.

The modern coalition program traces back to 1980, when American Airlines launched AAdvantage, the first frequent flyer program built on a reward currency of miles. Qantas Frequent Flyer followed in 1987 using points. Over the following decades, hotels, banks, supermarkets, and retailers built or joined coalition networks of their own.

Much of the recent history is a contest between two competing partnerships. In 2009, Woolworths partnered with Qantas Frequent Flyer, which grew the supermarket’s member base and gave Qantas a large population of members who rarely flew. Coles took full control of flybuys in 2011 and relaunched it, using cheaper points and supplier-funded bonus offers to compete. When Woolworths relaunched as Woolworths Rewards in October 2015 and replaced Qantas Points with a new currency earned only on selected products, members responded with sustained criticism, and the supermarket reversed much of the change within a year. By 2016, the industry had settled into two camps, Woolworths Rewards with Qantas Frequent Flyer, and flybuys with Velocity.

For operators: a currency change removes something members already value, and members tend to feel that loss more sharply than the gain meant to replace it. The Woolworths experience shows how quickly members react when a redesign reduces perceived value.

The psychology built into program design

The report set out the behavioural research that underpins program design. Several findings are worth knowing.

Operant conditioning (Skinner, 1948)3 holds that behaviour which is reinforced tends to be repeated. Bonus points for a specific action encourage members to repeat it. A related insight is that not all points are equal: the large airline, bank, supermarket, and hotel currencies are desirable enough to change where members choose to shop.

Social identity theory (Tajfel, 1978;4 Bhattacharya and Sen, 2003)5 holds that people fold the brands they identify with into their sense of self. Status tiers apply this directly. A Platinum frequent flyer receives lounge access, priority boarding, and upgrades, and that recognition can build an emotional connection to the airline. Status also raises switching costs, which can keep a member spending even when a competitor charges less for the same product.

The endowed progress effect (Nunes and Drèze, 2006)6 was demonstrated in a car wash study. Members given a card with two of ten stamps already filled redeemed at 34 per cent, against 19 per cent for members given a blank eight-stamp card, even though both groups needed eight stamps. Artificial early progress increased persistence toward the goal.

The goal-gradient effect (Hull, 1934;7 Kivetz, Urminsky, and Zheng, 2006)8 holds that effort increases as a goal comes closer. Members have been observed to accelerate their spending as they approach a status threshold.

Size heuristics describe how one hundred points can feel more rewarding than the one dollar of value it represents. Points let a program present value at a low cost to itself.

Surprise and delight can lift satisfaction well beyond what met expectations achieve. Berman (2005)9 reported that a delighted Mercedes-Benz customer had an 86 per cent likelihood of buying again, against 29 per cent for a merely satisfied one.

For operators: these mechanics work, and that is why they carry a duty of care. Design that manufactures progress or leans heavily on status can drive engagement, and it can also erode trust if members later feel the value was overstated.

How the largest programs earn their profit

A small number of coalition programs are highly profitable. Qantas Loyalty reported revenue of $1,546 million and earnings before interest and tax of $372 million in 2018.10

The report set out the standard coalition model with a worked example. A member spends $1,000 and earns 1,000 points. The program invoices the retailer at around 1.5 cents per point, so the retailer pays $15. When the member later redeems, the program values each point closer to one cent, or $10 for the 1,000 points. The program keeps the difference, roughly $5, a margin of about 33 per cent on that transaction. Across the hundreds of billions of points a large program can sell each year, those half-cents accumulate.

Two further mechanics matter. The first is breakage, the industry term for points that expire unused. Programs set expiry rules, for example 18 months of inactivity for Qantas Frequent Flyer, 24 months for Velocity, and 12 months for flybuys, and higher breakage translates directly into higher profitability. This is why some programs employ actuaries to model it. The second is deferred revenue. A program sets aside enough to cover future redemptions, and a holding of several billion dollars is not unusual for a large Australian coalition program, earning interest in the meantime.

Redemption value also varies by reward. A point redeemed on a flight might be worth one cent, on a gift card half a cent, and on a toaster around 0.25 to 0.35 cents. Pricing steers members toward redemptions that keep cash inside the business.

For operators: breakage and value-steering improve margins, and they sit in tension with member value. A program that optimises breakage too aggressively risks the disengagement that produces breakage in the first place.

The data behind the points

A loyalty program is one of the most effective ways to build a marketing database, because it links transactions to an identified individual over time. The report traced how far that data capability now extends.

Woolworths bought a half-share in analytics firm Quantium in 2013, gaining the ability to turn data from around 8 million loyalty cards into personalised offers. Data exchanges such as Data Republic, backed by Qantas Loyalty, Westpac, NAB, and ANZ, connect a broad network of organisations for secure data sharing. Data brokers can match a single member against tens or hundreds of external datasets, and one broker cited in the report, Rokt, described using billions of user records to personalise offers in real time.

For operators: members increasingly expect transparency and control over their data, a point the report emphasised. A program that collects widely without explaining clearly risks the trust that makes personalisation acceptable in the first place.

The competition question

The report examined whether loyalty programs affect competition, and the evidence points in more than one direction.

Consumer behaviour shows the effect is real. A 2018 Canstar Blue survey found that 21 per cent of shoppers who switched supermarkets did so to earn reward points, and 54 per cent of those who did all their shopping at one supermarket did so because of points.11 International research reaches similar conclusions. Lederman (2003)12 linked frequent flyer enhancements to gains in airline market share, with larger effects at hub airports. Cairns and Galbraith (1990)13 argued that programs raise switching costs and act as a sunk cost that a new entrant must match to compete. McCaughey and Behrens (2011)14 found frequent flyer members in the Netherlands willing to pay a premium of up to 6 per cent. Reichheld (1996)15 found that programs can reduce a member’s sensitivity to competing prices.

The concern is sharpest for smaller companies and new entrants. In a market of dominant duopolies, when the leading players both run large, engaged programs, the competitive tension between them can be neutralised while the barrier facing a new entrant without a comparable program rises. Norway took this seriously enough to ban the earning of points on domestic routes for a period, lifting the ban only in 2013 once domestic competition was judged robust.16

The evidence is not one-sided. Caminal and Claici argued that loyalty pricing can enhance competition by steering business between firms and lowering average transaction prices.17 Aldi, meanwhile, has campaigned directly against points-based programs, arguing that members who chase points routinely spend more, which suggests competitors view those programs as effective.

For operators: a program is a genuine competitive asset, and that same strength invites scrutiny where it raises switching costs or dampens price competition. Designing for real member value, rather than lock-in alone, is the more durable position.

Are members getting what they are promised?

The report closed on the question that matters most to members: the value they actually receive.

Value varies widely. Members of some programs receive as little as half a cent for every dollar spent, while others return 10 per cent or more. Some programs have also reduced value quietly over time. A $100 Barbeques Galore gift card that cost 13,500 points on the Velocity store in 2009 later cost 18,000 points, a 33 per cent increase. A $100 Myer gift card on the Qantas Store rose from 13,500 to 17,770 points, a 31 per cent increase, for a product whose value had not changed. Those increases outpaced the roughly 9.5 per cent inflation over the same five years, and members were not notified.

Some advertising also risks over-promising. The report noted a Qantas credit card campaign using the line “Latte, Latte, Latte, London”. Taken literally, a member would need to buy 20,000 to 40,000 cups of coffee to earn a flight to London, which at one or two cups a day could take up to 55 years. No reasonable consumer would read it literally, and that is the point: broad promotional claims can imply that value is more accessible than it is.

For operators: transparency around expiry, devaluation, and realistic earn rates protects the trust a program depends on. Members forgive a modest return far more readily than a value promise that does not hold up.

What the report means today

Australia’s loyalty industry is sophisticated, profitable, and built on well-understood behavioural science. The ACCC report showed that the same features which make programs effective, the psychology, the data, the coalition scale, and the points economics, are also the features that deserve the most care. A program earns durable loyalty when its design, its data practices, and its promises all hold up to a member reading them closely.

Loyalty & Reward Co produced this report as the loyalty consulting experts, and have since delivered more than 160 loyalty projects for leading brands worldwide. For the full detail, figures, and sources, read the complete report on the ACCC website.

References

Primary source: Shelper, P., Lyons, S., & Savransky, M. (2019). Australian Loyalty Schemes: A Loyalty & Reward Co report for the ACCC. Loyalty & Reward Co. Available at: accc.gov.au

The numbered sources below are cited in the article above. Full footnotes for every industry, media, and program source referenced throughout the report are provided in the ACCC report itself.

  1. Mastercard (2018). Achieving Advocacy and Influence in a Changing Loyalty Landscape.
  2. Posner, A. (2018). For Love or Money 2018, edition 6.
  3. Skinner, B. F. (1948). “Superstition in the pigeon”, Journal of Experimental Psychology, Vol. 38, pp. 168-172.
  4. Tajfel, H., & Turner, J. C. (1978). “An integrative theory of intergroup conflict”, in The Social Psychology of Intergroup Relations, pp. 33-47.
  5. Bhattacharya, C. B., & Sen, S. (2003). “Consumer-company identification: a framework for understanding consumers’ relationships with companies”, Journal of Marketing, Vol. 67, pp. 76-88.
  6. Nunes, J., & Drèze, X. (2006). “The endowed progress effect: how artificial advancement increases effort”, Journal of Consumer Research, Vol. 32, No. 4, pp. 504-512.
  7. Hull, C. L. (1934). “The rat’s speed of locomotion gradient in the approach to food”, Journal of Comparative Psychology, Vol. 17, pp. 393-422.
  8. Kivetz, R., Urminsky, O., & Zheng, Y. (2006). “The goal-gradient hypothesis resurrected: purchase acceleration, illusionary goal progress, and customer retention”, Journal of Marketing Research, Vol. 43, pp. 39-58.
  9. Berman, B. (2005). “How to delight your customers”, California Management Review, Vol. 61, No. 1, pp. 129-151.
  10. Qantas (2018). Qantas Annual Report 2018.
  11. Canstar Blue (2018). Consumer survey on supermarket switching and reward points, as cited in the ACCC report.
  12. Lederman, M. (2003). Do enhancements to loyalty programs affect demand? The impact of international frequent flyer partnerships on domestic airline demand, mimeo, MIT.
  13. Cairns, R., & Galbraith, J. (1990). “Artificial compatibility, barriers to entry, and frequent-flyer programs”, Canadian Journal of Economics, Vol. 23, pp. 807-816.
  14. McCaughey, N., & Behrens, C. (2011). Paying for status? The effect of frequent flyer program member status on airfare choice, Monash University Department of Economics.
  15. Reichheld, F. (1996). The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value, Harvard Business School Press.
  16. OECD (2014). Airline competition: note by Norway, Directorate for Financial and Enterprise Affairs, Competition Committee.
  17. Caminal, R., & Claici, A. (2007). “Are loyalty-rewarding pricing schemes anti-competitive?”, International Journal of Industrial Organization, Vol. 25, pp. 657-674.
<a href="https://loyaltyrewardco.com/author/georgette/" target="_self">Georgette Mikhael</a>

Georgette Mikhael

Georgette Mikhael is a Senior Strategy Consultant at Loyalty & Reward Co, the leading loyalty consultancy. Loyalty & Reward Co design the world’s best loyalty programs for the world’s best brands. She has worked in the loyalty and member benefits space for over ten years with brands across the financial services, legal, travel, retail, automotive, hospitality, philanthropy and technology industries with brands such as Mastercard and the Westpac Group. Georgette has particular interest and expertise in commercial sales, strategic partnerships, business development and customer engagement successfully conceptualising, implementing and overseeing innovative strategies & campaigns for account and business growth.

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