An 'avalanche' of marketing dollars diverted to loyalty schemes

By Rosie baker | 30 September 2013

The movement of marketing budgets into below the line activities such as CRM could become an "absolute avalanche" the International Advertising Association heard last week. The suggestion follows news that Telstra is diverting 40% of its marketing budget below the line to focus on loyalty and CRM activity.

Marketers from Woolworths, Qantas Loyalty, Clemenger BBDO Sydney and Salmat Digital came together to discuss the changing dynamic between advertising and loyalty at the IAA's conference.

Speaking in Sydney last week at a forum organised by the International Advertising Association (IAA), Salmat Digital's executive general manager for marketing and product Mark Mulder, says there is an “avalanche” of budgets moving from advertising into loyalty.

“In terms of the money, I don’t think it's a trickle, I don't think it's a flood, I think we're seeing an absolute avalanche in shifts in budgets from above the line to below the line. We're not playing with budget shifts in increments of just one or two per cent, we're looking at a tectonic shift in where budgets are going.”

Last week AdNews revealed Telstra is currently shifting 40% of its marketing budgets below the line. Two years ago, just 3% of the telco's budget was invested in CRM.

Steph Tully, CMO of Qantas Loyalty, believes competing for budget between traditional advertising and below the line activity like direct mail is “arbitrary” because the two are linked.

“I don't think we should be competing for funds when it's about the effectiveness of what we do. I think we're seeing increasingly great results from direct marketing and it has an important role within the business, but I don't think it will ever replace mainstream marketing and advertising. The challenge for us is how to stay as relevant, authentic and personalised as you can within increasingly diverse business models.”

Loyalty marketing is enjoying a resurgence as marketers are able to measure its impact more accurately than other forms of advertising. It is also a way for brands to develop a relationship with customers beyond transactions, but it doesn't always encourage the right kind of loyalty, said Luke Dunkerley, general manager of corporate marketing at Woolworths.

He warned that “things that start out as a privilege, such as petrol discounts, quickly turn into a customer right.”

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