But as well as allowing consumers to withdraw their rebates in cash, Aura’s platform enables members to invest it in exchange-traded funds (ETFs), putting it in competition with the likes of Raiz, Stockspot and other investing apps.
Perth-based co-founder Troy Zafer said allowing members to aggregate and accumulate all their loyalty in one place, and combining it with investing and donations, was a key differentiator that could deliver the scale required to create a large, profitable business.
Loyalty is big business
“There’s all these different points that have different earn rates. They can expire, they can be devalued, so the consumer has no control over that,” Mr Zafer said.
“When Virgin almost went bust, all those people were going to lose those points. It happened with Ansett many years ago. It’s happened to me when one of my favourite bakeries failed or moved.
“I might have $8 of credit in there – it’s not a lot of money, but when you think about all the consumers that are missing out and all these other different points out there that aren’t in one place [it’s a lot].
“Whereas with Aura, that’s one of the problems we’re solving: people get rewarded with real money they can control. The whole program is really powerful.”
Loyalty is big business, with the number of schemes growing since Qantas launched Frequent Flyer in 1987 – the driver of its loyalty division that generated underlying earnings before interest and tax of $374 million in full-year 2019 before COVID-19 on $1.7 billion of revenue.
According to the Australian Competition and Consumer Commission’s 2019 report on loyalty schemes, almost 90 per cent of Australians are members of at least one. Most are points-based, with the supermarkets, Virgin and Flybuys being the other major players.
But despite their prevalence, only 22 per cent of people consider their most important one has a significant influence on their shopping behaviour, the ACCC said in its report, which raised several concerns, including poor communication and unfair treatment of consumers.
It is these findings that Mr Zafer, who co-founded Aura with Adam Tegg, Vincent Teubler and Lorenzo Lorefice, hopes to exploit as the business ramps up in the coming months before a series A capital raising in the next 12 months.
He said Aura was on the cusp of unveiling another “massive” retailer and was looking to add banks, insurers, telecommunications companies and utilities as part of a goal to ultimately capture at least 50 per cent of consumers’ everyday expenditure. It estimates families could on average receive about $1100 a year, potentially generating multiples of that if they invest in ETFs through its platform.
Mr Ashforth, an early investor in Aura, said he was attracted to the potential scale of the business because of the size of the retail and investing markets, plus its simplicity and transparency.
Following the sell-off in tech stocks this year as interest rates rise and some, such as Netflix, disappoint on growth, he said investors would probably remain “risk off for some time”, given the macroeconomic and geopolitical uncertainty, but good businesses would still prosper.
“The success of Aura is a long-term proposition, underpinned by a solid business model with significant consumer and business appeal and the potential to be rolled out in other markets,” he says.
Mr Zafer said he would like to enter Europe and the US in the next few years after establishing Aura in Australia, where its research suggests it can reach a “couple of a million members” in the next two to four years.
One factor will be how quickly it can sign on businesses.
He said that among the many marketing options for businesses, loyalty schemes were one of the best customer acquisition tools because they were cost-effective and drove retention by giving customers more when they spend more or stay longer.
“This model of just acquiring customers with a short-term discount, whether it’s for a year or two, all it’s doing is incentivising and educating consumers to actually churn more often,” he said.
“And now the younger generation with more tech out there, the internet, it’s very easy to do a quick search and see actually I can get a better deal on my insurance or telco or my mortgage if I do churn on a regular basis.
“So we’re saying to businesses, why spend all that money acquiring the customer and then letting them go after a year or two years. They’re relying on people to be lazy and stay with them for many years, but that consumer mindset is changing.”