2011 began as a year with loads of promise for Loyalty Marketing. Top of mind for most program managers was the need to add value for members while keeping costs under control, and to better manage the financial liability associated with unredeemed points and miles.

Purchase behaviors exhibited by the Millennial generation were being adopted by broader segments of the population, and early in the year we estimated Consumer 2.0 to represent about half the US population, or 150 Million people.

With the old school orientation of most loyalty marketing strategists, cracking the code of Social Loyalty to engage, entertain and retain the business of Consumer 2.0 was one of the most intimidating challenges faced by the industry over the past 10 years.

So how did the industry fare in 2011 and what’s ahead for 2012?

On the liability management front, the year started out with more rumors floating about than during an American Idol contest. Solutions designed to unify consumer loyalty wallets and create uber currencies, some of which could be redeemed in real time point of sale transactions, as well as those promising unprecedented levels of consumer targeting via internet banking and credit card transactions, were receiving lots of attention. While we still wait to hear more from Free Monee and Swift Exchange, Cardlytics took a big step ahead by closing a $33 Million capital investment from Groupe Aeroplan.

Two highly viable solutions which loyalty marketers should consider not only as liability burn solutions, but as means to to add a new wrinkle to the value proposition are KULA Causes and LoyaltyShares. KULA Causes, which launched in fall 2011, introduced a new concept of Cause Related Loyalty marketing. The “currency of giving” enables loyalty program members to convert miles and points into donations to any of over 2 Million charities around the world. This is a concept which triggers consumer emotions and allows brands to heighten their quotient of corporate social responsibility in a financially efficient manner. LoyaltyShares is equally innovative, allowing loyalty program members to convert miles or points into shares of stock in the sponsoring brand. Converting liabilities into assets is a magic trick that any financially savvy consumer should like.

PointTunes.com and The First Club each introduced solutions that change the way digital content can be obtained by consumers through a rewards program. Improved customer experience and lower costs for program operators are key advantages.

Social Shopping became a reality as Zavee.com and ThanksAgain expanded their respective footprints and delighted consumers in their chosen market segments. Zavee has grown to boast over 500 brick and mortar merchants in their network across South Florida, while Thanks Again penetrated the airport frontier seeking to become a loyalty currency that travelers will aspire to collect before they fly.

“Gamification” took a big step forward during 2011 as both Badgeville and Bunchball proved that “gamification is not a fad”. Watch for much more in this space as game theory moves from a solution designed stimulate consumer engagement to one that can change consumer behavior across a full value chain.

As consumer research consistently supported the desire for immediacy and transparency of rewards along with improved customer experience and proximity to the loyalty “experience”, some important brands proved they were listening.

Early in the year, American Express played the social card as it touted Membership Rewards as a “social currency” and tested location based promotions with Foursquare. More recently, Groupe Aeroplan rebranded as Aimia, signalling a new era of competition among industry leaders.

In a year when many industries slogged along in a mediocre economy, Loyalty Marketers could barely keep up with all the change.

What will 2012 hold in store? I’ll have a look at trends to watch in a future post as the New Year gets started.

Change is exciting for some, frightening for others.

Today, one of the biggest global brands in the Loyalty Marketing business changed its name. Groupe Aeroplan has become Aimia.

I can’t imagine what it takes to plan such a change, as the stakes are high and the implications, while seemingly subtle to some, are immensely significant to the broader market. Changes of this nature are not done because someone decided it was time for a new logo, or that there was need to “freshen up our image”. To make a change of this nature, there has to be a core message that is being delivered to the market, and the message is one that couldn’t be adequately delivered under the former branding.

So, what’s the message?

First, listen to what Aeroplan, er Aimia is telling us. In a branding fact sheet, they make clear that the names of the well established coalition loyalty programs they operate (Aeroplan, Nectar (Chile, Italy and the UK) and Air Miles Middle East) will not change. Clearly the new image and branding is not targeted to consumers.

The business-to-business brands LMG Insight & Communication and Carlson Marketing, however, will operate under the Aimia name. Retiring a long-tenured name like Carlson is a bold move.

As press releases and brand sheets explain, the new name is “inspired from the word ‘aim’: highlighting focus and precision, describing our expertise in targeting the right consumers with the right messages”. The name also has roots in French words which inspire the importance of friendship, partnership and relationships. The brand essence here is compatible with the core tenets of loyalty marketing and lays the foundation to build in many different directions.

There are a few other interesting aspects to the new brand. The tagline is “Inspiring Loyalty” and there is intent to point towards the sweet spot where “the needs of clients and the wants of consumers overlap”.  As Aimia states in its new website, “we see relationships differently”.

I think very soon, we will see the landscape of global loyalty quite differently. Airmiles recently announced expansion of its Dotz program in Brazil, and American Express purchased Loyalty Partner at the end of last year.

Through its rebranding, Aimia has further distanced itself from its frequent flyer roots and sets the stage to become the dominant player in creating coalition and other forms of loyalty programs around the world. Global leader has a nice ring to it. Airmiles and American Express won’t stay silent for long but, for now, Aimia has created a nifty advantage to achieve its longer term goals.

I’ve long been a fan of Amazon and as proof carry an Amazon.com-branded Visa Rewards Card in my wallet. Sure, the interest rate is a few points higher than my primary credit card, but I’m a sucker for the points. I earn one for every dollar I spend and a whopping 3 points for every dollar spent on the Amazon site.

Over the past several years, the Amazon program worked like most others: you waited for your points to add up to a certain threshold, continually checking your balance online or on your monthly bill, and then ordered your reward. While there were a number of options, I always went for the $25 Amazon certificate available at 25,000 points.

But last month, something changed: while checking out, I noticed a small prompt about using my current point balance toward the payment of my order. Sure enough, I had earned 1693 points since my last cert was issued—and was able to apply a $16.93 credit to my purchase, right on the spot.

I mean, how convenient was that! No checking my points balance to see if I had reached the 25,000 point threshold, no ordering a certificate, no waiting 3-4 weeks for the cert to appear in the mail. I was able to get instant savings and in turn, instant gratification.

Now I can imagine this scares the bejesus out of some loyalty marketers because, having worked in hardcore points-based loyalty for several years, I know the philosophy. By forcing people to reach elevated point thresholds, you keep them as customers—because they have to stick around and make additional purchases to reach these thresholds, and are less likely to abandon their points for a competitor.

But you know what—the times in the loyalty marketing game are changing, with a mix of established and newer companies leading the charge. For example, check out the following recent developments:

• Marriott announced Marriott Rewards® Instant Redemption which enables members to redeem points on the spot at participating US hotels—for “dinner, cocktails, massage, golf…even a room upgrade…with no certificates, no waiting.”
• Location-based marketer Foursquare inked a deal with American Express to enable its 10 million cardholders to redeem location-based deals by swiping their AmEx card—giving them access to instant membership rewards.
• Online retailer Soap.com (as reported by Internet Retailer) rolled out “a customer loyalty program with a new twist. Instead of launching a traditional customer loyalty program that lets shoppers gather points…they reward customers with instant product discounts.”

I say it’s only a matter of time before all the traditional points-based loyalty marketers, including the airline programs, jump on the instant rewards bandwagon—or find themselves left behind by the competition. Sure, there may be a place for the hard-earned mega-point reward, but you better give your customers the option of quick and instant rewards and recognition.

What do you think?

Loyalty is Social and American Express knows it.

The credit card issuer launched its “Social Currency” campaign back in March and I have to admit that upon first review, I thought it was more show than go. Since that time, the multiple campaigns launched in market with partners including Foursquare, SCVNGR, and Facebook validate their commitment to incorporate digital tools and redefine cardholder perception of card based rewards programs.

The original ads that proclaimed Membership Rewards Points to be a Social Currency inspired my imagination of what they might offer. Would they enable points to be used with a check-in, at point-of-sale to complete a transaction, or to facilitate P2P payments between card-holding friends? The first offers weren’t quite this imaginative, being limited to cardholders being able to shout out their favorite use of points on the company’s Facebook page and offering its version of “deal of the day” with special offers on redemption items.

Nothing wrong with either of these, but I was hoping that the concept of “Social Currency” would evolve and fulfill the idea in earnest, rather than becoming another “Blue Card”, i.e. a smart (chip) card with more sizzle than substance.

My suspicion and skepticism has been gradually swept aside as Amex announced its merchant based test with Foursquare at SXSW and later took the check-in deals nationwide.

More recently, Amex teamed up with SCVNGR and Levi’s to create the first paperless daily deal redemption system. Using Amex’s Smart Offer Engine, the same one used to support the Foursquare promotions, cardholders can sync their SCVNGR LevelUp account with their Amex account and use daily deal coupons in real-time without having to print a coupon. That by itself should drive consumer engagement based on curiosity over an innovative and easy to use rewards delivery system.

To top it off, Amex now lets cardholders cash in their Membership Rewards Points to buy advertising on Facebook. Incorporated as a benefit in its Open Network, real business value is offered to small to medium businesses. Reports disclose that $6,750 equivalent of points buys a $50 Facebook ad, meaning a conversion rate valuing points around 70 basis points. Regardless of how you feel about the exchange rate, the new option allows business people to get something useful for their business for free and differentiates Amex from other card issuers.

Amex used the tagline “We live in a world of possibilities. Isn’t it time we had a social currency to match?” to introduce the concept of Social Currency.  What they unlocked at the same time was the consumer’s imagination as to the many new ways points can be used to gain rewards.

American Express may have also changed the way we look at credit cards. Millions of people desired an iPhone, not to make calls, but for the available apps and the cool things they would do for you.

Today, many people “don’t want another credit card”.  Through the multiple campaigns and partnerships introduced by Amex this spring, consumers they might want an Amex card for the “many cool things” that Membership Rewards will do for them.

I don’t normally post on current news releases. There are other sites with more resources to gather and report on current day happenings and I try to stick to broader trends or specific program reviews. The news today, however, calls for an exception.

American Express announced the acquisition of Loyalty Partner today and the coalition landscape just changed dramatically. The EU based company, which owns and operates Payback in Germany and another coalition in India, is one of the crown jewels among established coalition loyalty programs worldwide.

The surprise in today’s announcement is that suddenly what most of us assumed was a two horse race for global loyalty leadership between Aeroplan and LoyaltyOne, just became a three-way fight.

Just about one year ago, LoyaltyOne acquired a 29% interest in Dotz, the leading coalition program in populous Brazil. With just 200,000 members in a country of 190 Million, the growth potential for Dotz is formidable. As the press release stated, “LoyaltyOne’s investment in Dotz marks the beginning of its global expansion strategy that will take the company beyond North America.”

As LoyaltyOne was busy in Brazil, Aeroplan announced its acquisition of Carlson Marketing and launched a new program in Italy. But that wasn’t all…Aeroplan also made a strategic investment in Club Premier, the newly spun-off frequent flyer program associated with Aeromexico. With 2.5 Million members, Aeroplan was justifiably excited about the alliance.

Rupert Duchesne, President and CEO, Groupe was quoted in the press release saying “This is our first investment in an international frequent flyer program. As a result, this transaction represents a strategic breakthrough for our company, marking the export of Aeroplan Canada’s successful business model.”

Accepted thinking in the marketplace was that LoyaltyOne and Aeroplan would resemble two heavyweight prize fighters as their international ambitions developed. These two organizations are the recognized specialists in multi-partner loyalty and no other party had credibility to match.

So what’s a payment card organization doing in this game?

The motivation behind Amex’s interest in the coalition business is probably different than that of Aeroplan and LoyatlyOne. As the press release reads, “The acquisition will deepen American Express’ merchant relationships in select international markets, add more than 34 million consumers to the company’s international customer base and expand its range of rewards and loyalty marketing services.”

34 Million…Pause on that number.

What a great way to assemble a massive base of potential cardholders and to quickly expand the penetration of merchant acceptance in markets where Payback (and other coalitions) exist.

Today’s news tells me (at least) three things:

1. For all the flaws that are cited about loyalty programs, the business model remains one of the most powerful in the market and can yield benefits on multiple levels to any participating business.

2. The business of loyalty itself, is quite profitable and offers high growth potential worldwide.

3. Everyone at Aeroplan and LoyaltyOne will be out buying new racing flats this weekend, because the race pace for “world domination” just picked up!

I don’t normally post on current news releases. There are other sites with more resources to gather and report on current day happenings and I try to stick to broader trends or specific program reviews. The news today, however, calls for an exception.

American Express announced the acquisition of Loyalty Partner today and the coalition landscape just changed dramatically. The EU based company, which owns and operates Payback in Germany and another coalition in India, is one of the crown jewels among established coalition loyalty programs worldwide.

The surprise in today’s announcement is that suddenly what most of us assumed was a two horse race for global loyalty leadership between Aeroplan and LoyaltyOne, just became a three-way fight.

Just about one year ago, LoyaltyOne acquired a 29% interest in Dotz, the leading coalition program in populous Brazil. With just 200,000 members in a country of 190 Million, the growth potential for Dotz is formidable. As the press release stated, “LoyaltyOne’s investment in Dotz marks the beginning of its global expansion strategy that will take the company beyond North America.”

As LoyaltyOne was busy in Brazil, Aeroplan announced its acquisition of Carlson Marketing and launched a new program in Italy. But that wasn’t all…Aeroplan also made a strategic investment in Club Premier, the newly spun-off frequent flyer program associated with Aeromexico. With 2.5 Million members, Aeroplan was justifiably excited about the alliance.

Rupert Duchesne, President and CEO, Groupe was quoted in the press release saying “This is our first investment in an international frequent flyer program. As a result, this transaction represents a strategic breakthrough for our company, marking the export of Aeroplan Canada’s successful business model.”

Accepted thinking in the marketplace was that LoyaltyOne and Aeroplan would resemble two heavyweight prize fighters as their international ambitions developed. These two organizations are the recognized specialists in multi-partner loyalty and no other party had credibility to match.

So what’s a payment card organization doing in this game?

The motivation behind Amex’s interest in the coalition business is probably different than that of Aeroplan and LoyatlyOne. As the press release reads, “The acquisition will deepen American Express’ merchant relationships in select international markets, add more than 34 million consumers to the company’s international customer base and expand its range of rewards and loyalty marketing services.”

34 Million…Pause on that number.

What a great way to assemble a massive base of potential cardholders and to quickly expand the penetration of merchant acceptance in markets where Payback (and other coalitions) exist.

Today’s news tells me (at least) three things:

1. For all the flaws that are cited about loyalty programs, the business model remains one of the most powerful in the market and can yield benefits on multiple levels to any participating business.

2. The business of loyalty itself, is quite profitable and offers high growth potential worldwide.

3. Everyone at Aeroplan and LoyaltyOne will be out buying new racing flats this weekend, because the race pace for “world domination” just picked up!

Listening to execs sharing insights into key airline marketing and business issues at The Mega Event 2010, I put together an airline loyalty marketing  IQ test just for you.

The questions were raised and answered through a compilation of remarks from the following companies including, but not limited to: Aeroplan, American Express, Emirates Airways, Kobie Marketing, Millenium Aviation, Peppers & Rogers, Qantas, Sapient Nitro.

Here’s a Mega Quiz for you:

1. Name a line of business in the airline industry that is barely 2 years old and now accounts for $14Billion annually.
2. Name one aspect of air travel that is getting more attention from the Department of Transportation than helmet on helmet hits are getting from the NFL?
3. Name the second air carrier in the world to spin off its frequent flyer program (FFP) after Air Canada spun off Aeroplan?
4. Name the two most significant sources of profit for Qantas, the largest airline in Australia and the second oldest in the world?
5. According to Google Chief Economist Hal Varian, what will be the sexiest  corporate job over the next 10 years?
6. We have Twitterati, Datarati, and soon will have Loyalarati. Who are these people?
7. What percentage of Twitter conversations will be handled through automated means by corporate tweeters in the next 2 years?
8. What are 3 synonyms for loyalty program “liability”?
9. How important will Privacy issues be to business in the next 10 years?
10. What is considered to be the growth industry of the next decade?

Answers:

1. Ancillary Revenue a/k/a a conscious un-bundling of the air travel experience that generates profits but has potential to undermine customer satisfaction
2. Ancillary Revenue (The DOT is considering implementing new standards for fee disclosures as part of a broad rule-making proceeding)
3. TAM, the Brazilian carrier
4. Profit from its FFP and operation of its low-cost carrier JetStar
5. Statistician
6. Datarati are those companies who make a commitment to using their hard fought customer data to drive business results, while the emerging Loyalarati will be those enterprises which deliver their respective brand promise with a unwavering commitment to customer engagement and enterprise loyalty which honors customers, vendors, shareholders, and partners to create unshakable competitive advantage.
7. 20% minimum
8. a) Deferred discounts (they only get cashed in when points/miles are redeemed); b) Current Asset (If the company has reserved cash to account for some or all of the value of unredeemed points/miles, there should be a stockpile of cash that can be used to drive innovation and business results); c) A “darn good thing” because liability is an outcome of customer purchase behavior and an indicator of the health of customer engagement across the business.
9. What’s privacy? That dies just a little more each day as Millennials share more information and leading social networks leak personal data
10. Loyalty Marketing!

Frequent Flyer Miles, American Express Membership Rewards Points, Citi ThankYou! points,  AirMiles – which loyalty currency holds the crown as the world’s most recognized and highly valued?

While that debate rages on, let me suggest that the answer might be “none of the above”.

It’s not the points or miles that will drive consumers to shift their shopping habits in favor of  your brand.  It might be the TIME those points represent.

What’s more important, Time or Money? That question has been debated since the industrialized world has matured.

The conversation has reignited in the US as Americans have experienced tough economic times, triggering self evaluation of lifestyle and priorities. In a fascinating story on CBS Sunday Morning, Jim Axelrod reported that, “of the 33 richest countries, the U.S. is the only one with no legally-required paid vacation for its workers”. The finding came from a study authored in part by John Schmitt of the Center for Economic and Policy Research. Axelrod went on to say “Even when times are good, people don’t take their vacation – they don’t want to be seen as ‘That guy who’s always taking his time off,’ who values his time off more than being at work”.

This angst over taking what vacation time we do have is in direct conflict with the fact that “69% of all middle class Americans say their number one desire in life is to have more free time”. At least, that is what Congressman Alan Grayson (D Orlando) cited on CBS as part of his motivation to introduce legislation in Congress to require companies with over 100 employees to offer paid vacation by law.

This is more than a casual social issue as the US now has one of the highest gaps between rich and poor among all industrialized nations. A report from the Organisation for Economic Co-Operation & Development (OECD) stated that, on average in 2005, the richest 10% of the population in OECD countries have 9 times more income than the poorest 10%. In Mexico the ratio is 26 to 1, the United States is over-indexed at 16 to 1 while Canada and the UK were at par with the global average.

Time is a currency that all of us desire, whether rich, poor, or somewhere in the middle. It is highly liquid and does not come with capacity or fulfillment issues ala frequent flyer miles.I can see a new category of rewards options opening up that save time, make time, or share time for program members.

I won’t go into specifics, but let’s just say we’ve got lots ideas to make this work and, once again, change the game in Loyalty Marketing.

Got time to hear about it?

My Dad taught me the value of money. Cash is King and all that.

A dollar is a dollar, that can’t be denied. And, those dollars are increasingly hard to come by with the demands of business pressing harder on most over the past two years.

With my mind on cash and flipping through the latest issue of Costco Connection at home the other day, I couldn’t miss the half page announcement that at Costco, February is REWARD TIME. For holders of the  True Earnings Card® from American Express and Costco, shoppers can earn 1% on all Costco purchases and up to 3% back on other purchases including travel, dining out, and gasoline purchased at the Costco store. Business cardholders enjoy a similar offer, topping out at 4% for gas purchases.

Rewards accumulate all year long and, just as folks are thinking of flowers in the spring, the annual disbursement of rewards checks is made each February. The certificates are able to be used for in-store purchases only and expire in about 6 months on August 31.

Costco, in their partnership with American Express, reinforces that a dollar is in fact a dollar. But does it have to be so?

The Costco cash back rewards model has weakness on two levels. First, with consumers interested ever more in redeeming early and often, are they willing to wait one entire year to enjoy their rewards? Actually, the real question is not if they are willing, but if they will consistently alter shopping behavior over this extended period of time. Second, the once a year model is less likely to encourage an extra shopping trip to Costco as it becomes a way to make a regular trip “cheaper” when the coupon is redeemed.

Can Costco do better? You only have to look at far as Target and Tescos to find an answer.

Tescos is the undisputed king of grocery loyalty and may be the undisputed heavyweight champ of leveraging the customer data it collects to drive value for customers and results for the business. Tescos Clubcard is based on cash back rewards, but manages to  turns a dollar (Pound Sterling) into two as it offers Tesco Clubcard holders double the value of their vouchers when applied to purchase of a range of popular items in-stores and online. They even have a nifty rewards calculator to help customers build excitement.

Even before the latest announcement, customers could spend their Clubcard vouchers at face value in-store and online or increase the value up to four times by selecting rewards offered by Tesco Clubcard partners including restaurants and entertainment venues.

Target announced they are testing new offer combinations with their private label and cobranded credit cards. Instead of the usual “10% off today’s purchase” incentive to take a store charge card, Target is testing everyday rebates between 3-5%  on all store purchases made with the card.  To me this means they are testing incentives to drive repeat purchase and retention rather than simply acquisition.

While it is not different in structure from the Costco program and there is no leverage on specific items purchased like Tescos offers its members, the test does create an incentive to increase visit frequency and the rebate is higher than the industry norm.

Focus group members may have spoken that “cash back is king” for years, but a closer look reveals that the pure model doesn’t breed stickiness to the brand.

Target is experimenting with changes and Tesco has already shared a partial answer key to the test faced by all retailers – how to keep customers coming back for more.

My Dad taught me the value of money. Cash is King and all that.

A dollar is a dollar, that can’t be denied. And, those dollars are increasingly hard to come by with the demands of business pressing harder on most over the past two years.

With my mind on cash and flipping through the latest issue of Costco Connection at home the other day, I couldn’t miss the half page announcement that at Costco, February is REWARD TIME. For holders of the  True Earnings Card® from American Express and Costco, shoppers can earn 1% on all Costco purchases and up to 3% back on other purchases including travel, dining out, and gasoline purchased at the Costco store. Business cardholders enjoy a similar offer, topping out at 4% for gas purchases.

Rewards accumulate all year long and, just as folks are thinking of flowers in the spring, the annual disbursement of rewards checks is made each February. The certificates are able to be used for in-store purchases only and expire in about 6 months on August 31.

Costco, in their partnership with American Express, reinforces that a dollar is in fact a dollar. But does it have to be so?

The Costco cash back rewards model has weakness on two levels. First, with consumers interested ever more in redeeming early and often, are they willing to wait one entire year to enjoy their rewards? Actually, the real question is not if they are willing, but if they will consistently alter shopping behavior over this extended period of time. Second, the once a year model is less likely to encourage an extra shopping trip to Costco as it becomes a way to make a regular trip “cheaper” when the coupon is redeemed.

Can Costco do better? You only have to look at far as Target and Tescos to find an answer.

Tescos is the undisputed king of grocery loyalty and may be the undisputed heavyweight champ of leveraging the customer data it collects to drive value for customers and results for the business. Tescos Clubcard is based on cash back rewards, but manages to  turns a dollar (Pound Sterling) into two as it offers Tesco Clubcard holders double the value of their vouchers when applied to purchase of a range of popular items in-stores and online. They even have a nifty rewards calculator to help customers build excitement.

Even before the latest announcement, customers could spend their Clubcard vouchers at face value in-store and online or increase the value up to four times by selecting rewards offered by Tesco Clubcard partners including restaurants and entertainment venues.

Target announced they are testing new offer combinations with their private label and cobranded credit cards. Instead of the usual “10% off today’s purchase” incentive to take a store charge card, Target is testing everyday rebates between 3-5%  on all store purchases made with the card.  To me this means they are testing incentives to drive repeat purchase and retention rather than simply acquisition.

While it is not different in structure from the Costco program and there is no leverage on specific items purchased like Tescos offers its members, the test does create an incentive to increase visit frequency and the rebate is higher than the industry norm.

Focus group members may have spoken that “cash back is king” for years, but a closer look reveals that the pure model doesn’t breed stickiness to the brand.

Target is experimenting with changes and Tesco has already shared a partial answer key to the test faced by all retailers – how to keep customers coming back for more.