Planet Loyalty

VOL U M E 19 I S S U E
IN THIS
ISSUE:
5
/
2011
Strategy Report: Three Cures for
Loyalty Program Inertia
Program Mergers: Learnings From
Wyndham, GameStop and Others
Retail: How Aéropostale Built P.S.
Rewards in 8 Weeks, Start to Finish
THE ART AND SCIENCE OF BUILDING
CUSTOMER VALUE
Planet Loyalty
Global, Diverse, Sustainable
“Globalism” doesn’t merely mean doing business
overseas. It means incorporating range and diversity
into your offerings and practices no matter where
you set up shop. Join COLLOQUY as we examine
strategies from around the world to broaden your
loyalty thinking and help you fill in the missing
pieces of your loyalty puzzle.
W W W. C O L L O Q U Y. C O M
We know
who has what in their shopping carts,
and what you should do about it.
See how leveraging shopper insights
delivers profitable outcomes at
precima.com/results
www.colloquy.com
CONTENTS
On the Grand Tour
of Planet Loyalty:
V O L U M E 19 I S S U E
5
/
2 0 1 1
10 / Loyalty’s World Cup
South Africa’s loyalty industry is as
diverse as its population, and as
vigorous and competitive as its
national rugby team.
6 / Planet Loyalty
Global, Diverse, Sustainable
14 / From Glasnost to Points Growth
How Eastern European loyalty
programs explore partnerships and
remap the loyalty landscape.
18 / Mexico’s Loyalty Landscape:
Mis Amigos
The key word in Mexican loyalty
marketing is amigos. Take our tour
of new and innovative partnership
programs—and bring a friend.
COLLOQUY means
“conversation or dialogue.”
As the voice of loyalty
26 / The COLLOQUY Interview:
Flight Logs
Conversation with American Airlines’
Charlie Sultan, VP of AAdvantage
Partner Marketing, on the role of
consumer loyalty currency aggregators.
marketing since 1990, the
COLLOQUY media enterprise is your reliable
resource for innovative
strategies that drive
profitable customer
behavior.
“Globalism” doesn’t merely mean doing business overseas. It means
incorporating range and diversity into your offerings and practices no
matter where you set up shop. Join COLLOQUY as we examine strategies
from around the world to broaden your loyalty thinking and help you fill
in the missing pieces of your loyalty puzzle.
32 /
Going to the Chapel
Just as in matrimony, marrying the loyalty programs of merging
companies involves compromise, detailed planning, and a good bit
of patience, as we learn from Wyndham Hotel Group, GameStop,
United Airlines, TravelCenters of America and Wells Fargo.
Innovative Loyalty Marketing: News and Opinion From COLLOQUY
www.colloquy.com/twitter
www.colloquy.com/facebook
www.colloquy.com/linkedin
28 / Program Design:
Amazing Race—Retailer Edition
Your mission, should you choose to
accept it: Create and launch a loyalty
program to serve thousands of
customers at 64 stores in 17 states,
plus e-commerce, in just eight weeks.
2 / Loyalty Landscape: Buy 1, Get Ø
The world’s first reverse loyalty
program?
4 / Touch Points: You Gotta Believe
Join us on this, our first of a series of
“Loyalty Storm Trackers” articles, to
erect shelters against hovering dark
clouds and improve the ability of
loyalty programs to get things done.
36 / The Practitioner’s Perspective:
Cast a Wider Net
Unexpected places to search for
program creativity and inspiration.
1
C O L L O Q U Y / Volume 19, Issue 5, 2011
L O YA LT Y L A N D S C A P E
Snapshots of Planet Loyalty
The 2011 COLLOQUY Cross-Cultural Loyalty Study surveyed consumers in six countries to
learn about loyalty attitudes across the world. Here are some of the findings (see page 6 of
this issue for further details):
Redefining BOGO
WOM matters more in emerging markets†
Opinions of friends, family, and colleagues are “very important” to your purchase decisions:
INDIA
25%
BRAZIL
CHINA
AUSTRALIA
18%
29%
36%
CANADA
17%
U.S.
19%
Social and mobile preference‡
Preferred channel for receiving information from your favorite companies:
37% China
35% Brazil
32% U.S., CANADA,
AUSTRALIA
COMBINED
14%
41%
18%
In a story that went viral this past sum mer, Abercrombie & Fitch banned a
customer’s online purchases for buying
too much of the retailer’s clothing.
Abercrombie reversed the decision,
which had been made because the pur chase frequency signaled a possible
reseller at work—though the purchaser
was purely a fan. Even so, as one blogger
noted (we wish we had thought of it
first), “this could very well be the world’s
first reverse customer loyalty program.”
What we did think of first is that this
may be a case of “BOGO” (“Buy One
Get One”) becoming “BOG ” (“Buy
One Get Zero”).
INDIA
42% India
CHINA
SMS/TEXT MSG
BRAZIL
SOCIAL MEDIA
U.S. + CANADA + AUSTRALIA
2
54%
Source: 2011 COLLOQUY Cross-Cultural Loyalty Study
†Q: Please indicate how important conversations with friends, family or colleagues are to you when deciding what company to purchase from/use in the
following categories. Please use a scale from 1 to 10 where 1 means “not at all important” and 10 means “very important” or select “Do not buy in
this category.” Results indicate Top 2 Box average across categories. n = 4,414
‡Q: What is your preferred channel(s) for receiving information from your favorite companies? Please select all that apply. Results indicate proportions
selecting social media and SMS/text messages by country. n = 4,414
To see the full info-graphic from the 2011 COLLOQUY Cross-Cultural Loyalty Study, and
to download “The Global Loyalty Compass,” the free white paper presenting study results,
visit www.colloquy.com/crosscultural
Connecting Flights
I’ll Gladly Pay You Tattoos-day
for a Sandwich Today
You may recognize that headline as a riff on the
catchphrase of Wimpy in the Popeye cartoon, always
trying to negotiate a hamburger to be repaid next
Tuesday. We wonder if Wimpy is a patron of Melt Bar
and Grilled sandwich chain in Cleveland, Ohio. Customers receive a 25% lifetime discount if they get a tattoo
of the chain’s grilled cheese sandwich. It’s not a hamburger, but it could
make settling up on tattoos-day a lot easier for friend Wimpy.
Still want to be “Up in the Air”? Move
over Ryan Bingham. The Frequent Flyer
Twins mysteries are back. Originally
published by Random House in the
early 2000s, this series of kids’ books
featuring two world-traveling siblings
(their parents are photographers
shooting around the globe) has been
revived in eBook form. No word on a
movie yet—maybe because George
Clooney is a tad aged to be playing a
ten-year-old.
www.colloquy.com
The
Illustrated
Tale of
The Long Tail
The presentation style known as the “graphic novel” (think
“serious comic book”) has been employed to retell many a tale,
from classic literature to—now—classic nonfiction. Specifically,
business books. SmarterComics has released a series of classic
biz books in an accessible (and, yes, fun) picture format. Titles
include The Long Tail (told as a somewhat shorter tale) and The
80/20 Principle (80% of the principles in 20% of the words?).
Is Caffeine a “Simulant”?
(Pun Intended)
Dunkin’ Donuts is appearing in Sims Social, one of Facebook’s
online games that friends can play with friends. In case you’ve
been living under a virtual rock over the past few years, “Sims”
are virtual avatars in an online game—that is, they are simulated.
And now these people will be stimulated, as well. For as long as
the agreement lasts, players who visit Dunkin’ Donuts’ website
and “Like” them receive two virtual items to display in-game,
and once a month, players can give a food item and a cup of
coffee to Facebook
friends. The coffee is
described as a
“Dunkin’ Donuts
coffee boost.” Caffeine
Simulants indeed.
With such titles, COLLOQUY can now condone MBA candidates
hiding comic books inside textbooks they’re supposedly reading.
More Survey Results You Just Can’t Make Up
First smoke-free rooms. Now in-law-free rooms. Sort of. Affinia Hotels released a survey in support of its “Tender Loving Comfort
(TLC)” and MyAffinia programs. Some of the stats revealed are in line with what you’d expect. For instance, 64% of travelers look
forward to being out from under work pressure during a hotel stay, and 48.5% feel spoiled (and 41% feel selfish). But then the headscratchers begin. During a hotel stay, the survey tells us, 62% look forward to “escaping from their significant other.”
Then there’s the headline of the press release announcing the survey results: “80% of Travelers Would Opt for Sleeping on Floor of a
Hotel Over Their In-Laws’ Place.” And this observation later in the survey results: “Most travelers—75%—have lied to get a better
room or a free amenity.”
COLLOQUY wonders just what that lie might be?
“I’m here with my in-laws, so don’t make
me sleep on the floor”?
3
4
C O L L O Q U Y / Volume 19, Issue 5, 2011
TOUCH POINTS: PROGRAM EXECUTION
You Gotta Believe
Lack of belief in program ROI is the mother
of all pain points—as identified in a survey
of our Loyalty Storm Trackers
BY JIM SULLIVAN
EARLY THIS FALL, COLLOQUY’s radar
began to detect loyalty marketing
storm clouds not on the horizon,
but perched over us—raining, and
raining hard. Those clouds are
drenching signals that effective and
efficient execution—getting things
done—seemed to be growing much
more difficult. As industry fore casters, we decided to address the
threatening problems and their
solutions by conducting the 2011
COLLOQUY Loyalty Practitioner
Study, an online survey of loyalty
marketers who themselves are facing
the darkening clouds.
This is the first in a series of
COLLOQUY articles that will draw
on the survey’s results to focus
on overcoming implementation
challenges.
While the survey was open to all
and therefore “unscientific” as
projectable research, it provided
us with enough of the right feedback
from front-line loyalty leaders to
understand the major implementation hassles they face. Nearly half
of the respondents were senior
executives in their companies (SVP
on up) and the great majority who
identified their company’s industry
segment came from Financial Services, Retail, Travel and Hospitality,
or Telecommunications.
We developed the original list of two
dozen challenges to detect possible
issues within four acknowledged keys
to effective execution: strategic clarity,
effective and efficient systems and
processes, cultural alignment, and
reliable performance measures. We
asked respondents to select up to
three of their top pain points from
that list, such as “Outmoded IT
systems at the point-of-sale” or
“Inadequate staffing to implement
well” (both of which made it into
the top ten identified).
respondents raised four prioritization challenges to the top ten:
Too many competing priorities
across the organization, leading to
inadequate budgets, staffing and
resources for loyalty to get things
done speedily and effectively.
2. “Herding Cats” Misalignment:
Just over a quarter of respondents
pointed out that inadequate align ment with and focus on customers and poor cross-functional
coordination were blocking
effectiveness across critical
customer touch points.
3. “Rocket Surgery” Processes and
Systems: Roughly a quarter of
respondents cited outmoded POS
systems and the difficulty and
high cost of implementing “soft”
benefits as top challenges.
4. “Doubting Thomas” Metrics:
30% of survey respondents said
that a perception of high costto-benefit for loyalty programs
and poor ROI relative to competing investments was perhaps
causing a lack of support from
the top for program innovation.
Over many years as a loyalty practitioner, during which my teams
and I had to prove and re-prove the
It may be an all-time classic business attractive ROI on loyalty to a series
cliché, but it’s quite true that an
of new executive teams, I learned
average strategy with great execution that none of the first three problems
trumps the best strategy with poor above stand the slightest chance of
execution. Flexibly and quickly
being solved until the fourth—
adapting to changes in the regulatory, effective, convincing ROI measureconsumer, or category environments ment—is addressed. So that’s where
through great execution just may
we’ll focus this first article in our
be the root of sustainable competi - “Loyalty Storm Trackers” series on
tive advantage. That’s why we’ll
execution.
be addressing the execution chalBlocking and tackling
lenge over the next few issues of
COLLOQUY.
All these execution challenges have
a common root—lack of belief in the
Pain in the assets
superior money-making power of
As the sidebar on page 5 shows,
the loyalty program. If your program
our 2011 Loyalty Practitioner Study is being blocked by too many comidentified 10 top challenges across peting priorities, or a lack of suffi each of the four keys to effective
cient budget, resources, or crossexecution. Here’s a roll-up of those functional alignment, you must make
themes:
it crystal clear that your company has
few other investment opportunities
1. “Everything Is Beautiful”
on the table as attractive as your cusPrioritization: A third or more of tomer loyalty program. Solve this
www.colloquy.com 5
When It Pains, It Pours
problem, and you go a long way to
solving the others, too.
We will tackle the measurement
challenge from the perspective of a
mature program, but these principles also apply if your company is
considering a new loyalty program
launch.
Measure the right thing—economic
value.
Your shareholders, customers, top
leaders, and you can agree: value is
created when you deliver a soughtafter benefit greater than its cost and
better than competing alternative
investments. Your loyalty program
will get funded properly if your CFO
and CEO believe that it delivers that
value. As for benefits sought, companies’ loyalty strategies are shaped
by many different needs, but all are
united in the common need to boost
incremental net margin.
Bottom Line: Are you measuring
value?
Gain control of controls.
True control groups isolate a percentage of your customer base and
remove the loyalty marketing stimulus from their experience. That way,
the true effects of the loyalty program
can be calculated apart from everything else affecting customers. The
problem for mature programs is
that they typically do not maintain
permanent control groups.
The 2011 COLLOQUY Loyalty Practitioner Study, a summary of top-level findings from an online survey
of 252 loyalty marketers conducted from 9/30/11 to 10/31/11, reveals these storm clouds hovering over
loyalty marketers (in order of those chosen by respondents asked to select their top 3 challenges):
1. Too many competing priorities
2. Too many priorities
3. Perception of poor ROI
4. Inadequate staffing to implement well
5. Inadequate budget/resources
6. Inadequate cross-functional coordination
7. Inadequate customer focus
8. Outmoded IT systems at the point of sale
9. Cost and difficulty of implementing “soft” benefits
10. Lack of support for innovation from the top
to measure incremental lift, retention
and cross-sell on other profitable
product lines. They isolated a group
of cardholders who opened checking
accounts over a quarter, and then
retroactively matched their behavior
in the year prior with an identically
performing group of cardholders
control. In my experience, no one
will want to do that, and the suggestion alone may shock your skeptics
into belief.
And that leads to my concluding
question: Do you believe that your
program creates a benefit in excess
It may be an all-time classic business cliché, but it’s quite true that
an average strategy with great execution trumps the best strategy
with poor execution.
who did not open checking accounts.
They then compared the perform ance differential of those two groups
in the year following the “newaccount” quarter. This technique
relies on the ability to identify nonmember customers through other
means besides the loyalty card. While
not perfect, that technique convinced most skeptics, and had the
additional benefit of demonstrating
the analytical value of the customer
transaction data.
Confronted with doubting Thomases
and Thomasinas in the senior ranks,
how then can a practitioner retroac tively measure and underscore a loy- Create true believers.
alty program’s incremental benefits? If you have no other means of prov ing ROI, and your program’s credi bility is at stake, then consider
One major financial institution
successfully confronted this chal - the drastic step of re-establishing
a true control group by shutting
lenge when an executive in the
checking and savings account depart - your program down in a small but
representative geography, if
ment questioned the generous
rewards bonuses given credit card possible. You can then measure
customers who opened new checking both the immediate downside to
the business there, as well as the
accounts. Lacking a true control
group, the bank’s loyalty managers ongoing incremental benefits in
used a surrogate analytical technique remaining markets against that
of all its costs and, and delivers
benefit that’s better than that from
competing investments? If you have
the facts to establish that the answer
is yes, then sell your belief. Belief
is all anyone buys anyway.
If you don’t believe because you
lack the facts, go get them. If you
can’t sell your own belief, why would
anyone else believe?
There is another business cliché
that says you can’t manage what
you don’t measure . . . convincingly.”
Concentrate on building convincing
incremental ROI metrics, and many
of your other execution challenges
will evaporate as assuredly as the
rainwater from the marketing storm
clouds when the sun breaks out.
COLLOQUY Partner Jim Sullivan believes in
loyalty marketing. And not just because he
gotta. Further analysis of the 2011 COLLOQUY
Loyalty Practitioner Study will appear in
upcoming issues.
6
C O L L O Q U Y / Volume 19, Issue 5, 2011
Global, Diverse, Sustainable
www.colloquy.com
“Globalism” doesn’t merely mean doing business overseas. It
means incorporating range and diversity into your offerings and
practices no matter where you set up shop. Join COLLOQUY
as we go global, evaluating strategies from all the square corners
of the round earth to broaden your loyalty thinking.
Planet Loyalty
BY PHAEDRA HISE
“GREAT MINDS DISCUSS IDEAS; average minds discuss events; small minds
discuss people.” So goes the quote famously attributed to Eleanor
Roosevelt. Although Eleanor and her husband probably did discuss a few
people in the course of FDR’s presidency (Stalin and Hitler may have
merited a few choice words), they also focused on compelling events, like
World War II. Most famously, they took aim at some ambitious ideas, like
The New Deal.
Whether you agree with the economics of that particular platform, the
point is that their ideas, more than their associations with people or
events, made the pair unforgettable historical icons.
This applies to business thinking as well. For example, when faced with the
term “globalism,” do you fixate on people? In other words, do you rule out
the entire concept because you aren’t selling to consumers in South
Africa? Or maybe you think more about events, and just set aside the whole
“global” thing until your company decides to enter the fray.
Instead, broaden your perspective and focus on ideas. That’s where global
thinking can help any organization.
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C O L L O Q U Y / Volume 19, Issue 5, 2011
Isolationist strengths
Globalization isn’t about opening a store in China.
Focusing on such a level of business is keeping your
perspective too small. It’s about using global intel to
inform your loyalty strategy. Global thinking at the idea
level is relevant even if your organization has no
plans for overseas expansion, and this plays out in
several different ways:
First, your customers are becoming increasingly
global themselves. As the world shrinks, consumers
are increasingly likely to have flown on an overseas
carrier, stayed in a foreign-owned hotel, learned how
to prepare an ethnic dish for dinner, or are looking for
Kate Middleton-inspired fashions. Online shopping
continues to proliferate (growing 19% a year and will
hit $1 trillion by 2013, according to Goldman Sachs)
giving those consumers more and more opportunities
to do business with an overseas company—and participate in that company’s loyalty program and its potentially unique strategies. As their international knowledge increases, consumers are more comfortable with
the diversity that globalism offers—and are often
seeking that diversity.
A Burgeoning Global Middle Class
Income growth will increase the size of the middle class in proportion to the
world population. The middle class population will expand significantly from
2000 to 2030.
Rich
12.6%
Middle
Class
Poor
Rich
21.3%
Middle
Class
16%
1.33B
Poor
62.7%
+ 900MM
430M
Middle
Class
2000
2030
2000
7%
Middle
Class
Third, understanding overseas markets raises the
level of discussion. Here is where Eleanor was right:
Tracking worldwide trends and the ideas that fuel
them means you can be the smartest guy in the room
when (not “if”) the conversation turns global. When
discussions center on adding elements to a program—
recognition benefits or special access, perhaps—it’s
helpful to know that programs like Tanishq Jewelry in
India, for example, are heavy on such soft benefits, and
how those perform.
Expansionist strategy
Perhaps you’re considering overseas expansion. Emerging economies are calling to marketers right now and
for good reason: There’s serious potential here. Con sumers in these growing markets are embracing new
retailers, telecommunications providers and financial
offerings. The growing middle class is eagerly engaging
with imported goods and services in ever expanding
numbers.
We know this from our 2011 COLLOQUY Cross-Cultural
Loyalty Study, a unique project that examined global
consumer attitudes and behaviors regarding loyalty in
six countries: Australia, Brazil, Canada, China, India
and the U.S. We asked consumers how they felt about a
range of issues, including loyalty programs, the economy,
brands and brand engagement, money, and communication. The results have ramifications for loyalty programs both at home and abroad—no matter where your
home is and how you define “abroad.”
7%
80.3%
Second, global scans can inform your own program.
Think of what you could learn from an overseas program that’s built specifically for a particular customer
profile just now emerging in your own segmentation.
Or if your loyalty strategy is beginning to spread into
other areas of your organization and is driving, say,
merchandising, think how helpful it would be to study
companies like South African retailer Woolworths,
which employs loyalty insights across the organization
to determine pricing, merchandising and new product
offerings.
16%
2030
Source: Source: World Bank (2007)
• Uses World Bank definitions of “poor” (with incomes below $4,000 in 2000 international dollars), “middle class”
($4,000-17,000) and “rich” (above $17,000)
• Projected growth roughly equates to adding three additional U.S. populations to the “middle classes” in the
global economy
The potential for growth and for learning is particularly
intense in the BRICS countries of Brazil, Russia,
India, China and South Africa. In these fast-growing
economies, it would seem as if companies can open a
store or issue a credit card and instantly build a meaningful customer base. Organizations doing business
in such economies usually encounter conditions in
which growth is fueled by relentless acquisition,
leaving plenty of room for all comers with a similar
attitude toward gathering customers. With little need
at the moment to focus on shift or retention in these
markets, it may seem like there isn’t a major role for
loyalty.
www.colloquy.com
Closer to Home—Better or Worse
Dwindling engagement with loyalty communications domestically—particularly when contrasted with engagement
globally—demonstrates an opportunity to re-engage with best customers. Top 3 Box on a scale of 1-10 shows these
engagement trends:
Receiving program special offers via cell phone
2009
2011
18%
8%
Swapping program info via social networking sites
2009
2011
18%
9%
Learning program info via websites
2009
2011
44%
33%
Receiving program info in statements via regular mail
2009
2011
41%
38%
Receiving program special offers via regular mail
2009
2011
40%
38%
Responding to surveys about your preferences
2009
2011
42%
38%
Source: 2009 COLLOQUY Loyalty Demographic Study, U.S. General Population Results; 2011 COLLOQUY Cross-Cultural Loyalty Study, U.S. General Population Results
• Q: How active are you in each of the following? Please select one response for each statement. On a 1-10 scale where 1 is “Not at all active” and 10 is “Extremely Active”;
“Not sure”; “Never done it before”
• Results indicate Top 3 box ratings
• Statistically significant differences are highlighted in bold
• 2009 n = 373; 2011 n = 818
Not true, as we discovered when we set out to cover
global loyalty for this issue. Our features on South
Africa, Mexico and Central and Eastern Europe profile
companies that have taken the time to think about
building loyalty to bolster their business stability. They’re
working to win not just consumer wallet share, but
also—and more importantly—the hearts and minds of
the consumers who control the wallet. Winning busi ness in this way is achieved with creative programs
that connect with a socio-economically diverse set of
consumers. Employing innovation and range, those
companies are differentiating themselves from the
competition and building the base for a sustainable
long-term growth strategy.
Our research also reveals loyalty opportunity in developed economies. Consumers in mature loyalty-marketing
environments may be signing up for more new programs
every day, but when surveyed, they responded candidly
about the lack of relevance in existing loyalty programming and communications. The marketer who creates
the right recipe of powerful insights for shaping a
relevant, personalized program—in the way that cus tomers globally are demanding—can boast a staunch
competitive advantage.
Incorporating a global vision into your loyalty strategy,
therefore, is critical. Ask yourself: Why are overseas
consumers so highly engaged with their domestic loyalty
programs? What are foreign marketers doing to identify
customer needs and boost program relevance? The answers
will contribute to the global vision.
This level of international awareness contributes to
another global buzzword, “sustainability.” Long-term
sustainable success grows from staying in touch with
customers (as Eleanor Roosevelt said, “Understanding
is a two-way street”) and staying relevant to them—and
this is true no matter where in the global village you
set up shop. “In all our contacts,” said Eleanor, “it is
probably the sense of being really needed and wanted
which gives us the greatest satisfaction and creates the
most lasting bond.”
Who knows—thinking globally may help you develop
a “New Deal” level idea for your own loyalty initiative,
which will inspire others in your industry.
Embrace global thinking, and elevate your strategy to
the level of great minds.
COLLOQUY Senior Editor Phaedra is herself a world traveler, fluent
in three languages—four, if you include “business concepts” as a
language unto itself.
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C O L L O Q U Y / Volume 19, Issue 5, 2011
P L A N E T L O YA LT Y: S O U T H A F R I C A
country’s citizens live below the
poverty line. In 2009, 39.4% of
the country’s total personal income
was collected by only 3.8 % its adult
population. And while English is
the dominant language of business
and government, the country
recognizes 11 “official” languages.
In fact, English is considered the
“home language” of only 8% of
the population.
Loyalty’s World Cup
South Africa’s loyalty industry is as diverse as its population, and as
vigorous and competitive as its national rugby team
BY REBECCA McREYNOLDS
SOUTH AFRICA’S GREATEST sporting event
was memorialized in the 2009 film
Invictus, starring Matt Damon and
Morgan Freeman. The movie told the
story of Nelson Mandela befriending
the captain of the national rugby team,
the Springboks. The two worked
together to integrate the all-white
team. When the Springboks surprised
everyone by defeating favored New
Zealand to win the 1995 Rugby World
Cup, they became a symbol of the
nation’s post-apartheid strength.
Today, South Africa’s winning teamwork has landed it recent addition
to the BRIC (Brazil, Russia, India and
China) group of major emerging
economies, where it has leading
status among African countries and
growing importance in international
trade. How appropriate that South
Africa is the nation that makes the
BRICS acronym plural.
In South Africa, racial divide has
changed to economic divide, and its
loyalty industry has adapted to stay
relevant both to very wealthy cus tomers, and to those just trying
to make ends meet. Much can be
learned from studying programs
here, which manage to balance
critical hard benefits sought by the
lower end of the economic spectrum,
and special soft benefits that the
top tier demands.
The divide is wide: Unemployment
hovers around 25% and half of the
Because of this economic separation
and the population of 50 million,
there is no clearly defined mass
market around which South African
programs can be developed and built.
As a result, like much of the country
itself, the loyalty industry is divided
into two distinct tiers: A few large,
innovative programs are applying
sophisticated tools to leverage data
and customize offerings designed
to attract wealthier members; and
smaller retail offerings are targeting
tighter niche markets.
As consumer awareness and sophistication grow, however, demand for
high-quality programs will follow,
says Jolandé Duvenage, CEO of First
National Bank (FNB) eBucks rewards
program, one of South Africa’s oldest
and largest loyalty marketing initiatives. “As most loyalty programs are
focused on the more affluent South
African consumer, the opportunity
remains for programs to capture the
balance of the economically active
South African population,” she says.
Several programs in retail, grocery,
financial services and wellness are
finding creative ways to reach both
ends of this wide-ranging customer
base, putting South Africa’s loyalty
maturity among the top of the BRICS
class.
One uniform doesn’t fit every
member
At the top end of the South African
market are the most affluent households. These are sophisticated consumers who use rewards to pamper
themselves with trips to spas or upgrades on international travel. They
also tend to have multiple relation-
www.colloquy.com
ships with their banks, from checking
to investments to credit cards and
mortgages. At the other end are
members from some of South
Africa’s poorest communities. Those
customers may only have a debit
or check card, and often need help
just paying for food at the end of
the month.
BRICS and Mortar
And travel and food . . .
and other interests of the
South African consumer.
Absa Financial Rewards maintains an extensive
client database, which allows tailoring of
promotions and communications, with up to
eight different newsletters and a magazine
tailored with articles and advertisements from
The last two years have seen the
launch of two major loyalty initiatives
that successfully cover these extreme
ends of the customer spectrum: The
Absa Group Ltd., one of South Africa’s
largest retail banks with more than
11 million customers, and Pick n Pay,
one of the country’s major grocery
store chains. By leaning heavily on
20 years’ of industry knowledge, Absa
Financial Rewards and Pick n Pay
Smart Shopper have leapfrogged into
the top tier of programs by providing
the benefits consumers want with
the ease of use they demand.
“When we started the
program, we had to look
at our large customer
base and look at the
different needs among
those customers,” says Fayelizabeth
Foster, General Manager of Absa
Financial Rewards.
The program’s challenge was to find
rewards that would resonate with the
entire client base while differentiating the program in the market.
Absa found the answer in the universal language of cash. Every rand
(South Africa’s currency) that’s spent
earns cash that can be deposited
directly into an Absa account. “I
think a lot of the programs have currencies that are not easy to convert,
or consumers have a difficult time
understanding what they were getting out of the program,” Foster says.
“There are no magic bucks in our
program.”
The real differentiators, though, are
the soft benefits. Absa has developed
a broad range of value-added services
targeted to meet very specific market
niches. For entry-level customers
retail partners based on the needs of the
various client profiles.
there is the “Teacher-on-Call” option,
a helpline that’s approved by the
Department of Education and staffed
by a panel of qualified teachers who
can provide homework support in
all major subjects and languages.
“Legally Yours” offers a panel of
experienced attorneys who will advise
callers and offer legal opinions on
almost any issue. Customers who
need face-to-face legal help get the
first half hour for free.
For the high-end market, Absa’s
“Know-it-All” is a personal concierge
service that will answer just about
any question callers can ask, from
the political climate in a country they
are planning to visit to the fastest
way to the airport during rush hour.
“Dial-a-Discount” finds the lowest
price on virtually any product or
service available in the market.
Leveraging its extensive client databases, Absa tailors every promotion
and every client communication to
carefully defined markets. For example, six times a year Absa sends up
to eight different newsletters based
on client profiles, and its quarterly
magazine has different articles and
different advertisements from retail
partners to suit the needs of the
various client profiles.
The power of teaming up
Pick n Pay’s Smart Shopper program
launched in March 2011, and as with
the Absa program, it offers a fast and
easy conversion to cash. Each rand
spent earns one point, and when
members hit 1,000 points, they can
go to a touch-screen kiosk in any
Pick n Pay location and redeem those
points for a cash voucher usable at
check-out.
The cash deal attracts customers
eager to save. At a base earn rate of
1%, it’s not a huge payout, but Pick
n Pay has optimized earn potential
by adding partnerships with key
suppliers, including Coca-Cola,
Kimberly-Clark, Nestlé, Tiger,
Unilever and Vodacom. Members can
earn double or triple points when
they purchase specific products or
brands.
Smart Shopper relies on technology
to help members track their status
and engage with the program via a
host of interactive channels, including the web, social network sites and
its in-store kiosks. And the grocer
is working to leverage the data it
collects via more than 50 million
individual transactions every month
to target members with special offers.
By November 2011, Pick n Pay had
signed up more than 4.2 million
Smart Shopper members, and more
than half of all transactions had a
card numbers attached, according to
company reports.
Another successful initiative is the
eBucks rewards. eBucks was
11
12
C O L L O Q U Y / Volume 19, Issue 5, 2011
South Africa in Brief:
Population:
Total: 49,004,031 (July 2011 est.)
Growth rate: -0.38% (2011 est.)
Urban population:
62% of total population (2010)
Rate of urbanization:
1.2% annual rate of change
(2010-15 est.)
Median age:
25 years
Communications:
Telephones–main lines in use:
4.225 million (2010)
Telephones–mobile cellular:
50.372 million (2010)
Internet users: 4.42 million (2009)
GDP - real growth rate:
2.8% (2010 est.)
-1.7% (2009 est.)
3.6% (2008 est.)
Vitality initiative.
Household income or consumption
by percentage share:
Lowest 10%: 1.3%
Highest 10%: 44.7% (2000)
National this and that:
Holiday: Freedom Day, April 27
Motto: : “!ke e: /xarra //ke”
(“Diverse people unite” in /Xam),
formerly “Ex Unitate Vires”
(“From unity, strength” in Latin,
1910–2000)
Bird: blue crane
Flower: king protea
Animal: springbok
Fish: galjoen
Tree: yellowwood
Anthem: two songs combined:
“Nkosi Sikelel’ iAfrika” (“God Bless
Africa” in Xhosa) and “Die Stem van
Suid-Afrika” (“The Call of South
Africa” in Afrikaans)
founded in 2000 as part of a bigger
FNB eCommerce launch and was
spun off in 2004 as a stand-alone
entity. Today, eBucks works with
dozens of partners throughout the
country, allowing members to both
earn and spend rewards through a
variety of options. For example, using
the eBucks card, members can either
earn points for eligible purchases
at participating retailers or use the
card like a debit card, using points to
pay for part or all of their purchases.
Online shoppers can use their eBucks
to pay for a wide range of merchandise, book discounted travel, or buy
minutes for their cell phones.
“We constantly challenge ourselves
to drive differentiation and value
for customers,” eBucks’
Jolandé Duvenage says.
“As the rewards industry
evolves, eBucks wants to
ensure that we remain
valuable to our members and our
partners.” Innovations include
becoming the first online supplier
of Lotto tickets (South Africa’s
national lottery) and being the only
loyalty program to allow members to
spend their points directly on fuel.
Factoid:
Soweto’s Vilakazi Street is the
only street to have featured two
Nobel-prize-winning residents:
Nelson Mandela and Desmond
Tutu. COLLOQUY hasn’t been able
to find a tally of how many loyalty
marketers live in the vicinity,
however.
Sources for the stuff we didn’t know
already in this chart: The CIA (they know
everything) World Factbook, INEGI, World
Bank, International Telecommunication
Union, World Telecommunication/ICT
Development Report, The U.S. State Dept.,
D&B, random web searches, Suzette
over in suite 17, not to mention a table
COLLOQUY published just like this four
years ago.
This is particularly notable because
the fuel industry is highly regulated
in South Africa, Duvenage says.
“Programs such as eBucks typically
make use of highly complex actuarial
models to define profitable member
behavior and, because of this, are
able to offer profitable members
exceptional value,” says Duvenage.
eBucks boasts 2.3 million highly
active members who spend more
than 80% of the eBucks earned in
any given month. In fact, through
the program’s first decade in
operation, members have spent 1.5
billion rands’ worth of eBucks (about
$190 million USD).
High scores for health
One company in South Africa is helping drive the relationship between
loyalty and wellness. Founded in
1992 as a specialized health insurer,
the Discovery Group is now the
largest health insurer in South Africa
with a market share of 40%. Along
the way, Discovery has redefined
the insurance landscape not just in
South Africa, but also in Europe and
the U.S., thanks in large part to its
While Alan Pollard, CEO of Discovery
Vitality, is quick to note that this
is a wellness program as opposed to
a loyalty offering. Still, the goals—
and the results—are in essence the
same. Members earn points based on
certain behaviors, and those points
can be spent on a wide variety of
benefits. The difference with Vitality,
though, is that points are earned not
by how or where members spend
money, but how well they take care
of their health.
For example, join an affiliated gym
and rack up points every time you
swipe your card to check in. Take
the children in for their annual
check-up, and earn points. Members
collect points for regular health
screens, for getting an annual flu
shot or even for taking a CPR course.
The more points earned, the more
benefits a member is eligible to
receive.
The theory behind the program
design was that it would create
healthier clients, which would drive
down health care costs and generate
higher profits for the insurer and
for its corporate clients. In 2008,
armed with a decade’s worth of
detailed user information, Vitality
crunched the numbers on its 1.2
million members to see if the theory
held up. It did.
Health care costs to active members
were 10-15% lower compared to costs
to all other members. And the active
members who did get sick recovered
faster and generated lower health
care costs than non-active members
with the same conditions. Maintaining these results, though, requires
active, engaged members, and they
need a rich assortment of entice ments to keep them motivated,
Pollard says.
These enticements include cashback, discounted travel, and an
online mall where members can
buy anything from sports equipment
www.colloquy.com
to computers. However, Pollard says,
the range of benefits among loyalty
programs has become so ubiquitous
that rewards alone are not enough
to build or sustain
market share in the
industry. “Whether it
be a discount or cash back, the offer has to
be meaningful enough to the client
to make a real difference in their
behavior,” Pollard says.
typically make use of highly complex
actuarial models to define profitable
member behavior and, because of
this, are able to offer profitable members exceptional value,” says eBucks’
Jolandé Duvenage.
so have the country’s loyalty programs been able to cover the varied
economic levels of consumers.
With effective analysis and segmen tation, the nation’s top-tier programs
are able to reach customers at both
ends of the economic spectrum with
targeted rewards and offers, and
earn high levels of engagement.
South Africa’s sophistication among
emerging loyalty economies is a big
score for this BRICS country.
South African marketers are responding to the challenge of extreme economic diversity with the resource fulness of their rugby team—the
Springboks won the World Cup again
in 2007, and advanced to the quarSo Discovery expanded Vitality as
terfinals in 2011. Just as the team
it grew its business. Members can has been able to embrace and rep- Rebecca McReynolds is a COLLOQUY
Contributing Writer.
earn rewards on the company’s life resent the diversity of the nation,
insurance and investment products,
and they can use points for discounts
on premiums or to lower their fees.
In Training
Its newest offering, VitalityDrive, is
Fitness prep not necessarily for the next big rugby match, but for life itself.
attached to Discovery’s auto insurance
unit. Members collect rewards based
The Vitality wellness program (as opposed to a loyalty program) from health insurer Discovery Group
on driving records, and can use
encourages healthy behaviors to drive down health care costs and generate higher profits for the insurer
the points for fuel discounts from
and for its corporate clients. Part of the goal is to allow participants to engage
British Petroleum. Connecting all of
in the scrum of life more safely and more vigorously (the “scrum of life”
these programs is the DiscoveryCard
metaphor is COLLOQUY’s, in case you were wondering where to place the blame
credit card, which lets members earn
even more rewards faster.
for it). This page from a Vitality brochure demonstrates methods of participant
engagement.
The results have been so impressive
that the program has been duplicated
in the U.K., through Discovery’s
partnership with Prudential, plc,
known as PruHealth, and has been
introduced in the U.S. as The Vitality
Group and to clients of Humana
Inc. as HumanaVitality. Today the
company is monitoring input from
its now 1.9 million members on three
continents to upgrade and expand
its roster of benefits. “The data is
important because the program is
based on cost-driven results,” Pollard
says. “We work on verifiable identities, and we need to make sure that
the rewards offered are driving the
right behaviors.”
Because of the stratified customer
base in South Africa, programs like
Vitality rely heavily on data crunching
and refined segmentation to create
relevant offers and rewards. Collecting data—and knowing how to use
it—has long separated South Africa’s
top-tier loyalty programs from the
rest of the pack. “These programs
13
14
C O L L O Q U Y / Volume 19, Issue 5, 2011
P L A N E T L O YA LT Y: M E X I C O
Mexico’s Loyalty Landscape: Mis Amigos
The key word in Mexican loyalty marketing is “amigos,” with
progressive partnership programs that let members earn quickly
BY LESLIE BROKAW AND PHAEDRA HISE
Today, collaborations are taking hold
in Mexico the way they have in more
developed markets such as Canada,
the U.S. and the U.K. Marketers in
Mexico now have a developed
loyalty industry that focuses on
retention, using vehicles like
partnerships to boost customer
earn; mobile tools that appeal to a
younger demographic; and crossborder marketing. Companies are
increasingly working with data
analysis. The Mexican loyalty
market is hotter than a jalapeño.
“In Mexico, consumers belong to at
least three loyalty programs,” says
David Rebolledo, Loyalty Programs
and CRM Sub Director for Grupo
Posadas. As shoppers become more
accustomed to programs, companies
are working harder to differentiate
themselves. They have become more
sophisticated about the financial and
marketing advantages that partnership programs can offer over standalone programs.
Viva la partnership
IN 2001, THE MEXICAN LOYALTY MARKET
seemed poised to say “óle” for two
reasons: The first was a general
Mexican economic malaise, which
reinforced a quest for value among
consumers. The second was the 1989
signing of NAFTA, which spurred a
loosening of Mexico’s closed market
and prompted an inflow of international companies, fostering a flowering of nascent programs. Together,
these factors created a culture of
competition that made it suddenly
important for Mexican companies
to think about customer devotion
in ways that they hadn’t before.
A rudimentary Mexican loyalty
industry has been in place for ten
years, beginning in travel, retail,
financial services and hospitality.
In 2001, three main programs stood
out for their millions of memberships and valued promotional cur rencies: airline Aeromexico’s Club
Premier, airline Mexicana’s Frecuenta
program, and hotel company Grupo
Posadas’ Fiesta Rewards. Banks such
as Banamex, Scotiabank Inverlat and
Banorte were in the loyalty game, as
well, with credit card rewards. And
high-end Mexican retailers Palacio
de Hierro and Liverpool had introduced programs that included per sonalized shopping and membersonly sales for top customers. But
programs were generally singlebranded and insular.
“Mexican customers understand
better now the dynamics of accumulating and redeeming points or
miles,” says Yelitza Guerrero,
Frequency Loyalty Marketing Manager for InterContinental Hotels
Group Mexico Region. It’s not
surprising, given Mexico’s history
of publically-owned corporations,
to see strong public/private loyalty
partnerships emerge in response.
Culturally, it’s familiar ground.
In late 2009, for instance, such a
partnership emerged to provide
banking to low-income Mexicans
via “correspondent,” or “agent,”
banking at non-bank retailers.
A pilot program in state-owned
Diconsa grocery stores, which are
www.colloquy.com
run by Mexico’s Ministry of Social
Development (SEDESOL), used
point-of-sale devices and finger print-based identity cards to deliver
government payments, thereby
increasing its customer base. The
program offered value to both sides:
access to banking in areas that
lacked other services, and new markets for financial institutions.
Another public/private partnership
is the one between Soriana, a grocery
and department store chain with
2010 revenues of 93,700 million
pesos (about $8 billion USD), and
Mexico’s national electricity commission. Soriana has its own standalone frequent-customer card, which
the company says “without doubt
has become the distinguishing
factor from our competition.” But
Soriana also partnered for a time
with the national electricity commission, Monedero. When customers
spent $30 or more at Soriana and
present their Monedero CFE cards,
they received 4% back in a “CFE
e-wallet.” Half of the return could
be spent at Soriana, while the other
half was applied toward their electric
bills. Although the program was
recently cancelled, the company says
that it’s creating new loyalty programs
with other government agencies.
Rodrigo Benet, director of investor
relations for Soriana, says the company’s marketing strategies are
entirely focused on generating loyalty because they must be: “Markets
without boundaries, the accessibility
to information, more aggressive
competitors, and the entrance of
selective and intelligent consumers
are challenges that every venture has
to be prepared to face.”
Earlier this year, Grupo Posadas—
which operates a chain of about 100
hotels throughout Mexico, Brazil,
Argentina, and Chile—signed a
partnership with Santander Bank to
introduce a co-branded credit card
that allows hotel customers to earn
points on all their purchases. The
credit card partnership helps to
differentiate the company, David
Rebolledo says: “Our customers now
earn points faster than any other
program in the region.”
The partnership trend in Mexico is
heating up so much that international
investors are joining in. For example,
take Aeromexico’s relationship
with Groupe Aeroplan (now named
Aimia). The Canadian company
invested $22 million USD in the
Mexican airline’s Club Premier in April
might be limited—only 25% of
Mexicans had access in 2009—but
phones are ubiquitous.
To leverage this trend, several companies are exploring the possibility
of bypassing plastic or paper cards
for their customer relation programs.
For many Mexicans, mobile has
become the most common, and most
reliable, way to communicate and
carry personal information. Financial
transactions are a natural next step.
Dynamic Opportunity
“Mexican customers understand better now the dynamics of accumulating
and redeeming points or miles,” says Yelitza Guerrero, Frequency Loyalty
Marketing Manager for InterContinental Hotels Group Mexico Region. They’re
also under standing and benefiting from the dynamics of technology: “IHG was an early
pioneer in the mobile space with the hotel industry’s first wireless reservation system
in 2001,” she says. “The initial release of our Priority Club Rewards iPhone app contains
the features members expect when booking and managing reservations.”
2010, and another $11.8 million USD
ten months later, with a goal of growing Aeromexico’s own partnership
network.
By contrast, Mexicana Airlines’
MexicanaGo (formerly Mexicana
Frecuenta) was pegged by COLLOQUY
as a pillar of the loyalty industry ten
years ago. But the August 2010 bankruptcy and subsequent shuttering of
service of the airline brings home
one of the big vulnerabilities of
single-company programs. That
same month the MexicanaGo website
posted a notice that redemption and
transfers of program points were
being suspended. Currently, the site
expresses confidence in the airline’s
eventual return.
For example, Starbucks Mexico
recently initiated a program that
uses bar code coupons sent to
phones. The strategy was to reward
loyal customers and acquire new
ones. Starbucks handed out postcards with details about where to text
any of several keywords. In response,
customers received a WAP link to
download a mobile coupon for a buyone-get-one-free or other discount.
Stores were equipped with 2D bar
code recognition software to read
the coupons directly from people’s
mobile phones. Redemption rate
was 60%. Every time a customer
presented the coupon, the offer
would be modified to present a
purchase upgrade that differed based
on the frequency of use, thereby
rewarding return visits.
Mexican mobility
Mexican loyalty campaigns are spiced
with a heavy mobile flavor. This
isn’t surprising, given that Mexico’s
median age is 27 (compared to the
United States’ median age of 37),
and that there were 75 mobile
cellular subscriptions in Mexico per
100 people in 2009. Internet access
InterContinental Hotels Group has
used mobile applications since mid
2010, says Yelitza Guerrero. “IHG
was an early pioneer in the mobile
space with the hotel industry’s first
wireless reservation system in 2001,”
she says. “The initial release of our
Priority Club Rewards iPhone app
15
16
C O L L O Q U Y / Volume 19, Issue 3, 2011
Mexico in Brief:
Population:
Total: 113,724,226 (July 2011 est.)
Growth rate: 1.102% (2011 est.)
Urban population:
78% of total population (2010)
Rate of urbanization:
1.2% annual rate of change
(2010-15 est.)
Median age:
27.1 years
Communications:
Telephones – main lines in use:
19.89 million (2010)
Telephones – mobile cellular:
91.36 million (2010)
Internet users: 31.02 million (2009)
GDP – real growth rate:
5.5% (2010 est.)
-6.1% (2009 est.)
1.5% (2008 est.)
Household income or consumption
by percentage share:
Lowest 10%: 1.5%
Highest 10%: 41.4% (2008)
National this and that:
Holiday: not Cinco de Mayo, but
Independence Day, Sept. 16
Motto: none
Bird: águila real (“royal eagle”)–the
golden eagle
Flower: the Dahlia pinnata
Animal: the xoloitzcuintli, and others,
like the jaguar–the national mammal; the chihuahua–the national
dog; and the grasshopper–the
national arthropod
Anthem: “National Anthem of
Mexico” (we’re not kidding:
“Himno Nacional Mexicano”)
Factoid:
The cotton-like balls produced by
the kapoc tree were used to stuff
baseballs before the days of inexpensive synthetic fibers. COLLOQUY baseball fanatics cheer.
Sources for the stuff we didn’t know
already in this table: The CIA (they know
everything) World Factbook, INEGI, World
Bank, International Telecommunication
Union, World Telecommunication/ICT
Development Report, The U.S. State Dept.,
D&B, random web searches, Harold
over in suite 32.
Grupo Posadas admits that the hotel
chain has struggled with getting the
most out of its information. “Posadas
had a tremendous amount of data
in its CRM system, yet the marketing
team felt they didn’t ‘know’ their
customers–their preferences, booking patterns,” says David Rebolledo.
Grupo Posadas’ Fiesta Rewards pro gram had been in place since 1987,
but the company only started using
data-mining and marketing automation tools in 2009. Since then,
the hotel has been targeting its
communication campaigns based on
customer preferences. As a result,
Grupo Posadas was able to improve
conversion by 300% and reduce the
email unsubscribe rate by 500%,
according to Rebolledo. He also
notes that Fiesta Rewards members
spend 45% more than non-Fiesta
Rewards members.
None of that surprises Leopoldo
Gómez of GomezLee Marketing, a
contains the features members
Mexican beverage Jarritos, which
21-year-old Dominican Republic
expect when booking and managing is marketed in the U.S. by Texasfirm and international COLLOQUY
reservations: using GPS functionality based Novamex, a points-underNetwork Partner that has helped
to find nearby IHG hotels, viewing the-caps loyalty program called Club Latin American companies with
photos and amenities for each hotel, Jarritos targets U.S. teens over 13.
loyalty strategy since 2000. Gómez
getting custom directions using GPS, Each cap has a code, and members met recently with a major Mexican
click-to-call for the front desk, and enter the code either online or by
company that has lost faith in its
using Priority Club Rewards account sending a text message. The program loyalty program. “They say it’s not
information to facilitate bookings.” was supported by Spanish-language doing anything for them,” he says.
media buys, “eBlasts” and text
They don’t see any value in the
An iPhone app that’s been downmessaging. As of November 2011, it program. The problem is that they
loaded nearly 2 million times, a
has distributed more than 6.5 mil - don’t have any best practices, they
Facebook page with more than a mil- lion points. Rewards include Jarritos don’t have the proper objectives,
lion fans, and a constant stream of
bottle cap earrings (150 points) and the proper metrics. And that’s very
tweets to more than 250,000 Twitter a 37” widescreen TV (15,000 points). common in Latin America.”
followers are big pieces of the loyalty In another smart nod to social netstrategy for Cinépolis, a major
working, club members who “like” The growth of partnerships will
the program through Facebook get likely change that, as companies
Mexican movie theater chain with
269 theaters in Mexico and Latin
to see their photos and comments
have access to more customers and
America. Based on interactivity and right on the Club Jarritos homepage. more data and begin to glean insights
engagement, the Cinépolis strategy
from their analytics. Combine that
allows fans to comment to the Face- Data leading to
with the maturation of existing
conclusions
book wall and reply to tweets, and
partnerships and formation of new
uses an app that, in addition to deliv- Gathering data and leveraging in - alliances, and the Mexican loyalty
sights remain a particular challenge fiesta will be getting even louder
ering movie trailers and starting
in Mexico. Until recently, accurate and more boisterous in the coming
times, allows users to submit film
ratings that are included at the com - databases simply didn’t exist. That years.
pany’s Twitter and Facebook sites. continues to be part of Mexico’s
Leslie Brokaw is a COLLOQUY Contributing
puzzle, and therefore where marWriter, and Phaedra Hise is COLLOQUY Senior
Companies are targeting the youth keters are likely to increase their
Editor.
market across borders, too. For the efforts.
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18
C O L L O Q U Y / Volume 19, Issue 5, 2011
P L A N E T L O YA LT Y: C E N T R A L A N D E A S T E R N E U R O P E
adept at negotiating and managing
partnerships. The loyalty industry
in this part of the world may be
“emerging,” but in some ways it
already outpaces some more devel oped economies. In particular, this
region relies less on proprietary
programs and more on creative
partnerships and coalition.
From Glasnost to Points Growth
How Central and Eastern European loyalty programs explore partnerships
BY PETER WRAY
IT’S BEEN A BUSY FEW DECADES for Central
and Eastern Europe (CEE), which in
the space of a generation has transformed from a region under the wing
of the Soviet Union to a set of countries that have joined the European
Union or are in the process of negotiating membership. This journey
has involved political, economic and
social upheaval, and has introduced
huge challenges for their political
leaders and citizens.
The economic journey in general
and the face of loyalty marketing in
particular has also experienced
significant change. Despite limited
consumer disposable income, and
the small population bases of individual countries, CEE citizens are
now engaged in several recentlylaunched loyalty programs, especially
bank-card-based initiatives. Most
notably these are growing in Poland,
the Baltic States, the Czech Republic
and Croatia.
Perhaps because of the fluctuating
nature of the region’s political
boundaries, marketers in Central
and Eastern Europe seem particularly
Regional challenge
This former Soviet region may look
unified to Westerners, but it is defined
by its differences. It comprises a
very diverse cultural, ethnic, economic, political and geographic mix.
Launching on one national base and
then leveraging program-development costs across borders with any
degree of standardization therefore
presents significant challenges.
In addition to the ethnic differences
to consider and adapt to, the region
has been challenged by economic
factors following the recent reces sion. For example, the Baltic region
of Latvia, Lithuania and Estonia has
suffered massive negative economic
impact, and the GDP for its seven
million citizens is still very low—a
quarter of that of their more-developed Scandinavian neighbours,
Sweden and Finland.
The economic story improves for
Croatia, part of the former Yugoslavia.
This country has seen dynamic
change (and sometimes conflict)
during its adjustment to the postCommunist era. Its population base
is 4.4 million, and its GDP per
person is around 58% of their near
neighbor Italy. GDP has been climbing steeply over the last decade, and
Croatia is now awaiting membership
in the EU.
Poland and the Czech Republic, both
EU members since 2004, are slightly
better positioned. Poland is the
largest market in the CEE, with a
population of 38 million. It navigated
the recent recession well and is
currently enjoying relatively good
growth, but GDP per person in
Poland is still less than half that in
Copyright © 2011 Peter Wray
www.colloquy.com
all the Western European mature
markets. In the Czech Republic, GDP
is tracking around 75% of the EU
average for its 10 million citizens.
Overlooking these emerging markets
is far too easy if judgments are based
purely on population, cultural
differences or lesser GDP numbers,
but loyalty programs in Eastern
Europe are surprisingly robust. Some
areas have established programs.
Marketers are optimistic, and eager
to learn and grow loyalty initiatives.
A bold start
The Baltic region is proof that
economics don’t need to be perfect
for launching loyalty. At first glance,
this small population facing serious
economic challenges doesn’t seem
the best target for an ambitious
loyalty program, but setting sights on
consumers in the region is exactly
what BalticMiles did in October 2009.
Their brand vision is to be “the
currency of the North,” and they
claim to be the fastest-growing
loyalty program in Northern Europe.
BalticMiles is based on a frequentflyer program created originally to
support Baltic Air, a regional carrier
operating across Northern Europe.
BalticMiles claims it delivers the
highest earn ratios in the global
airline industry, with selected offers
of 30-40 points per Euro spent via
partner purchases. Current partners
include Nordea Bank, Neste retail
fuel sites, Sixt car hire and international travel and leisure brands,
including Radisson. The redemp tion website operates in seven
languages and currencies.
The original frequent-flyer points
base delivers an upper-tier socioeconomic membership of core
spenders within the program. The
publicity, marketing and general
“feel” of the program is upmarket.
“We are signing new
partners every day,”
says Gabi Kool, CEO of
BalticMiles. “Our vision
is to be the most successful loyalty
company in Northern and Central
Europe.” Partner growth is Kool’s
top goal, with the challenge of
maintaining balance and quality of
partners in the program.
BalticMiles has more than 10,000
POS locations and a robust mobile
loyalty program built to leverage the
market’s active smart phone use.
The current membership base is half
a million households, Kool says, with
a goal of increasing to two million,
achieving 50% market penetration.
Over 30% of typical household
budgets are spent on grocery items
in these markets, so securing a leading brand grocery retailing partner
was an immediate priority. Kool
expects future growth to come from
recruiting members with lower
social demographic profiles, and as
a result, the program has evolved to
incorporate low redemption thresholds (and younger demographic
appeal), such as music downloads.
Adapt and learn
Because program operators are still
experimenting and learning, there
is the occasional awkward hiccup
and growing pain. For example, the
Czech Republic has grown several
large single-brand customer loyalty
programs, which are typically either
based on a bank card or operated by
a fuel company. On the one hand,
the Czechs made a progressive early
move by embracing coalition with
the RENOME program four years
ago. On the other, that program
(successful by all accounts), is now
closing down with no clear explanation of why.
RENOME grew out of a single-brand
program begun by shoe retailer Bata
12 years ago. Bata became a wellestablished brand, with half a million
active cards in circulation (more
than 10% of Czech households), and
the program grew into a fashioncentric coalition.
“Then we tried some cooperation
with other speciality retailers,”
says Radek Hrachovec, former
director for both the Bata Club and
RENOME programs and now an
independent consultant. “These
joint promotions
brought new customers and Bata
received income plus
satisfied customers.”
The basic idea behind RENOME
was to find the way to both operate
the Bata Club more efficiently and
secure a constant stream of new
customers. Hrachovec lined up a
group of speciality retailers mainly
focused on women’s fashion and
beauty services. He persuaded
non-believers of retention-loyalty
marketing to become enthusiasts.
“Most of RENOME partners totally
changed their approach to marketing and refocused their massmarketing money into direct communication with their core
customers,” Hrachovec says. “By
far the most important business
achievement was keeping the growth
of cross-shopping rate. Members
of RENOME were year-by-year more
active. The most important figure was
about 30% of these members were
cross-shopping among partners.”
Ironically, Bata recently announced
(after a change in management)
that it will be closing down the
RENOME project, a move that has
confused loyalty practitioners
impressed by the success of the
program. “RENOME was a good
concept, proven to be commercially
successful despite competitive
programs,” says Jan
Bizik, an independent
loyalty consultant.
“The future really is to
learn how to use the
loyalty program to improve the
business model by adopting strategy,
saving costs, and satisfying better
customer needs.”
Tesco has recently introduced its
Clubcard into the area, which will
likely spark marketers to apply
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C O L L O Q U Y / Volume 19, Issue 5, 2011
learnings from the Bata/RENOME
program.
Scaling up
The Czech market may be taking a
hiatus from coalition, but other CEE
markets are embracing this program
format. Rather than develop proprietary programs, some retailers
in Croatia and Poland are jumping
straight into the economies of scale
that coalitions offer.
The MultiPlusCard is the first
coalition-based program on the
Croatian market. It allows customers
to collect loyalty points via a network
of 2,000 points of sale. The program
grew out of the Konzum’s Supermarket loyalty program, wellestablished after five years in the
Croatian retail market. Konzum is
known for its constant innovations
and customer care, and this was a
guiding principle for the MultiPlusCard development, which was spun
off and launched last year as an
independent company.
The program has already built a
substantial partner network,
including leading banking group
Zagreba ka Banka (part of the
UniCredit Italiano), T-mobile, Tisak
and Tisak Media (a leading chain
of kiosks and multimedia shops),
national drugstore Kozmo, and
large tour operator Atlas Airtours.
“We developed our model based
on the best loyalty programs in the
world,” says Nikola Jurcic, CEO of
MultiPlusCard. “As the leaders in
their segments, our partners are
bringing a huge collective knowhow and customer base to the
MultiPlusCard program.”
The program has almost a million
members, with over 70% of those
actively engaging with regular
frequency.
The MultiPlusCard program is a
combination of collecting loyalty
points and coupons. Each partner
rewards customers for purchase via
points, as well as by using various
combinations of targeted award
coupons. Members collect points
for three months and then receive
a booklet of financial coupons—four
rewards for items that they usually
buy, and another four to stimulate
spending, or targeted incentives.
“Data analytics helps all
our partners to prepare
new products and ser vices according to cus tomer needs,” Jurcic
says. “There are some differences
between the levels of previously
existent data analytics among our
partners. We are adding deeper and
richer insight, and helping partners
to utilize that advantage. This is
especially helpful for the partners
that hadn’t any form of loyalty program before and now can see their
customers in a totally different
perspective.”
Poland made an early attempt at a
coalition program at the start of
the new millennium with a Statoilsponsored coalition called the
Premium Club. The program has
achieved some penetration of the
market with around 2 million
active members, but it still lacks a
retail grocery partner. That isn’t
surprising, as Poland’s grocery
market is historically fragmented,
and hard discount grocery brands
are strong in the market.
Another recent entry has made great
progress in Poland, however. In
2009, Loyalty Partner GmbH (the
program management company
behind PAYBACK), moved into the
Polish market. PAYBACK brought
together its existing issuance partners, BP service stations and Real
grocery stores, plus Polish telco
partner Telekomunikacja Polska
(TP). The initiative also included
Allegro, a dominant e-commerce
partner in the Polish market, and
BZWBK bank.
The program launched in 2009, and
grew rapidly to overtake Premium
Club. The critical differences for
PAYBACK Poland were that it included
high-frequency, high-touch partners
in grocery and fuel. As one of the
“big three” coalition companies,
Loyalty Partner was able to leverage
the expertise and economies of scale
that it developed in PAYBACK’s operations in Germany.
Home-grown success
A delicate balance is being maintained between success and failure
in some of these emerging programs,
the primary issues being the relatively
small populations and generally low
disposable incomes as compared
to Western Europe.
The trend toward coalition leverages
the fixed costs of running a consumer
loyalty program, and that will put
more pressure on single brand consumer loyalty initiatives. Can any of
the single-brand loyalty programs
that are common across Central
and Eastern Europe demonstrate
sustainable key performance
indicators and returns on their
investment?
It remains to be seen if outsiders or
home-grown initiatives will take
the day in this region. While local
knowledge and growth from
existing strong national brands is
currently driving the action, that
may not last for long. It’s likely that
national players are standing by,
waiting to join the game after local
skirmishes have winnowed the
players, and those left in the game
are ready to be acquired by larger
teams.
The winners, of course, will be CEE
consumers, who will gain ever
more earn-and-burn opportunities
when those tumultuous changes—
which they’re now very much used
to given the history of the region—
settle further into a strong and stable
loyalty business environment.
COLLOQUY Contributing Writer Peter Wray
is Managing Director of loyalty consultancy
pgw Ltd.
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C O L L O Q U Y / Volume 19, Issue 5, 2011
T R A V E L R E P O R T: M I L E S A G G R E G AT O R S
Flight Logs
A COLLOQUY Q&A
Lately, there’s been a boom in the
number of “aggregator” websites
devoted to helping consumers manage
and track their loyalty program points
and miles in one place. But what do
loyalty program executives think of
these varied services?
COLLOQUY asked that question of
American Airlines’ Charlie Sultan, VP
of AAdvantage Partner Marketing—
which has had a direct relationship
with one loyalty tracking/management
site, Points.com, for over a decade.
COLLOQUY: What are your thoughts
on the explosion in points and miletracking and management programs
over the past couple of years, including Traxo.com, AwardWallet.com,
UsingMiles.com and Superfly.com?
CHARLIE SULTAN: The fact that
this many keep sprouting up
demonstrates that people are passionate about miles. Sometimes it’s
difficult to keep track of who all these
companies are and what the value
proposition is for each of them. We
want to make sure we are customerfriendly and that customers are
getting what they need, but we also
want to maintain direct relationships
with our customers. We want to direct
the customer experience and we want
to ensure that customers get the
relevant and reliable information
they need.
www.colloquy.com
While members can trade and
exchange AAdvantage miles on
Points.com as well, I don’t see theirs
as just another customer-facing
service that aggregates miles. I see
them more as an additional technology provider that enables
AAdvantage to offer more options
to customers.
: How do you feel about consumers
being able to trade AAdvantage miles
for competitor miles?
A: We grapple with that question all
the time. Ultimately, one of our main
objectives of the AAdvantage program
is to ensure that the rewards you’re
earning endear you to the airline and
motivate you to earn more AAdvantage
miles. It’s a balance of delivering
value to the customer—and if some
people want to exchange miles, that’s
just one other way of adding value and
delivering flexibility. But it’s a fine
line of balancing economics and our
own interests with customer desire
for convenience and flexibility.
: How do you react to pointstracking/management services that
don’t have a direct relationship with
AAdvantage?
going on and what other opportunities we can offer them. Our actions
in this area are no different than in
other industries.
: Many, though, say the future of
loyalty lies in offering consumers a
way to manage their many different
program memberships.
I’m a user, too—I’m curious about
what everyone else is doing, and
we’ll continue to monitor these
services and see. As a case study,
Points.com has several million users,
many of whom, it appears, do like
being able to see all of their information in one place.
A: A lot of it depends on how you’re
: Is there a significant danger or
downside you’re concerned about?
planning to use and redeem reward
currency. Obviously, COLLOQUY has
measured how many rewards programs people belong to and are active
in, and our goal is to keep our currency
as valuable as possible so that you’re
motivated to come to our site.
A: Several. This is sensitive data that
we’re talking about and we want to
ensure that it is properly secured,
which is why we have recently sent
several cease-and-desist letters to
some of these sites. Technologically,
Maintaining the AAdvantage
“One of our main objectives of the AAdvantage program is to ensure that the
rewards you’re earning endear you to the airline and motivate you to earn
more AAdvantage miles. It’s a balance of delivering value to the customer—
and if some people want to exchange miles, that’s just one other way of adding value
and delivering flexibility.”
To me, it doesn’t make much sense
to say I need to see my CVS ExtraCare
balance next to my HHonors points,
next to whatever other currency I
have, because I’m not using them in
A: To be honest, it really depends
the same way. If you’re trying to figure
on what they’re doing. If they’re
out how many gas credits you have,
promoting a way to use and earn
that’s different than calculating how
miles, that may be a service to the
quickly you can get a free trip to
customer, which is great. However, Hawaii, for instance. So while we’ve
if they’re scraping our site or using created alternatives for redemption,
robots, we terminate their ability to such as redeeming for car rentals and
do that.
hotels in real time, we still see and
believe, and the data still proves, that
We try to meet and have a discussion most people are still motivated and
with them and understand what the
more interested in taking that trip to
value is of the relationship. In the
the Caribbean than they are neces cases where they are trying to go
sarily for redeeming for something
around our policies without going more functional.
through the proper channels and
access this sensitive content without As the economy goes up and down,
getting permission, we take appro- and gas is more than $4 a gallon,
priate action. Again, we want to
maybe you’ll redeem for gas, but
ensure that our customers are seeing it’s really not as exciting as flying
current, accurate information and to Paris for the week. So for us, the
that the data is safeguarded. When question is about the nature of the
a customer is on our site, we have a program and how people are using
better ability to tell them what’s
it. From a user standpoint—because
they put a strain on AA.com and may
not present the data in an accurate
way. Some of these sites are also
trying to put a value on the miles by
themselves. However, that’s not an
easy exercise to do. For example, the
value of Hilton and Hyatt points can
be vastly different. If you see 30,000
Hilton points and 30,000 AAdvantage
miles and 30,000 Delta miles, you
can read those three things very
differently. Not all miles or points are
created equally and third parties
don’t always take the time to capture
all of the nuances. In our case, we
have a relationship with Points.com
that assures us the proper safeguards.
But given all of our priorities and that
so many new sites like this are sprouting up, we simply can’t take the time
and resource to continuously monitor
all of them for accuracy.
As we went to press, American Airlines filed for Chapter 11
bankruptcy protection, while emphasizing the importance
of AAdvantage and the airline’s determination to protect
and maintain the program during reorganization.
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C O L L O Q U Y / Volume 19, Issue 5, 2011
S T R AT E G Y R E P O R T: P R O G R A M R E D E S I G N
promise, patience and learning
from each other—as well as from
mistakes—are essential for any pair
that’s in it for the long haul.
Going to the Chapel
Just as in matrimony, marrying the loyalty programs of merging companies
involves compromise, detailed planning and a good bit of patience
BY LAUREN BELL
Travelers may have noticed this
familiar give-and-take as numerous airlines—including Southwest
and AirTran, Delta and Northwest,
and United and Continental—worked
through their own “honeymoon
periods” recently. United, which
closed a $3.22 billion all-stock
merger with Continental late in
2010, has devoted itself to a 2011 full
of slow but steady integration steps,
including unveiling a new credit
card for the combined MileagePlus
program, which integrates the old
Continental OnePass.
“The merger closed on
Oct. 1, 2010,” notes
Thomas O’Toole, SVP
and COO—MileagePlus,
“and the new program is effective
as of January 1, 2012,” when the
airlines will receive their single
operating certificate from the FAA.
Such mergers, of course, are motivated by the need to take advantage
of the efficiencies and economies
of scale of running a single program,
motivations that are particularly in
force in the current economic
climate. In July, United Continental
reported a 10.3% rise in revenue.
Though this gain was tempered by
soaring fuel prices, the newly merged
airline beat Wall Street expectations.
ANY LONG-MARRIED COUPLE will tell you
that the key to a lasting, happy union
is compromise, shared values and a
little bit (OK—a lot) of patience. No
sane newlywed expects her husband
to immediately start putting his dirty
socks in the laundry basket if he
entered the marriage an unrepen tant slob. But they work through it;
expectations are adjusted and new
understandings emerge. A happy
marriage is hard work, yes, but it’s
hard work that yields visible—and
mutually beneficial—results.
Romantics may scoff, but a merger
between two companies closely
mirrors a successful marriage. Com-
As in marriage, though, only fools
rush in—a poorly-handled loyalty
program integration can hurt a
company’s relationship with its customers, not to mention its bottom
line. To get perspective, COLLOQUY
turned to several companies with
long-term merger experience, and
came away with four tips on keeping
customers loyal once merger matrimony officially confirms the vows.
1. Combine the best of both worlds
Though merger and acquisition
(M&A) usually requires one company
to take the dominant role—adding its
www.colloquy.com
branding, leadership, and strategy
to the combined product’s public
face—it’s essential to keep in mind
the reasons for the merger in the first
place: both companies had something
to offer each other. Merging companies need to acknowledge and take
advantage of each other’s strengths.
“We wanted to use this unprece dented opportunity of the airline
merger to optimize the program
going forward,” Thomas O’Toole
says of the MileagePlus/OnePass
consolidation. “There are myriad
examples I could cite that came up as
we went through all of the features,
benefits, and policies of the two
programs and really tried to come
up with the optimal combination.
A lot of thought went into designing
the combination of features for the
new program,” and response, he
reports, has been “very positive.”
Bob Ryan, SVP and
manager of rewards
management and
enhancement services
for Wells Fargo, names
sharing strengths as a major concern behind the ongoing merger
(announced in 2008) between Wells
Fargo and Wachovia. “Wells Fargo has
a great reputation in lots of respects
but especially in cross-selling and
deepening customer relationships,”
Ryan says. “Wachovia is known for
its service, and we took the time to
make sure we got it right and
combined the best of both worlds.”
This translated to physical changes,
like bringing Wells Fargo’s envelopefree deposits to Wachovia ATMs, as
well as operational changes, like
incorporating key elements of
Wachovia’s WISE customer service
program into the Wells Fargo service
approach. WISE, started in 2001,
stands for Wachovia Is Service
Excellence and dictates, among other
things, regular executive meetings
devoted solely to customer satisfac tion ratings. Wells Fargo continues to
hold monthly meetings, as with WISE,
and has added post-conversion
surveys in its quest for customer
satisfaction.
Similarly, Wyndham Hotel Group
took the best of both worlds when
integrating the Wyndham Hotels
and Resorts brand—acquired from
Blackstone in 2005—into its
Wyndham Rewards loyalty program.
Wyndham Hotels and Resorts was, on
its own, offering a guest recognition
program called Wyndham ByRequest,
which allowed guests to select their
own in-room snacks, pillow types
and other amenities. During the
integration, ByRequest was rolled
into the more widespread Wyndham
Rewards program, giving Hotels
and Resorts customers even more
bang for their loyalty buck: ByRequest
continued to give high-end guests
a personalized experience, but they
could also enjoy the recognition
and points-earning potential of
Wyndham Rewards customers. The
combined programs’ success led the
company to introduce elements of
ByRequest to some other Wyndham
brands, including Hawthorn Suites by
Wyndham and Wingate by Wyndham.
pie before you bake it,” says Michael
Hogan, who is the SVP of marketing
and oversees loyalty for video game
retailer GameStop. “For us, the
important thing is to say we have a
social contract with our customers
and everything we do has to add
value to their experience.”
When GameStop introduced its
PowerUp Rewards program in October
2010, it had already acquired the
gamer website Kongregate and was
able to introduce the two new offerings to GameStop customers simultaneously. With the introduction of
Kongregate running at full force,
the company continued sprucing up
PowerUp Rewards, creating events
and discounts for PowerUp Rewards
members and using customer data
gained online to make more relevant
offers.
GameStop also allowed users to
link up their PowerUp Rewards and
Kongregate accounts. Now, gamers
can use PowerUp Rewards points to
buy Kongregate Kreds, and members
can earn PowerUp Rewards points
Keep in mind the reasons for the merger in the first place: both
companies had something to offer each other. Merging companies need
to acknowledge and take advantage of each other’s strengths.
2. Make your loyalty program
relevant to both your new and old
customer base
A truly successful acquisition
smoothly integrates old and new
customer bases. This means that the
program operators are continually
improving on the loyalty and cus tomer service initiatives that their
long-standing customer base knows
and loves. But it also means that
loyalty marketers are using these
programs to woo a whole new set of
customers—who could leave if the new
programs don’t meet their needs.
“What happens a lot in loyalty discussions is the financial
considerations tend to
dominate, but that is
premature because it’s
kind of like dividing up
on the Kongregate site. Since its
launch in October 2010, PowerUp
Rewards has aggregated more than
12 million members, including a
number of Pro members, who pay
$14.99 per year to participate in the
premium group. PowerUp Rewards
now represents more than 60% of
GameStop’s transactions in the
U.S., and, by GameStop’s calcula tions, PowerUp Rewards users
represent more than a quarter of all
video game consumption in the U.S.
Robin Korman, Senior
Vice President, Loyalty
Marketing, Wyndham
Hotel Group, adds that
rewards should be more
than just improved. They must also
target new members and their
characteristics.
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C O L L O Q U Y / Volume 19, Issue 5, 2011
The Merger That Made Market Share
When TravelCenters of America (TA) purchased Petro Stopping Centers in 2007, we found ourselves with two heritage loyalty programs dating back nearly a decade. Both of the brands
provide fueling, dining and maintenance services to the trucking industry, and had loyal customer bases.
In the past when we made acquisitions like this, we just absorbed those assets into our network. But we knew that Petro was such a well-loved brand that we couldn’t make any sweeping
changes. Customer comments confirmed this, and we knew we had to consider brand implications before doing so.
For the first couple of years after the merger, Petro’s Passport program was hosted on a thirdparty card-based platform and remained separate from TA’s in-house-hosted member-based
RoadKing Club. The two programs were similar: both were points-based with rewards for fuel
purchases and truck services. TA rewarded for restaurant visits; Petro offered shower upgrades
to its Platinum tier.
When the recession hit in 2008 and 2009, freight loads were knocked down by more than 35%.
Our company increased resources on improving our traditionally high service standards. We
wanted to put brands in the best position possible upon recovery. That
work prepared us for further positioning as the top service brand in
our industry when we learned that our top two competitors were planning to merge.
As we began implementing our marketing and operational plans, we decided to ask customers for input. We
set up a concept called Driver Councils, where our
executives hold roundtable discussions with customers
on location at TA and Petro sites.
One of our big discoveries at these Driver Councils was that
customers were tired of dealing with two different loyalty programs.
Even though they preferred that Petro remain distinct from TA, they wanted
a card they could use at both.
That sparked the July 2010 launch of UltraONE, a member-based rewards program for all sites. Members were auto-enrolled from all legacy programs and
carried their previously-earned points with them. Earn structure is the same as
the legacy programs, although points now never expire if you are an active member and earned showers have a longer expiration period. Plus, UltraONE members can redeem for a variety of new rewards, including a new merchandise
program, a restaurant frequency reward program, and access to newly
installed fitness rooms at selected TA and Petro locations.
We also added a Christmas Club-style promotional feature that allowed our
customers to save points during a July fuel promotion and redeem those
points on specific holiday store items from Thanksgiving through the
holiday period. That boosts our breakage, and increases store traffic
during the redemption period. Another advantage to our customers is
that we give them a 10% bonus on their lowest daily account balance
at the end of the year.
Three months after rollout, UltraONE usage already accounted for 85%
of all club activity. Quick customer uptake and PR support from
industry radio and magazines all helped us get UltraONE voted
the best loyalty program for truckers by Overdrive magazine, an
industry publication for professional drivers. UltraONE allowed us
to retire the Petro Passport and RoadKing programs within a year,
and we have seen consistent growth in customer engagement and sales volumes across our businesses. Our ongoing
goal is to have as many ways for our customers to earn and
redeem rewards as there are ways to engage our products
and services.
By Tom Liutkus, Vice President of Marketing and Public
Relations, TravelCenters of America
In Wyndham’s case, global differences were taken into account.
“Rewards structures must be localized because tastes are different
and accrual is different.” In China,
for instance, where Wyndham is
expanding, lower hotel prices result
in reduced earn velocity, and things
like mobile prepaid cards are popular
as reward items. That’s not the case
in the U.S. “You do need to be be
cognizant of how points are accrued
in the local market and the appetite
for various redemption items,”
Korman says. “Know your market
and tailor your programs to deliver
what they want.”
United similarly looked at differences
in the membership—in particular, the
levels of travel members engaged in.
“We tried to look at the program
from all of the various subgroups of
members involved,” says Thomas
O’Toole, “keeping in mind that we
have millions and millions of
general members who fly with us
periodically.”
3. Communicate with
customers—and give them time
Communication is crucial to
making your loyalty program meaningful to consumers in a merger.
Not only must you show customers
what they are gaining through the
deal, but you must also demonstrate
that you’re keeping their needs
front and center throughout all of
the big changes that your company
is making.
In 2008, Wyndham Hotel Group
acquired Microtel Inns & Suites
and Hawthorn Suites brands from
Hyatt. A first priority in each
acquisition was notifying members
of the change and letting them
know that they had a finite amount
of time to use their old rewards
program points. Wyndham had to
do double-duty notification, letting
customers know they had six
months to earn and redeem points
on their old program before it was
terminated and then going back
out and convincing those same
www.colloquy.com
consumers to sign up for Wyndham
Rewards.
Korman advises, “Whenever there’s
any kind of program change, the
sooner you can tell your members
what’s going on and what it means
for them, the better. If they feel like
you haven’t given them sufficient
time or they hear it through the
grapevine, it is never good.”
For Wyndham, acquiring a brand
that has its own rewards program
means old brand program members
are usually auto-enrolled into the
new multi-brand program and given
the option to opt out. With clear
communication, “the opt-out rate
is generally minuscule.”
In the Wells Fargo-Wachovia merger,
one of the biggest challenges was
converting Wachovia customers to
the Wells Fargo rewards program,
which had different earning and
redemption rates for its currency.
To prepare customers for the conversion, Wells Fargo sent multiple
direct mailings and used online communications to outline the change,
remind customers of conversion
dates, and give tutorials on the Wells
Fargo rewards program once the
conversion took place.
Consumers must be educated about
all of the details of the merger.
Korman says, “People don’t like
change. Even if the program is better,
the immediate reaction is a sense of
discomfort. Once consumers understand and get used to it, they often
change their minds. But that initial
change period is really stressful.”
To keep things running smoothly
after the Kongregate acquisition,
GameStop immediately started
promoting Kongregate in its stores
and on its site, while Kongregate
posted an explanatory letter and Q&A
about the acquisition on its site.
GameStop has continued to transition customers over by using PUR
profile information to guide gamers
to Kongregate, making targeted sug -
gestions that help them sift through
Kongregate’s 40,000 games. Thanks
to GameStop’s ceaseless promotions,
Kongregate increased traffic by 42%
over last year, per Google Analytics,
and increased revenue by 64%.
Robin Korman adds that in these
transitional periods, it’s best to give
as much notice as possible and communicate with customers more than
once about the change. And don’t be
surprised if some consumers still
claim ignorance of the change after
you’ve sent out emails and mailings.
Just stay focused on customer service,
Korman recommends, and try to help
those who have been more reluctant
and IT—because they all play a role
in the integration process.
A big challenge of successful integration, Korman notes, is employee
training at the hotel level. If a desk
clerk cannot answer guests’ questions
on the newly-merged companies’
customer service plan, or if the
experience at one hotel isn’t on par
with the rest of the brand, the whole
merger can look sloppy to guests
and feel confusing to employees.
Michael Hogan of GameStop agrees
that employee buy-in can make or
break the new members in a corporate family. Because GameStop relies
Communication is crucial to making your loyalty program meaningful
to consumers in a merger. Not only must you show customers what they
are gaining through the deal, but you must also demonstrate that
you’re keeping their needs front and center.
to change by offering goodwill points
or other perks for those who missed
the official transition date.
4. Be clear with employees—and
give them time
It’s not just your customers who
need time to adjust during a merger.
Taking time to get employees acclimated to changes in the company
ensures fewer headaches on the backend and happier customers out front.
Wells Fargo, for example, has spread
the full conversion of the Wachovia
brand out to nearly three years,
through October 2011. As Wells
Fargo’s Bob Ryan points out, “We
are making sure we err on side of
measuring twice before cutting.”
This gradual change gives customers
time to adjust, but it also ensures
that the thousands of employees at
Wachovia and Wells Fargo are getting
each tiny change right.
For Wyndham, the trick to a successful merger is a very clear integration plan that includes and is
communicated to employees at every
level of the company—marketing,
call center, customer service, web
on customer interaction with
employees for product promotions,
the company gave all of its managers
memberships to PowerUp Rewards
back in 2010, “So by the time we
rolled out program, the store
managers wanted it and wanted to
sell it,” he says.
In a transitional period, it’s easy
to lose sight of long-term goals
and values. Imagine a couple who,
in the middle of a cross-country
move, get so fed up with each other
that they don’t speak at all from
Nashville to Carson City. If those
two stick to their plan, listen to each
other, and buy into the long-term
dream of living happily ever after,
they’ll be able to look back on that
tense period and laugh. The same
is true for merging companies and
their customers. With patience, smart
planning, willingness to learn from
each other, and commitment to
constant improvement, merging
businesses can toast to many happy
years with each other and with their
loyal customers.
Lauren Bell is a COLLOQUY Contributing
Writer.
27
28
C O L L O Q U Y / Volume 19, Issue 5, 2011
PROGRAM LAUNCH
day gift, and ’round-the-clock, online
account access are also offered.
Elapsed time from start-up to
implementation for P.S. Rewards was
just eight weeks.
“We wanted the P.S. Rewards pro gram to be simple to understand,
easy to use from a consumer standpoint, and quick to execute on the
business side,” says Scott Birnbaum,
Senior Vice President of Marketing and E-commerce for P.S. from
Aéropostale. “We believed in the
program and knew, given the right
partners, we could achieve all three.”
Advances in technology have made
quick rollouts like this possible.
Today, real-time loyalty marketing
solutions can be built that suit the
needs and budgets of most mid-sized
businesses, including retailers who
have been scrambling to establish
programs in response to customer
and competitive demands. The best
of these application platforms work
seamlessly with third-party systems,
whether in-house or off-site, and
come with knowledgeable loyalty
marketing consultation and advice.
Moreover, they can dramatically
accelerate the time it takes to
create the data infrastructure that
is crucial to planning and imple menting successful loyalty programs.
Amazing Race—Retailer Edition
Your mission, should you choose to accept it: Create and launch a
loyalty program to serve thousands of customers at 64 stores in 17
states, plus e-commerce, in just eight weeks
BY PHAEDRA HISE
MANY MARKETERS WOULD SAY creating
and launching a loyalty program from
scratch in less than a year, or perhaps
even two, is impossible. But that’s
old-fashioned thinking, according
to national children’s apparel retailer
P.S. from Aéropostale.
The company ramped up this year to
plan and implement P.S. Rewards, a
multi-channel rewards program that
benefits customers who shop both
in-store and online at P.S. from
Aéropostale. P.S. Rewards rolled out
on July 18, 2011, just in time for the
lucrative back-to-school season.
The free program is fully loaded—it
offers both in-store and online
enrollment, and customers receive
one point for every dollar spent. At
75 points, members receive a $5
reward toward a future purchase.
Additional benefits, such as access
to VIP sales and events, a free birth-
The race challenge
Aéropostale, Inc., is a mall-based
specialty retailer of casual apparel
and accessories that caters to kids
age 7 to 12 through its new brand,
P.S. from Aéropostale. It was
launched in 2009 and currently
operates 64 stores in 17 states.
Immediately following the new
brand’s launch, its marketers spent
a year of learning about their customers by gathering transactional
data, using secret shoppers, perform ing surveys, and holding focus groups.
Among other insights, they learned
that moms wanted a program that
rewarded them for purchases. But
the company lacked consolidated
data about their best and most loyal
www.colloquy.com
The Gr8 Race
customers, and didn’t have a way to
engage and communicate with them
on a consistent, ongoing basis.
Aéropostale has a history of quick starts and quick success. With a June 2009 launch
of the P.S. from Aéropostale banner, the chain expects to have around 70 stores by
“We wanted a systematic way of
identifying, recognizing, and
rewarding our best customers, as
opposed to the classic retail marketing strategy,” says Birnbaum.
“We decided we were going to treat
our best customers differently and
we wanted to find a way to get them
back into the store more often,
having them spend more, and
reward them for doing so.”
the end of fiscal 2011. As promotional literature notes, “P.S. from Aéropostale offers
trend-right merchandise at compelling values for girls and boys ages 7-12. The P.S.
from Aéropostale store provides an
experience that is cool for kids and
enjoyable for parents”. . . and we see
that attitude in this sample product
shot—little devils making snow
angels.
Birnbaum and his team pitched the
concept to their board. After that,
he says, it was “do it as fast as you
can and get into it as fast as you can.”
According to Birnbaum, the com pany didn’t want to redo its entire
POS system or put its IT department
“on the hook” for the program in
any way.
To find a partner who could over come these hurdles, Birnbaum con ducted a formal selection process
that requested responses to an RFP
he and his team developed. By late
April 2011, a vendor was chosen and
the program began to take shape.
“The smartest thing we did was
really clarify for potential partners,
‘This is what we’re after, this is
what we might add on later, but this
is what we’re focused on now,’”
Birnbaum says. “So then, when we
sent out the RFPs, we were able to
ascertain instantly if a vendor would
be able to deliver what we wanted.”
Managing the roadblocks
For Aéropostale, achieving simplicity
for consumers within a short timeframe wasn’t easy. Aside from
watching the clock, other challenges
included resource constraints, a
virtually non-existent “getting to
know you” ramp-up period between
the company and the program vendor
teams, the need to communicate
with disparate stakeholders, and the
need to devise a solution that integrated numerous and disconnected
P.S. Rewards was on a
similar speed track, with a July
2011 launch after just eight weeks of development. Almost as fast as the delivery of the iconic
text messages on the P.S. Rewards card. “PS4U” indeed.
data sources. Internal and external
team leaders say they overcame these
potential roadblocks by working
collaboratively and promoting
open and honest communications
with all stakeholders. That same
29
30
C O L L O Q U Y / Volume 19, Issue 5, 2011
philosophy was also carried into
stores.
As the company got close to launch,
the team set up department meet ings to walk everyone through the
final program details, focusing on
the customer experience and setting
initial program expectations. Postlaunch, there were weekly meetings
with key stakeholders, with an
emphasis on IT, Customer Service
and Store Operations. “We’re still
overcommunicating to fine-tune
and grow based on customer insights
and ideas,” Birnbaum says.
“We wanted the P.S. Rewards program to be simple to
understand, easy to use from a consumer standpoint, and
quick to execute on the business side,” says Scott Birnbaum,
Senior Vice President of Marketing and E-commerce for
P.S. from Aéropostale.
Clarifying objectives up front is
critical to a quick rollout, Birnbaum
says. Companies must also have a
defined system of metrics against
which to evaluate the program’s
success, and the loyalty team must
educate the entire organization about
what they will, and won’t, get right
away with a rapid-fire implemen tation.
For example, the team was clear from
the outset that the program was a
tool to drive incremental store visits
(and subsequent purchase). Although
there was a lot of buzz at the company
about the potential for loyalty to
reward social behaviors, drive mobile
activity and offer personalized
content and communication, trying
to develop those aspects of the program in tandem with rollout would
have watered down the team’s focus.
“It would have added time to the
timeline and diluted the ROI without
any intelligent insight to make it a
worthwhile investment,” says
Kimberley Brennan, Director of
Customer Relationship Management
for P.S. from Aéropostale.
Instead of developing everything
simultaneously, the team decided
to focus on the additional bells and
whistles after the concept had proven
itself, Brennan says. Initially,
stakeholders were advised of the focus
area timeline: First six months—
enrollment; second six months—
active member participation and
enrollment; 13+ months—program
growth and evolution.
The team also resisted the urge to
create custom reports immediately.
“We were able to get good visibility
into the key program metrics at
launch,” Brennan says. “We wanted
to live with the program for a month
or so, and then it became clear after
time passed what we wanted to create
reports around.”
The voice of loyalty marketing since 1990
Managing Partner: Kelly Hlavinka
Partner: Jim Sullivan
Senior Editor: Phaedra Hise
Managing Editor: Bill Brohaugh
Online Editor: Josh Milner
Market Alert Editor: Joan Deno
Research Coordinator: Wardah Malik
Contributing Editors: Dennis Armbruster,
John Bartold, Stephanie Cohen, Bruce Kerr,
Mitch Martin, Dan Ribolzi, Richard Schenker,
Shawn Stewart, Fred Thompson, Sol Zia
Marketing Assistant: Jeff Stoermer
COLLOQUY Editorial Board:
Graham Atkinson, Chief Customer
• Experience
Officer, Walgreens
Tom Collinger, Chairman, Integrated
• Marketing
Communications Dept.,
Eye on the finish line
From the beginning, store leadership
and associates were part of the development process. They were trained
on the intricacies of P.S. Rewards
using a “train-the-trainer” approach.
When the program went live, customers were treated to a mini-party,
complete with balloons, signs, and
free Yo-Yos for kids, among other
amenities. The P.S. from Aéropostale
in-house creative team developed
customer communications to promote the program, which included
teaser emails, website announce ments, and a launch package for
every store.
Associate Dean, Medill School at
Northwestern University
Stephanie Coyles, Chief Strategy Officer,
• LoyaltyOne
Dan Finkelman, SVP, Chief Marketing
• Officer,
Retail Services Alliance Data
Garret Ippolito, Vice President Global Key
• Accounts,
MasterCard Worldwide
Catherine McIntyre, SVP, Corporate
• Strategy
Group, LoyaltyOne
Kyle Murray, Director of the School of
• Retailing
and Associate Prof. of Marketing,
University of Alberta
• Bryan Pearson, President, LoyaltyOne
Randy Petersen, Chairman and President,
• InsideFlyer
Magazine
Mark Vandenbosch, Kraft Prof. of Market• ing,
Richard Ivey School of Business,
University of Western Ontario
4445 Lake Forest Drive, Suite 200
Cincinnati, Ohio 45242
Telephone/Fax: +1.513.248.9184
Email: [email protected]
www.colloquy.com
There is a hidden payoff for quick
rollouts, Brennan says. “The beautiful thing from a marketing standpoint is that we have a good shot at
a really great ROI, whereas when
you’re starting from scratch and
building this enormous Rolls-Royce
program, you’re in negative ROI
land for two-plus years.”
COLLOQUY ® is published by LoyaltyOne, a global
provider of loyalty strategy and programs, customer
analytics and relationship marketing services. Its
roster includes: the AIR MILES Reward Program,
North America’s premier coalition loyalty program;
Direct Antidote, a direct-marketing agency specializing in data-driven campaigns to inspire customer loyalty; Precima, a consulting and analytical
services firm that uses shopper insights to boost
retail performance; LoyaltyOne Consulting, a
global loyalty advisor to Fortune 1000 companies;
and Dotz, Brazil’s largest coalition loyalty program
with more than 3 million users and 50 sponsors.
Toronto-based LoyaltyOne is an Alliance Data
company. For more than 30 years, Alliance Data
has helped its clients build more profitable, more
loyal relationships with their customers. For more
information, visit www.loyalty.com.
To date, sign-ups are well ahead of
plan and the program has exceeded
expectations. Not only did P.S. from
Aéropostale complete the amazing
race in record time, but their loyal
customers are big winners.
COLLOQUY Senior Editor Phaedra Hise took
an equally amazing eight weeks to write this
article. OK, maybe seven weeks.
©2011 LoyaltyOne US, Inc. All rights reserved. Permission to reprint may be
granted upon specific request. COLLOQUY is a trademark of Alliance Data
Systems Corporation used under license by LoyaltyOne US, Inc., an Alliance
Data Systems Company.
Release the Power of Total Customer Insight
enterprise loyalty in practice
COLLOQUY’s Journal of Innovation in Loyalty
Brought to you by
, the voice of loyalty marketing since 1990, Enterprise
Loyalty in Practice is the semi-annual executive journal devoted to practical strategies and tactics
for integrating focus on the customer throughout the enterprise.
Learn from executives who are out there in the field, pioneering the best practices in applying
customer insights throughout their entire organization and bringing Enterprise Loyalty to life.
To subscribe to Enterprise Loyalty in Practice, visit www.COLLOQUY.com/EnterpriseLoyalty
Subscription Price: $99 for 2 years.
4445 Lake Forest Dr. • Suite 200 • Cincinnati OH 45242 • [email protected] • 1.513.248.9184
32
C O L L O Q U Y / Volume 19, Issue 5, 2011
PRACTITIONER’S PERSPECTIVE
imagination. But unfortunately, I
see too many searching inside the
box for out-of-the-box solutions.
Why are practitioners so obsessed
with only comparing themselves to
others in their industry sector and
country?
Cast a Wider Net
Unexpected sources of program creativity
Instead, consider casting a wider net.
To catch creativity, go fishing for
examples outside your home pond.
Look at programs in different sectors,
different categories and even different countries for ways to freshen
up your program. For example:
BY KELLY HLAVINKA
I ALWAYS HAVE TO SUPPRESS a big gulp
of apprehension when I hear The
Question.
It comes all too often, from marketers
and loyalty practitioners eager to
spark up their programs: “What’s the
best example of creativity in loyalty
in my industry?” They’re looking for
innovative strategies that that they
can adapt to differentiate their own
programs.
After a hesitant pause, I have to be
honest with my response. The answer
is usually, “There’s just not that much
creativity out there in your vertical.”
It pains me to give such a disappointing answer, but that speaks to
the larger issue of why I’m getting
that question in the first place.
Clearly, practitioners want to keep
their programs fresh and evolving.
They’re looking for creativity and
The Soft Touch: What Members Want
Special perks and benefits beyond rewards
Canada
42%
43%
U.S.
Special or preferential treatment for members
Canada
U.S.
36%
43%
Source: the 2011 COLLOQUY Cross Cultural Loyalty Study: “Please indicate how important the
following factors are or would be in your decision to join a rewards program”— from 1
(“not at all important”) to 10 “very important.” Top 3 Box results from current members
or those willing to join. n = 2,191
Other categories: Face it: You probably already know all you need about
what other companies in your own
lane are doing, so try exploring other
industries. For example, what could
retailers learn about adding recognition benefits and perks from the
gaming industry, which showers
different comps on best players and
empowers front-line staff to deliver
surprise-and-delight perks when
needed?
Other countries: Programs in other
countries experiment at a different
pace, and address varied cultural
issues. For example, while most
telecom loyalty strategies in North
America are still searching for the
right mix, European or Asian Pacific
telecom programs offer a variety of
rewards and recognition benefits.
In studying business practices, and
best practices, your organization may
find something that can be adopted,
tweaked or taken to the next level
at home.
Other models: Your company may
not be interested in changing its
structure, but there are still learning opportunities in looking at
features of different programs. For
example, retail proprietary programs
are quite often “closed earn” and
“closed burn” ecosystems. What
can retailers learn from the vast partnership networks that the travel and
hospitality category has created?
How would that be a game-changer
for your value proposition?
Casting a wider net means identifying and gathering those other sources
of inspiration. I’ll give you a hint
about where this exploration will
likely lead: incorporating meaningful
soft benefits.
Our findings from the 2011
COLLOQUY Cross-Cultural Loyalty
Study point to this often-overlooked
program element. In the study, 74%
of U.S. and Canadian consumers
said they joined programs for the
rewards and benefits – and this
sizeable number would explain why
practitioners often focus on offers
and discounts. But 43% of U.S.
consumers and 42% of Canadians
joined for “special perks and benefits,” and a nearly equal number for
“special or preferential treatments.”
Has your program identified member attitudes regarding soft benefits
like perks and privileges, and
members-only access to content and
events? Does your program offer a
relevant mix that connects with your
high-value customers? If your industry isn’t delivering such recognition
benefits, then it’s high time to explore
successful models and examples by
looking outside the normal fishing
spots.
To find sources of inspiration, you
don’t need to cast your net very wide
to pull in a few helpful resources. For
example, when I search for inspirational answers to The Question, I
begin with COLLOQUY’s Breaking
News (listed on our website), which
gives daily blurbs on industry devel opments and programs from around
the world. Scan marketing news
feeds, and reports from your own
industry—but don’t skip over the
profiles of programs that aren’t
similar to yours.
The truly inspirational examples are
out there. In fact, maybe I should
start responding to The Question
with a question of my own—“Where
are you looking for answers?”
Kelly Hlavinka is Managing Partner of
COLLOQUY.
“ Our qualitative data and vendor analysis shows
Smart Button’s loyalty offering is robust and
configurable for several retail, entertainment
and other service industry environments.
Smart Button’s solution has an effective workflow
involving all the elements of a loyalty program:
planning, implementation, evaluation and analysis.”
Sahir Anand
Research Director—Retail Group
Aberdeen Group
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