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August 11th, 2011

Flying high with Aimia: Interview with VP of Knowledge Development

We catch up with Rick Ferguson, VP of Knowledge Development at Aimia (formally Groupe Aeroplan) to discuss the pros and cons of utilizing coalition loyalty programs over traditional loyalty cards, and the importance of the program, rather than the card itself.

Rick, would you mind telling us a little about Groupe Aeroplan and the history of the company?

Groupe Aeroplan has its origins in the frequent flyer program of Air Canada, named “Aeroplan” and Aeroplan was launched in 1984, so the legacy and the history of the company goes all the way back to the core frequent flyer program and it quickly became a very big and successful program. The folks around in those days, including our CEO quickly realized there was a lot of potential to build out the frequent flyer program into a true national multi-partner loyalty program.

That was the vision very early on, and the first step was to spin off the frequent flyer program into a separate entity apart from Air Canada. This was actually the first time in the world that anyone had reorganized the frequent flyer program as a separate company. The company launched an IPO in 1995 and the company quickly became the premier coalition loyalty program in Canada.

That was a big success story, so then the company then embarked on a plan to build out loyalty services through a number of key acquisitions to make that happen.

Firstly there was Loyalty Management group in the UK in 2007. It operated which is now the largest loyalty coalition program in the world, Nectar and also bought a “standard” loyalty company called Insight & communication, which has now built out to become a core part of our offering.

In 2009 we acquired Carlson Marketing, with a global footprint with offices around the globe – which leads us to where we are today – the global leader in loyalty management, with operations in over 20 countries and a full suite of loyalty offerings. It certainly has been an amazing journey over the years, and what’s interesting is that the vision to build out the company to the way it has grown was realized very early on. The management including Rupert saw the opportunity, and continued to drive and build that opportunity to where we are now.

Thanks for that. One thing we’ve noticed is that you typically work within coalition programs, rather than a single organization running a loyalty program just for themselves. What are the benefits of doing a coalition program, as opposed to running a singular program?

Sure, the coalition is a natural evolution of loyalty marketing in a mature economy. There are natural synergies and economies of scale that can be deployed, so a proprietary loyalty solution could absolutely be the best solution for a brand if they are interested in taking total control and own the loyalty brand, and the liability of the customer relationship. Obviously proprietary programs have worked very well for some of the world’s biggest brands.

However the advantage of being part of a coalition, and that you are partnered with likeminded brands is that it provides benefits to the 3 main constituents in the coalition.  So the coalition partners can band together and offer a rich reward proposition and provide it at much cheaper cost than they would be able to if they were to do it on their own proprietary program.

As consumers earn across a network of partners – they enjoy the value proposition because they can earn more and faster, as if they consolidate their spending across the col partners, in many cases they are earning rewards on things they are purchasing anyway. As coalition partners typically include a grocery store, fuel / retail partner and a financial services partner with one or more credit cards – consumers really love the value proposition because of the ability to earn in a lot of different places and earn for things they would be doing anyway.

The partners enjoy the value proposition as they can offer the rich rewards and be a part of that consumer relationship without having to incur all of the cost. A coalition is typically owned  and operated by a third party, in this case Groupe Aeroplan owns and operates the Nectar coalition in the UK, Aeroplan in Canada, Nectar Italia, Airmiles Middle East – so if the relationship becomes profitable and valuable for both the coalition partner and consumers, it naturally becomes valuable for us (Groupe Aeroplan). So, GROUPE AEROPLAN specializes in building the value of the coalition, whether its building a program from scratch like we did with Nectar Italia or if its investing in other programs such as club premier, or aero Mexico – we see the value in the model and we understand the value it provides real benefit for both sides and it becomes beneficial for us as well.

When you approach a potential coalition partner or introduce a loyalty program into an organization, what are the general pitfalls or hurdles you face when rolling this out?

I mean there’s a real strong advantage of being  a member of a coalition, but the thing you have to accept is that this is a long-term relationship that you are entering into  – because once a coalition is set up and become big and successful, there is a high stickiness factor. In order to get a maximum value from being a strategic partner in a coalition, you need to go to work with the other coalition partner and make sure you understand each other.

The two biggest pitfalls for getting involved in a coalition are, typically, underfunding and lack of relevance. A lot times, companies launching loyalty programs just try to do the bare minimum in terms of offering value to the consumers. They might offer a point per dollar or, sometimes, event less, and they won’t add any additional value. They don’t add any recognition elements to the program, so you don’t get any kind of special access or treatment as a program participant. They think if they offer a point per dollar as a benefit, that’s all they need to do.

Consumer values are very sharp these days and if the companies don’t detect value in the program, they’ll disengage the consumers very quickly. So, you have to be able, as long as the program’s financials are sound and you understand it before you launch, you have a reasonable chance of getting your ROI. You’ll want to fund a rich value proposition as you can in order to change customer behavior.

The second biggest pitfall is the lack of usage on the data. In addition to offering recognition and rewards to the consumers the real benefit for a brand is the ability to collect and analyze the proprietary data on the customer relationships. This could be transactional data at the till, so you can understand what they are buying, or how frequently they are buying - Or it could be survey data, loyalty program members typically respond to surveys at a much higher frequency than other customers do.

If you are a grocer such as Sainsbury in the UK you can start to analyze the basket data – the things they are purchasing and start to understand your consumer relationships that way.

In order to get real long term benefit out of the program, you need to make that data actionable. You need to look at it – start to understand your consumer behavior and predict what sort of offers they will respond to in order to enable them to buy more or shift more spend from your competition to yourself. The data collection and the data insights are really of primary importance. Consumers understand what is happening – they understand that you are collecting information about them; they expect to see some benefits they get back in the form of relevant offers and relevant communications. If you are offering a loyalty program and sending out the exact same offer to everybody in your membership base and not making any attempt not to segment those offers, and get the right offers to the right customers at the right time, - you are not only leaving benefit on the table, but you are creating an environment where consumers are going to start dis-engaging with your brand loyalty very quickly.

The relevance of the communication is driven by data analysis, so the insight from the data and the ability for organizations to offer a rich as value proposition as possible are the two main things that they need to look at.

So yourselves at Groupe Aeroplan, as the coalition organizers – do you provide something to look at the data, and turn that into actionable data?

Loyalty analytics is a core service offering around the globe for Groupe Aeroplan for both coalition and proprietary clients. Earlier I mentioned we purchased Loyalty management group, and part of that was the “Insight & communication business” a really robust data analytics business with some cool cutting edge software tools that we can deploy on behalf of our clients such as the basket analysis. For example, Sainsbury in the UK has enjoyed great success working with Groupe Aeroplan to really look at what consumers are purchasing in the basket – of course, this is all permission based, and opt in – so they are able to get targeted offers to their nectar members either by either email, mobile or coupons at the till – they are getting the right offers to the right customers.

Some of our readers would be thinking potentially about setting up a loyalty plan – how easy is it to implement or join a coalition program?

The one point we would like to drive home with any potential client or prospect is the main difference between loyalty marketing and other forms of marketing (direct or mass marketing) is that it is focused on the relationship. And all successful relationships are long term – you have to be able to enter into the loyalty space knowing that you will be working for a period of years to be building up value in the program.

Typically there are some upfront investment costs – so you have to be investing ahead of the curve, so you might be investing in operations, you might have to invest in a technology platform so that you can implement the program, communications or data analytics.

With Groupe Aeroplan, we offer a full suite of loyalty services so we can engage with a client anywhere they need help.

However in saying that after the initial investment costs, over a period of 12-18 months you will start to see that ROI develop and then it really becomes essential to implement some proper measurement tools in place, so you can understand that the program is being successful and

It’s not just that you want to make sure that the program is in the black, and that you have enough increase in spend and that you are covering the cost of the program on a quarterly or an annual basis, that’s of course important – but if you are looking far enough ahead, what you should see is that over the entire customer lifecycle, you start to see the value of the lifetime relationships increasing, and through that you have the ability to measure that increase in value and then you can start putting measures in place to reduce customer churn – knowing when to flag customers when they start to look like they are disengaging with the brand by putting reactivation offers in place or some offers that help them re-engage with the brand. This compounding benefit is also part of the program.

We try to impress that onto clients we work with as early in the process.

This is a long term play to building customer relationships – make sure that they put the proper measurement tools in place and you’ll see the value compound over time – and that is truly the long term benefit of the program.

Finally, you work with a number of companies – are there any organizations that stand out as a true success story?

That’s a good question. I would say that there are so many that I couldn’t choose from just one, however if we look at the 3 largest markets we play in – such as Canada, US and the UK.

Certainly in the UK Sainsbury’s has been a huge success story – they are a great partner of the coalition. The understand the value of the coalition, they are a great partner with how they work with the Nectar team to how they get maximum value out of the consumers, and they have certainly helped to make Nectar the largest loyalty program in the UK.

In the US, there are several relationships the US teams are really proud with – Pampers get to grow program is the main one at the moment – it’s a program geared towards expectant mothers to build a relationship directly with the Pampers brand. As you know, it’s challenging for a packaged goods company to build a customer relationship, as they generally don’t have access to the relationship - generally they provide the goods and services through a grocery partner or retail partner. So it’s a challenge to build a direct relationship there, but Pampers has started to build and increase sales with even a look to roll it out in other markets other than the US.

And finally in Canada, the coalition partners in the core Aeroplan program have really helped build out the program into the premier coalition so very proud of those relationships as well!

You can catch Rick Ferguson at the upcoming Loyalty World USA in Las Vegas during the 17th – 20th October 2011. Members of the Return on Behavior magazine are eligible for an exclusive discount. Simply quote “Return on Behavior” for a saving of over $200 for your ticket!



About the Author

TeleFaction A/S

TeleFaction is an international privately owned, Danish company founded in 2002. We deliver Return on Behavior®, a patented concept that helps large organizations drive growth and increase profitability through improved customer loyalty. Our clients believe that the process of becoming customer-centered starts from acknowledging that their performance for service can always get better.

Our team of experts within Customer Experience Management produce surveys, gather and analyze data on your customers’ level of satisfaction at all contact points. These measurements are used to understand the clients´ needs in order for you to create positive customer service that guarantees retention. As a result, you also increase employee engagement, sales efficiency and improve your product and services.

This is because, at TeleFaction, we know that the bottom line of any effective customer service strategy is the maintenance of a constant corporate message that managers, employees, and customers understand and trust.






 
 

 
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