Avios says adios to BA Exec, IB Plus and Airmiles

Loyalty is making headlines again.  With Airmiles announcing that it's to rebrand to Avios, there has been a media feeding frenzy discussing everything from the u-turn on taxes and potential devaluation through to the re-branding and how long it might last.
Overall the publicity seems to have been negative but then this is to be expected; Airmiles is a well loved brand but has become a little like Woolworths before it's demise - everybody of a certain age knows about it and many remember it fondly, however actual usage has declined over time from it's height in the late 80's and early 90's with only 2m active members now out of the 8m total.
Renaming it will feel like the end of an era for many.  However people mellow over time and get used to change, even for every day brands like Norwich Union (Aviva) or Marathon (Snickers).
While most of the mainstream commentary though is focusing on the fact that Avios is replacing Airmiles, what's interesting is that it's also replacing the BA Exec club and Iberia Plus, now all part of International Airlines Group (IAG).  Both of these frequent flyer programmes will retain their current branding, but the underlying currency (whether that's BA Miles or IB Puntos) will change to Avios.
This is also not just an alignment of currency name, it's also an alignment of the currency itself.  BA have been quoted on Flyertalk as saying:-

We realise that we may have members in the Executive Club, the Avios reward programme or in Iberia Plus so we are developing a new tool called Combine my Avios which will allow you to combine some or all of your balances into one or the other programmes

This is actually quite an interesting step.  By combining Airmiles UK, BA Exec and IB Plus into a single currency they have instantly created an international loyalty programme - albeit heavily biased to the UK and Spain.  If this was just BA and Iberia combining then you could argue it was more of a consolidation of schemes in the same way Northwest and Delta programmes combined.
The inclusion of Airmiles UK though which is not a frequent flyer programme and is instead a more traditional coalition programme suggests an ambition for the currency to be used wider.
This is backed up by Andrew Swaffield, Managing Director of the Mileage Company who runs Avios when he was quoted in Business Traveller Magazine as saying:-

[The intention of the new programme was to] "create a new shared global reward currency to provide benefits for all three members"

While the main focus of discussion is still around how members perceive the change in benefits with the introduction of Avios I suspect the real discussion is yet to be had about the potential impact of a new, global reward currency with around 17m members (Iberia Plus 4.2m, BA Exec 4.5m and Airmiles UK 8m).

Loyalty in 2011 - A marriage of location, gaming and social

Predicting where things will be in the next 12 months is notoriously difficult as you don't know what you don't know, and an unexpected innovation can pop up at any time. However as respected journalist and technologist John Battelle said in his blog recently about the "next big thing":-

Often times what's directly in front of you is, in fact, the next big thing.

Something however that doesn't need any amount of prediction is that there will be a peak in the sales of commemorative tea-cups, plates, tea-towels and other Royal memorabilia in 2011. With the recent engagement of Prince William and Kate Middleton it seems we'll have the first Royal Wedding in a quarter of a century as well as an additional bank holiday for us Brits to enjoy it. 2011 will be the year of wedding fever, nostalgia, bunting and street parties.

This does neatly segway into another type of engagement however - customer engagement and the associated loyalty we look for from it. What 2011 looks like for loyalty is a little harder to predict - there are no fixed dates or big events. There are though some key trends that we are seeing in the wider market which will all impact on loyalty in some way - taking us one step closer to solidifying that customer engagement into wedded bliss.

No self respecting bride however would consider walking up the aisle without taking account of the Victorian tradition of taking something old, something new, something borrowed and something blue - and neither shall my loyalty predictions.

Something old - Coalition

Coalition programmes have been around for decades, starting with the original stamp collecting programmes. However they have really come of age now with existing programmes going from strength to strength and new programmes rolling out worldwide. Group Aeroplan has recently launched Nectar Italia and Nectar Chile and Loyalty One has taken stake in Dotz in Brazil. Now American Express has bought Loyalty Partners who run PayBack in Germany. Ed Gilligan, American Express Vice Chairman said of the deal:-

“The loyalty coalition model is growing rapidly in many parts of the world [and] Increasingly, consumer decisions about where to shop and how to pay are based on loyalty offerings"

It's not just the growth of new programmes, the existing ones are also gaining strength, with Nectar UK recently following up it's new partner Homebase with leading utility company, British Gas.

This is a high growth, and increasingly competitive area so expect to see more of these programmes coming to a country near you.

Something new - Geo/Local

You can't have failed to miss the explosion of Groupon in 2010. It's meteoric rise culminated in Google trying to buy it for a reported $6bn and when that fell through they then managed to secure $0.5bn in additional funding. While Groupon has an interesting (but not unique) business model, what really makes it interesting is the local merchant aspect. Representing about 1/3 of all sales within the US, these independent retailers are a large pool to fish in, but the challenge has always been economies of scale.

What Google ad-words did for online marketing however, services like Groupon are doing for offline. Barclaycard Freedom is another example of scheme engaging the thousands of small independent retailers and although this has yet to become well established, I think the prospect of creating services that engage local merchants will grow.

The reason for this is simple - relevance. All brands need to be relevant to get cut through and it's much easier to be relevant when the marketing is from a local restaurant or retailer than when it relates to an increasingly sterile national (or global) brand. It also provides larger brands with the ability to target marketing spend more effectively, rewarding spend at locations that have room to grow without simply rewarding spend everywhere.

As Fast Company recently reported on Google's move into this area and it's recent move of Marissa Mayer from Search Products to Geo/Local, Google said

"Marissa is moving over to an exciting new role covering geo/local, which is crucial to our users and the future of Google" (emphasis added)

It's not just Google, Facebook or Foursquare that get this; location is going to be a key variable in our marketing toolkit in 2011.

Something borrowed - Gamification

Well 2010 was when gamification really burst upon the scene and along with it a lot of controversy about the term itself. However, despite the controversy most people agree that the idea of utilising gaming dynamics to help create motivation is worthwhile.

It's interesting that currently early adopters have been either online communities/e-commerce sites or offline automotive companies with both Ford and Nissan using gaming mechanics to improve driving techniques within their electric vehicles.

I think 2011 will see this become more mainstream, with full blown traditional loyalty programmes such as hotel, airline or retail loyalty utilising gaming mechanics explicitly. As I've blogged about a number of times this year, this one trend has the possibility to really lift levels of engagement within a loyalty programme and looking forward, to possibly remove the redemption currency itself (and the associated liability)

You don't get very far however within gaming mechanics before the need to go social kicks in - the real power being based on the bragging rights that come from achievement - and so this is the theme of the final predication.

Something blue - One word. Facebook.

Facebook has come of age. It now has the majority of the Western world assimilated into it's network. It has the lions share of their online attention (recently beating Google) and a depth of information on individuals that rivals Wikileaks.

Retailers like JC Penny and Best Buy are integrating their e-commerce offerings directly into Facebook and brands such as Oreo cookies are now driving all of their traffic to their Facebook page. The reason for this is simple - brands want to fish where the fish are, and Facebook represents a very big ocean.

What's interesting though is not the use of Facebook, brands have been doing this for a while now. It actually that Facebook is for many brands starting to replace their own online offering. I think in 2011 we'll start to see loyalty programmes actually launching their online offering directly within Facebook or at the very least, using Facebook Connect for security.

This will bring three huge benefits. The first is simplicity. Members will be able to login and service their loyalty accounts without any effort - no credentials to remember. The second is interaction. Members will be able to see posts from their loyalty programme directly within their social feeds - no email, no direct mail and much more immediate. The final benefit is social proof - members will be able to see what other friends are doing, what other friends have bought and what other friends have redeemed for.

Combine this with the potential that Facebook brings to virtual goods in the form of social gaming - something that Amex has recently introduced into the Membership Rewards programme and that Citi qucikly followed by introducing them into the Thank You programme - and you have a major change in how loyalty programmes are designed and deployed.

Whether proprietary or coalition loyalty, the marriage of these three main trends of location, gaming and social will change the face of loyalty over the next 12 months.

Image credits: Google T-Shirt, Badges,

Boots to generate value from customer relationships

It seems coalition is the buzzword of the moment, and I'm not just talking about politics.

Nectar and Airmiles have already seen recent competition from Barclaycard Freedom for the multi-merchant loyalty model, but now high street loyalty behemoth Boots has announced their intention to open up their Advantage card to other partners.

Although most Boots Advantage card holders are also members of another large loyalty scheme like Tesco Clubcard or Nectar, with 16m members they can hit the ground running with regard to engaging other partners - not least using their aquisition of Dollond & Aitchison which they have just pulled out of Nectar.

It's also not surprising that this is happening given the ownership of Boots by private equity firm KKR.  They will be looking to maximise their investment of over £11bn when they first purchased Alliance Boots and a 16m customer database is certainly one asset that could provide profitable returns.

Looking at coalitions though, what's clear from the current government is that brand identity can become diluted.  With most news reports referring to the government as the "coalition government", "Liberal Conservatives" or "LibCons" it's evident that sharing the platform with someone else can force individual brands to be pushed to the back a little more.  For any partners looking to join the Boots Advantage programme, it may be difficult for their brand to shine as brightly as Boots.

So what's the attraction for any potential suitor to join a programme like Advantage?

Quite simply it's acquisition.  The benefits of tapping into a large shared membership base can bring great benefits to a new brand joining, with a loyal base of members keen to maximise their earning and willing to change their behaviour to do so.

When Tesco for example joined Airmiles back in 2002 they say searches for the nearest Tesco store jump 450% and they issued 1m new Clubcards.

The other side of this though is tied into the reduction of brand identity, with customers becoming more loyal to the programme than the participating brands.  When Tesco's for example saw an influx of Airmiles customers, it was reported in Scoring Points: How Tesco Continues to Win Customer Loyalty that Sainsbury's saw a corresponding loss of 1% of sales volume - equal to losing 60,000 of it's most valuable customers.

Another potential advantage though of a coalition programme is the shared earn & burn model.  With many brands not seeing enough frequency to remain front of mind or enough value to make the loyalty currency attractive in it's own rights, then a model which contributes to a wider and more open currency seems like the natural choice.  In fact, if you ask customers what they want these come out as key aspects.

For example, the Home Retail Group which recently launched Nectar points at Homebase to replace the previous Spend & Save programme said:-

In-depth consumer research that showed Nectar points were more attractive to customers as they are more flexible and can be earned and redeemed at a much wider range of outlets.

When part of a coalition, it's sometimes better to see it as a marriage of convenience - just like the Lib Dem and Conservative coalition.  Neither political party would have chosen the situation, but the benefits of working together and representing a majority of the electorate outweigh the alternative.

For coalition loyalty the situation is similar.  No company would ideally look to encourage focus on another brand, but sometimes the benefits outweigh the risks.  Increasingly however partners are looking to protect their brand at the same time as benefiting from coalition loyalty.

Tesco for example has managed to navigate a route with Airmiles which allows them to be part of the coalition programme, without in any way devaluing their own brand or their own loyalty programme - really having the best of both worlds.  Shell is another example - offering a variety of rewards within their Drivers Club programme including Airmiles and now being part of Barclaycard Freedom.

However, with an increasing number of UK coalition programmes to choose from, each offering different benefits and potentially different audiences, brands now have more choice - including creating or keeping their own proprietary programme.

What is increasingly not a choice is whether to have a loyalty programme at all.

As Justin King, Chief Executive of Sainsbury's recently said in The Times about retail loyalty:-

"There will be a big difference between the haves and have-nots"

So whether the choice is joining a coalition, creating a coalition or setting up a propriety loyalty programme - it's clear that loyalty marketing has evolved into the business tool to generate value from customer relationships - a value that Boots are obviously keen to increase.

2009 – Year of loyalty?

Well it seems customary at this time of year to look forward into the next to think about what may be round the corner. 2009 promises to be a good year for loyalty marketing as now is most definitely the time to be concentrating on existing customers. That said, it will also be a year of increased focus on marketing budgets and all marketing disciplines will need to deliver the goods - loyalty will be no exception.

#1 – Loyalty marketing will become more accountable

2009 will be the year of accountable marketing - Group M, the media buying subsidiary of WPP is projecting that traditional above the line advertising will be down 9% in 2009 and Business Week reported just last week that US advertising spend is projected to be down 10%. This is not in itself unexpected, as the President and CEO of the Interactive Advertising Bureau (IAB) said recently "It's a normal recession trend: Above-the-line dollars are moving below-the-line".

As the blog Note to CMO puts it "What happens to a poorly led company when the economy goes south? The marketing budget gets cut. What happens to a well led company when the economy goes south? The marketing budget gets cut, as well; but in a well led company, the budget doesn't just get axed -- it gets reallocated…You see more channel promotion, more marketing development funding, more sales incentives."

When times are hard, marketers will be expected to get the best value for every pound spent, as a Marketing Week survey showed, 71% of UK marketers said they felt more pressurised than usual to demonstrate the impact of every marketing activity. This means all forms of accountable marketing will benefit, with online marketing projected to grow by 6%-10% but I'd also expect most below the line disciplines to benefit including loyalty marketing.

Loyalty programmes will have to work harder though – moving from a "points = prizes" mentality to one which looks to utilise all available behavioural information to target customers at every point with relevant messages and offers – recognising and rewarding the interaction not just the transaction.

#2 – Coalition schemes will expand

Coalition programmes will have an increased focus in 2009.

The coalition programme makes sense for many companies – not only are costs shared but companies that don't have enough frequency or margin to make a compelling programme can still participate and benefit from loyalty within the programme as a whole. I think we'll see more emphasis in 2009 from coalition programme providers such as Nectar and Airmiles as well the widening of existing standalone programmes and the creation of new programmes containing a number of partners. This makes sense as loyalty is going to be the watch word in 2009 and with more companies wanting to have the benefits of a loyalty scheme without the cost or long lead times of establishing one - any way of short cutting this will be taken.

Coalition programmes also make a lot of sense for consumers as it allows them to accumulate points from a larger share of their spend with a single provider. Airmiles are already reporting increases recently in new members and increased usage of the programme and have recently launched a £3.5m TV campaign to drive awareness.

#3 – Physical rewards will be back in vogue

I think rewards requirements may be a little different in 2009. Recent changes in the strength of the Pound versus the Dollar and Euro have made international travel more expensive at a time when people are also watching their spending. Vouchers or gift certificates, another popular reward choice have also taken a knock recently - with retailers such as Woolworths and Zavvi going into administration many of the vouchers issued cannot be used and also weren't being accepted by the other solvent partners such as Comet and B&Q. With predications of 10-15 other UK retailers going to the wall in 2009, people will be wary of choosing a voucher which may not be worth the paper it's printed on. Merchandise including durables such as home-wares and electrical goods as well as entertainment products like downloads, CDs/DVDs will become more popular as people stop spending money easily and so items that were simply purchased on a whim are now saved for or put off.

It's also in the programme operators interest to move rewards towards merchandise as there is very little margin in either travel of voucher based rewards and with many companies looking to reign in their marketing budgets, one simple way to do this is to offer merchandise rewards. When introducing rewards though it will be key that these don't cheapen the programme through the introduction of low value brands and items – instead as Rachel Deacon, Client Partner as Carlson Marketing puts it "With house prices deflating, people are not so interested in moving and are starting to put down roots - this is reflected in more colour being used in houses and more furnishings rather than just stark, basic furnishing. This focus on and pride in the home means people will put more premium on quality items than has been the case in the Ikea world of the past decade."

#4 – Loyalty will get more social

I've written previously about how I feel loyalty and social media can work together well – however convincing many brands of the value this could bring to their loyalty programmes has been more challenging. Social media can provide customers with reassurance that they have made the right choice through recommendations and reviews – whether this is the choice of their purchase or the choice of their loyalty redemption. It can also make it easier to sell additional products and services to other customers, once the relationships between them is understood as friends of friends are up to 3-5 times more likely to purchase a service that a friend already has.

It has however been seen as a new, disruptive technology – something that is hard to control once the genie is out of the bottle. 2009 though may be the year when we see its use within loyalty programmes as marketers look for more creative ways to utilise their budget. As Ann Handley, blogger and Chief Content Office of MarketingProfs puts it, "Dwindling budgets suddenly make low-cost social media look like the pretty girl at the ball".

#5 – Consistency

The final prediction is simply more of the same - consistency – don't rock the boat too much and make sure that any changes made work well within existing marketing efforts. Doug Burton says in Progressive Marketer "When faced with an economic downturn, some companies shoot from the hip, jumping into new mediums with no real plan for integrating their brand message or measuring the return on the investment..As consumers become more cautious and contemplative with regards to their spending, it's simply going to require a more consistency and persistence to move the needle"

Well those are my thoughts – feel free to chip in with your own thoughts and suggestions and have a Happy New Year!