3,000 Foursquare users in New Zealand (maybe).

On Saturday, the mighty All Whites drew 1 all with Honduras at North Harbour Stadium. The official crowd was 18,153. There were 12 Foursquare users checked-in there ( I checked - I was one of them).

Foursquare had a penetration of 0.0661% of that crowd. If that is true (probably not) and all other factors remain constant (they definitely don't) this implies that 0.06% of Kiwis are Foursquare users. Or : of the 3 million Foursquare users globally - 3,000 are to be found in New Zealand.

Foursquare seems made to be part of a loyalty programme. Air New Zealand's adoption of a Foursquare special attached to it's Airpoints Frequent Flyer Programme almost makes it a mainstream technology in New Zealand. But - it's not. Not yet anyway.

Maybe straight up penetration is the wrong way to view a social tool like Foursquare. In social technologies we know there's a very strong distribution operating. The most voluminous poster in a community posts twice as much as second highest poster and they in turn post twice as much as third highest poster. We also know that the 1:9:90 rule is in play :

• 1% of people post lots a frequently
• 9% of people comment on these posts
• 90% of people do nothing other than read them (and maybe in Facebook 'like" things)

Foursquare check-ins can be shared on Facebook and Facebook is now the biggest site in New Zealand (bigger than Trade Me, bigger than Google). So - maybe sharing by the few to the many is what's important here. And Facebook Places is coming : we'll all be able to share where we are Foursquare style inside Facebook (on smartphones and some feature phones).

In general : we over-estimate the impact of a technology in the short term and under-estimate it's impact in the long term (which I thought was coined by Bill Gates but is actually from the head of the Human Genome Project).

New Zealand credit card loyalty programmes rated by Cannex in their inaugural study

Cannex - the research company which reviews banking products and gives the best ones 5 star ratings - have undertaken the difficult task of doing the same for credit card loyalty programmes. In their inaugural review in August they rated 33 rewards programmes tied to 44 credit cards in New Zealand.

It's difficult because there's a multitude of variables and special options in these programmes which don't lend themselves to standardisation, but it can be done. To achieve this they've split the rewards cards into 2 main buckets:

• General rewards programmes (that give you gift cards, merchandise. experiences, trophies and the like)

• Flight rewards programmes - all of which give you Air New Zealand's Airpoints Dollars (they appear to have missed ANZ Bank's Qantas offering)

What's more difficult (maybe impossible) to asses is the benefit to the customer because there are no average customers. However Cannex have done a solid job of identifying two different customers who use these cards :

• Those who spend $24,000 per annum on their credit cards

• Those who spend $60,000 per annum

The results? The best card in the market if you want General Rewards and spend $24,000 a year is the Warehouse MasterCard. This delivers $137.42 return for that $24,000 spend according to the Sunday Star Times review of Cannex's ratings. [Full disclosure - Carlson Marketing deliver this programme for The Warehouse].

Cannex dished out 5 Star ratings (Outstanding Value) to:

• General Rewards - ANZ's World Visa programme and Westpac's hotpoints programme [Full disclosure - Carlson Marketing deliver these programmes]

• Flight Rewards - American Express's Air New Zealand Airpoints programme and BNZ's Global Plus programme.

The Sunday Start Times article recommends to card carrying customers that "Rewards should not change your spending habits, even if they change the way you pay". Changing the way you pay is precisely what rewards programmes are designed to do.

Foursquare provides mobile loyalty interactions to established loyalty programmes

It's taken a while for the mobile phone to to produce exciting innovations in the world of customer loyalty. Finally though there are two key developments that have achieved sufficient consumer adoption that programme operators are including them in their offerings. Both are products of the mobile app stores delivering cool tools to smart phones.

Cardstar

The first and somewhat more mundane of the two is Cardstar

- a smart phone app downloaded over 1.5 million times globally (Apple, Android and Blackberry). Once on the customer's phone - the app stores the bar codes of all the customer's loyalty cards (which can then be tipped out of overloaded wallets). The customer then presents the selected card's bar code on the phone's screen for scanning at checkout.

Foursquare

Foursquare is much more exciting. Its not the first of it's type of service but it's not generally accepted to be the leader with the largest installed user base. Also an app downloaded to a smart phone (and also usable over the mobile web but not as good) - it's a geo-location app that allows customer's to "check in" at retail or other locations by tapping a button their phone screen. Once in you can see which of your friends is there or nearby and what they recommend you try there (it cleverly gets your friends from Facebook). Foursquare awards you badges (on the screen) for various achievements (earn the Newbie for your first check in). You can also become Mayor if you've checked in to a specific location more than anyone else.

It gets interesting when the local coffee shop elects to run campaigns against the customers checking in. Starbucks (USA) awards Mayors $1 off a frappuccino. All they need do is show their Mayor status on the phone to the barista. In fact - Starbucks have their own barista badge to be earned on Foursqare.

Domino's Pizza in the UK cited their use of these

types of Foursquare promotions as a leading driver of a 29% increase in pre-tax profits on July 12th this year.

Pepsi in the USA is also using Foursquare while developing its own proprietary platform called Pepsi Loot based on a form of Foursquare from Zumobi (where Eric Hertz - CEO of Two Degrees Mobile - was before he hit New Zealand). While it's Foursquare play seems solid - Pepsi Loot has been panned for being "Foursquare, minus the cool and built in incentives".

And in New Zealand ?

Foursquare is just over a year old and in March

had half a million users (globally) and 1 million venues registered. It's small. But it's growing fast - it hit 2 million users on 10th July this year (that's 100,000 new users per week) and pulled funding from Marc Andreessen (who invented Netscape all those years ago). Numbers are hard to come by but in New Zealand we estimate everyone has a phone and 2% have an iPhone while 9% have Blackberrys (Android's not really here yet). Also small.

Air New Zealand has been the first (again) to deploy a Foursquare offering. Mayors at our airports get Koru Lounge access or Airpoints Dollars - an excellent programme tie in. Air New Zealand beat the Intercontinental Hotels Group to market with IHG announcing last week that customers in its loyalty programme can also earn points for checking in at the hotel venues globally.

Foursquare is now integrated through Facebook Connect and last week announced tie up with Cardstar. After flashing their loyalty card bar code at the till customers can also check in to the retail venue.

Loyalty programmes have long aspired to be able to reward interactions as well as transactions. Transactions are generally discovered through the payments cycle. This is an example of interactions being rewarded inside the framework of the larger loyalty programme.

Auckland University research : loyalty programs designed to make sure customers don't get rewards

An article earlier this month in the New Zealand Herald claimed that "Shoppers may be missing out on millions of dollars of savings through unclaimed rewards every year". It referenced research from Auckland University' Senior Marketing Lecturer Rick Starr under the headline "Loyalty schemes rely on shoppers forgetting to cash in their points". Rick's view was that "people often forget to redeem their points. And companies count on customers doing so because full redemption would "cut their profits"".

True - in part. But. It depends what type of program you're talking about. In the programs we operate, the driving principle is to get all the points that have been issued turned into rewards by the customers who have earned them. This isn't some egalitarian approach but a very mercenary one.

[Full Disclosure - the article mentions ASB True Rewards and The Warehouse's Rewards MasterCard - both are programs we work for].

There are two key behaviour changes that occur when a customer joins your performing, well designed, rich, relevant loyalty program.

Behaviour change 1.

The first occurs when they begin to earn points and is particularly marked if you've made them pay a fee or annual subscription to join (always a good idea if possible). For example - credit card customers who join the loyalty program attached to the credit card will almost immediately spend more on that card by a multiple of 2 or 3 times what they were spending on the same card before they joined the associated loyalty program.

Behaviour change 2.

The second and far more significant behaviour change occurs when the customer makes their first redemption for a reward. At this point their spend on the card increases again by a factor of 3 to 8 times their pre-loyalty program spend. This second spend lift is determined by what it is they've redeemed for. Customers who redeem for cash back or against their annual fee don't generally increase their spend markedly after redemption. If they've redeemed for merchandise, gift cards or travel - then the second lift is particularly marked.

Customers who don't redeem don't experience this second lift.

The upshot - redemption is good (very good) and points that don't get redeemed (termed "breakage") are bad. How much breakage is there in New Zealand? Rob Mercer of Forsyth Barr Research reckons it's 10% of all points.

Far from cutting a company's profits - points that don't get redeemed are bad business and a missed opportunity to lift spend for the points issuer.

Wall Street Journal profiles the "Stingiest" airline frequent flyer programs

In an article in today's Wall Street Journal entitled "The Road to Redemption - Which Airlines Are Generous With Frequent-Flier Award Seats and Which Aren't" some of our locally available airline's frequent flyer programs are profiled.

The article reports on research by IdeaWorks Company on the ease (or difficulty) with which members of airline Frequent Flyer loyalty programs are able to redeem their accumulated airline miles or points for free flights. According to IdeaWorks airlines are "killing these programs by not allowing more reward availability".

The IdeaWorks study was comprehensive making 280 different Frequent Flyer Program seat requests per airline Frequent Flyer Program reviewed (both long and short routes). This amounted to 6,160 queries at 22 airline websites.

The worst performer in the study was US Airways in which only 11% of the requested redemptions could be achieved. The best performer was SouthWest Airlines in which 99% of requested redemptions were available.

The study also included some (but not all - Air New Zealand was not part of the study for example) of the airlines that fly into New Zealand. The best performer for our locally available airline's Frequent flyer Programs was Virgin Blue's Velocity program in which 90% of requested seats were available. The results for the locally available airlines surveyed were:

• Virgin Blue's Velocity program - 90% of requested seats available
• Singapore Airlines KrisFlyer - 77.1%
• Qantas Airways Frequent Flyer Program - 72.9%
• Emirates Skywards Program - 36.4%

There are more and more airline miles chasing a flat pool of airline seats and according to the Wall Street Journal the "world is awash in frequent-flier miles partly because airlines have built a lucrative business selling them to credit card companies, hotels and others who use miles as incentives and rewards".

The volume of miles issued for things other than flying is now greater in some airlines than the miles issued for using the airline. For American Airlines in 2009 - 66% of the 175 billion miles issued were through their 1,000 partners (credit card companies, hotels and the like) who pay for them. That rate of issue together with the difficulty customers experience in redeeming them means that the balloon of frequent flyer miles outstanding around the world (currently estimated to be 10 trillion) just keeps growing.

Barclaycard Freedom - the (nearly) new credit card loyalty model

Barclaycard Freedom launched in the UK this month. It's an unusual model which has been implemented in similar forms in other parts of the world - most notable in our neighbourhood : Asia. BPI bank in the Philippines run this technology as their card loyalty program (called Real Thrills) as do Axis Bank in India (theirs is called Spice Rewards). The technology that underpins these offerings comes from France based Welcome Real-time who have been developing their solution for over 12 years (and with whom Carlson has a Asia Pacific partnership).

The mechanics (there are two) are similar in all applications :

(1) customers of the card company receive segmented offers at point of sale when they swipe their cards. These offers are printed on the till slip and are redeemable either back in that merchant or at another merchant.

(2) Customer of the card company can use their points to pay for their purchase at that merchant (not unlike ASB Bank's True Rewards program here in New Zealand).

The value of the first mechanic (offers on till slips) is clearer perhaps than the second (burning rewards points at the till). Most retailers want to get their customers through the till as fast as possible and any delay occasioned by a new process to redeem points wouldn't be appreciated. Importantly the retailer never knows the name or details of who they're making the offer to. They're simply card X which belongs to segment Y.

Merchants can set up segments of card carrying customer types from that issuer - a "frequent visitor" or a "never been here before" segment for example. These segments get different offers on the till slip. Frequent Visitor might get a "bring a friend for free next time offer" while Never Been Here Before might get a "come back and get a discounted item" offer. Merchants self manage these offers through an web portal.

What's different about Barclaycard's Freedom is that this is the first time this type of solution has been implemented on such a large scale in such a mature and sophisticated card market. The scale is significant. Barclaycard have 8 million customers who will be able to benefit from this solution at a large portfolio series of merchants (30,000 have been invited but less than that are available today). The goal is to have 200 outlets withing 5 miles of each customer making relevant offers.

If it pans out as its intended to then this is a great example of a marketing network in action. The three parties involved all benefit from relevance and richness.

The merchant is able to make different offers to different customers instead of the classic One Size Fits All structures. They don't have to incentivise business they were already going to get.

The customer gets an additional benefit on top of the others they're already receiving which, if the merchant gets their campaign management right, should be differently rich and differently relevant to each of them.

The bank in Barclaycard adds significant value to the near-commodity business of merchant acquiring as well as making their program an order of magnitude (again - if the merchants get their campaign management right) richer than competitor's card programs.

Oracle CRM and Loyalty event in Auckland - Carlson's 10 Loyalty Programme "Must Haves"

Karl Schuster (president of Carlson Marketing Asia Pacific) presented on loyalty as a business strategy at Oracle's CRM and Loyalty Event event in Auckland.

Oracle's CRM Solution Consulting lead Andrew Davidson first profiled Oracle's offerings in this space. Interestingly, Oracle's customer facing solutions are based on a four core components around a Siebel core. Sales and Service form the expected base and are pretty much table stakes for a customer application. The addition of Marketing tools lift the value of the offering from tactical to strategic. The inclusion of Loyalty as the fourth pillar recognises the importance of sustained customer relationships.

Karl Schuster followed Andrew and addressed a list of best practices that our global clients have implemented or are implementing in 2010. Not all suit all industries and not all necessarily belong together in the same program. However they're a useful starting point.

They are :

1. Multi-channel Quick Enroll : create as few barriers to joining as possible. Ask as few questions as possible when a prospect signs up to the programme. Ask for more data later on in the time of redemption.

2. Preference Center: Where the member manages their communication choices, such as their desired channel, timing, frequency.

3. Member Get Member : Allow the top loyalists in your program to become ambassadors and leverage their own networks to drive acquisition.

4. Multi-channel code submission: is a feature that enables a member to submit an on-pack rewards code via SMS, mobile website, email, web cam or any other channel.

5. Program Dashboards. get all the program data together in one view to be able to assess the performance of your investment (well supported in the Oracle solutions).

6. Instant Rewards: usually for smaller redemption value that drive engagement as an adjunct to the accrual of points. This is also an efficiency play that doesn't have to deal with physical goods.

7. Loyalty program toolbar and widget: Distribution of content and functionality via web browser toolbar or desktop applications.

8. Mobile Program website : The mobile internet is growing faster than than the PC based internet ever did. Customers are trained now to expect ubiquity of access.

9. Loyalty program fan page and feed: Specific fan-based messaging for Facebook, Twitter and others.

10. Dynamic e-Offers: Deployment and overall management of personalized, highly relevant, location based incentives