Card Based Offers solution wins Best of Show at Finnovate

Finovate is a boutique banking technology research firm based in Seattle.  They produce the Netbanker publication as well as retail banking conferences in the USA and UK.

At this February's FinnovateEurope conference 35 number of new products and services were demonstrated with 4 being voted by attendees as being "Best In Show".  One of those 4 was the Transaction-Driven Marketing (or Card Based Offers) solution from Cardlytics.

In this video from the conference Jonathan Harman (Aimia) and Lynne Laube (President of Cardlytics) demonstrate the merchant-facing portal, powered by Cardlytics, that is used by merchants to track offers served, activated, and revenue earned. 

Video courtesy of and owned by Finnovate

In this new generation of highly targeted marketing:

• Banks win : they monetise their transaction data and bring meaningful value to their customers
• Retailers win : in this pay for performance model retailers target only those customers with "headroom" - the capacity to spend more with the retailer (as they are perhaps shopping the retailer's competitor more frequently) and not those customers who are already giving as much business as they can to the retailer  
• Customers win : they receive much richer and more frequent offers from retailers than retailers would otherwise be able to offer

Retail growth of 8% to 30% per customer from data driven marketing

Retailers have been bombarded with approaches from the raft of daily deals companies that are following the Groupon model.  These require deep discounts to be offered and for all customers to be treated the same - same offer, same time, same channel.  While these certainly have their place we're seeing retailer fatigue at this one-size-fits-all approach.  

There's another way.  Not surprisingly  - an approach that treats different customers differently is working well for retailers in the USA.  To do that at scale requires a customer data driven strategy.  There's a new breed of marketing pioneered in the USA called transaction driven marketing.  Customers credit and debit card transactions, possibly the richest source of customer buying behaviuour available,  are mined on behalf of retailers.  Retailers are able to select target customers more accurately than perhaps any other method is capable of.  They can address customers who have shopped a competitor more than them or have not shopped them recently.  Customer data is anonymous and not handed to the retailer.  The retailer then makes an offer to those customers (and not anyone else) which is presented inside the customer's online banking screen; some of the most trusted and highly use online real estate.   To redeem the offer (usually a cash back) customers need only use one of their payment cards at that retailer in the offer period.  If they don't - the retailer doesn't pay.

Today the largest bank in the USA - Bank Of America - launches this offering under the banner  BankAmeriDeals.    It's delivered by Cardlytics  - a US based leader in merchant-funded transaction-driven marketing for electronic banking (full disclosure : we Aimia own a minority equity position in Cardlytics and have a long-term global strategic alliance with them).  Cardlytics reaches almost 70% of the USA population with these offers.  

New Zealand lends itself as a prime market for this type of marketing.  We use our credit, debit and Eftpos cards more than almost any other country and we're high users of online banking.   

Most importantly though the results from transaction based marketing are excellent.  Cardlytics released their 2011 aggregate results at the National Retail Federation's (USA) Big Show two weeks ago.  

Targeted, data driven offers are producing sales lifts of between 8.5% (current customers in Apparel) and 30% (new customers in Specialty Retail).  Mining and refining customer data has produced a new industry in which the bank, the customer and the retailer all win.

How Generation Y will reshape customer loyalty

Generation Y are skeptical of the location-based offers that pop up on smartphones but (not unsurprisingly in the era of over-sharing on Facebook) will reveal personal details for fast, free and easy rewards.

Gen Y (or Millennials) are a fair portion of the global population today at 1.7billion strong (there’s more of them than there are Baby Boomers and three time as many of them as Gen X).  We’ve completed a proprietary study in the USA, UK and Canada (with possibly markets closer to home to follow) on this important market segment.

In all markets we’ve found that Millennials are active in loyalty programmes (75% participate and they’re more willing than their parents to do so) and 75% of them will prefer a brand that gives offers a programme over one that doesn’t. In unprompted responses, Millennials rate loyalty rewards as the top incentive they look for in exchange for sharing personal information with marketers.

Millennials are willing to promote brands or products through social media in exchange for rewards.  This doesn’t extend to them wanting to receive location based offers on a smart phone (only 10% have responded to these offers).  They do however (25% of them) want their smart phones to be a replacement for a plastic loyalty programme card and for the loyalty programme to deliver coupons or gift cards through the smart phone.  Only 10% though want the smart phone to replace their credit or debit card.

The first part of the study covering the USA is available for download from Aimia.com.

Rick Ferguson, Aimia's VP Knowledge Development lead the research and presented it in Sydney this week at The Customer And Loyalty Show.  

Rick Ferguson - Aimia's VP Knowledge Development -  presents the Millennial Research in Sydney this week.

"Millennials are even more willing to participate in loyalty and reward programs than their parents, but they expect reward programs to be free, easy and fast," said Rick. "This generation also relies heavily on outside information to make purchase decisions—information that is often out of the realm of control for marketers. The winners in building sustainable brand loyalty with Millennials will be those who break through the information overload to deliver value at the level of the individual customer."

Retailer offers delivered inside online banking - our new partnership.

Last week our parent Groupe Aeroplan announced that it had signed a long-term global strategic alliance with Cardlytics, a US based leader in merchant-funded transaction-driven marketing for electronic banking. Groupe Aeroplan has also acquired a  minority  equity  position  in  Cardlytics  for  total  cash  consideration  of  US$23  million.


Cardlytics’ solution is ground-breaking in the world of marketing. Cardlytics leverages individual financial card information, captured and secured behind the financial institutions’ own firewalls, to provide consumers with personalized merchant offers. These highly targeted offers are delivered directly to the consumer via trusted electronic banking channels including mobile, email and on-line banking. The company’s proven technology solution is uniquely designed for banking offering maximum security for the protection of customers’ personal information.  In  addition  to  providing  participating  retailers  with  a  targeted  and  measurable  channel, Cardlytics provides valuable analytics services to help understand where consumers are making their buying decisions.


Cardlytics Video - describes Cardlytics ground breaking solution.



“This  transaction  allows  us  to  further  complement  our  full-suite  loyalty  services  offering  within the important  financial  services  sector,”  said Rupert  Duchesne, President  and  Chief Executive Officer of Groupe Aeroplan. “Our alliance with Cardlytics will also give us invaluable access to top  retailers  around  the  world  and  is  in  line  with  our  strategy  of  making  small  strategic investments in the data, mobile and digital spaces.”


“Cardlytics  brings a solid track record and international reputation among leading retailers and
financial  institutions,  in  addition  to  a  highly  trusted  and  reputable  technology  solution,”  added Duchesne.  “We  look  forward  to  working  closely  with  Cardlytics  in  the  nascent  but  fast  moving space of transaction-driven marketing.”


Through  their  long-term  global  strategic  alliance,  Groupe  Aeroplan  and  Cardlytics  will  further grow Cardlytics’ offering outside the United States.


“Transaction-driven  marketing  is  a  uniquely  powerful  solution  for  retailers  and  financial
institutions,” said Scott Grimes, Chief Executive Officer of Cardlytics. “Today, we can reach 70% of  U.S.  households  in  conjunction  with  our  financial  institution  partners.  Our  deep  strategic alliance with Groupe Aeroplan positions us to rapidly establish the same leadership position in
other major markets.” 

Digital marketing technology – the best thing since sliced bread?

I recently attended the Shopper Marketing conference in Sydney which featured speakers, workshops and case studies on how to best drive sales, engage shoppers and subsequently influence their purchasing power while in store.

One consistent theme at the conference was that digital marketing technology is the latest trendy must-have for retailers and manufacturers. From iPhone apps, digital billboards and interactive LED screens, digital was touted as the next best thing.

However, many of the opportunities lacked a strong business case and ROI - primarily because the core foundations of new product development were missing. This means for marketers - beyond the "cool" factor, the ability to get a solid ROI out of the innovation is missing.

It's a good reminder, whether working with loyalty programmes, promotional communications, or iPad apps, to look beyond the trend to ensure that the opportunity;

• meets a need that a customer has yet to realise they have (if not meeting an existing need);


• relates to your product or service and the purpose of your business;


• tells you something about your customer that you can use in your business;


• is difficult for your competitor to replicate.

And don't forget, if your customer service is poor, your product unappealing or the pricing is wrong, the coolest app will not save your sales.

Loyalty expert Nathalie Moolenschot joins us from Air New Zealand's Airpoints

We're very pleased to have Nathalie Moolenschot join our team from Air New Zealand Airpoints. We've known Nathalie for some time and she claims to have been through a 10 year job interview to join us as our Strategy & Rewards Services Director.

She has a history steeped in the best of New Zealand loyalty programmes. We first met Nathalie in the 1990's at Westpac where she worked on their hotpoints loyalty program (our client for the last 11 years). She moved over to their then new joint venture with the Red Sheds - The Warehouse Financial Services - and drove card acquisition (and we're fortunate to be able to count Warehouse Financial Services as a client since 2009) . She moved to BNZ to work on their loyalty programmes - Fly Buys and GlobalPlus (their partnership with Air New Zealand Airpoints). Finally she joined Air New Zealand where she launched the Fly Buys and Air New Zealand Airpoints partnership ( a world first).

Nathalie says “I’m excited to be working at the forefront of loyalty. With the continuous pressure on companies to achieve results, my role will be to make sure that we continue to help our existing and prospective clients develop effective and dynamic loyalty propositions to exceed those targets. I will also keep challenging the traditional loyalty program concepts with innovative solutions regardless of industry. This focus will also benefit our suppliers as we develop partnership models moving forward”.

She'll also be sharing here thoughts here on our blog.

Air New Zealand's Airpoints innovations (again)

Air New Zealand has recently delivered a comprehensive renewal of the Airpoints Dollars Frequent Flyer scheme. While it follows similar actions by Qantas Frequent Flyer in Australia it is a very Kiwi and innovative solution.

First mover - Qantas in Australia

Air New Zealand's new innovations follow moves in Australia by Qantas over the last 3 years. Qantas first signaled a partial listing of it's 5 million member Frequent Flyer Programme in 2008 which could have fetched it AU$1.5billion (for many airlines there's more money made in the frequent flyer scheme than in flying planes). The listing strategy was based in large part on Carlson Marketing's parent Groupe Aeroplan's success in Canada according to Simon Hickey - boss of Qantas Frequent Flyer in 2008. Qantas changed tack, held onto ownership of the Frequent Flyer programme, (which produces more profit than subsidiary Jetstar) and took it on an aggressive expansion drive.

Most frequent flyer programmes struggle with too many points being issued (typically by partners such as credit card companies and at a a compound annual growth rate of 10%) and not enough seats being available to redeem them (new planes add only 5% more seats to the global fleet per annum).

Qantas first addressed the redemption options from difficult-to-find-free-flights to include an online store stocked with merchandise and gift cards (full disclosure - we deliver this service for Qantas) and an any-seat, any-Qantas-flight redemption options. It then required all banks who were offering Qantas Frequent Flyer points on their credit cards along with other rewards to offer cards with Qantas Frequent Flyer points only (know as Direct Earn credit cards) - or not at all. Then last year it struck a deal with Woolworths Australia in which Woolies offered Qantas points to its shoppers and along the way added 700,000 new Qantas Frequent Flyer members.

The result? Depending on who you talk to either Qantas or FlyBuys is now the biggest and best loyalty programme in Australia. Either way - FlyBuys has a new attacker. And for Qantas it's a big earner : in the year to June 30, it generated underlying EBIT of A$328 million and now has a base of 7 million members.

Air New Zealand's strategy here

Air New Zealand didn't face the issues of limited seats being available for redemption in its Airpoints programme. In fact it could be argued that anything that got passengers onto it's planes was positive with the Centre For Aviation describing them as a "small airline getting smaller". The world first Airpoints Dollars innovation introduced a few years ago means any seat on any Air New Zealand flight could be bought with Airpoints (rather than the roughly 3%-5% of seats reserved per plane in other classic frequent flyer schemes).

Air New Zealand's advance in 6 steps

1. Flying on Air New Zealand flights had always gave customers Airpoints Dollars which could be redeemed for..
2. ...more Air New Zealand flights.
3. BNZ had long issued the GlobalPlus credit card on which customers earned even more Airpoints Dollars. ANZ (our client), Kiwibank and American Express have all issued new Airpoints Dollars credit cards over the last year.
4. Then recently - Air New Zealand enabled Fly Buys customers too to convert their Fly Buys points to Air New Zealand flights.
5. The really interesting piece has been the issuing of a new Airpoints membership card last month which is co-branded with Fly Buys by Air New Zealand. With this Airpoints card customers can now earn even more Airpoints Dollars (earned instead of Fly Buys points) at any of the Fly Buys merchants. This is a significant innovation and not one we've seen elsewhere. It's a collaborative local solution which is in contrast to the development of Qantas's programme in Australia.
6. The unexpected piece has been last week's release of an online Airpoints gift store. Airpoints Dollars can be used to buy goods and gifts from a $50 digital camera up to a $1,670 high end camera. Some goods are delivered in the same fashion as Fly Buys such as the new iPod Nano which must be picked up in store from Noel Leeming.

There are strong arguments in Australia to support the primacy of either Qantas Frequent Flyer or FlyBuys. In New Zealand - it looks like Air New Zealand's trumped them all.

New generation fuel rewards - the Smart new orange card

While we're all now used to fuel dockets in New Zealand we may soon have a better alternative available to us. It's the result of solid Kiwi entrepreneurship together with some solid marketing discipline.

Australia - 1

Woolworths Australia (who own Countdown and the rest of the Progressive Enterprises stable here) were offering fuel dockets (as we currently have here in New Zealand) successfully in 2005. At the Caltex Woolworths sites there was an average 80% increase in petrol sales. When the offer was 12 cents per litre, sales went "through the roof ". Also - sales appeared to be up in grocery competitor Coles who also offered fuel dockets - maybe as much as 3.8%.

Woolworths Australia have since progressed to offering an orange card which collects the various cents/litre discounts (doing away with the paper dockets) in 2007, launching an online community the same year, partnering with Qantas Frequent Flyer in 2009 and then this week launching a Woolworths Everyday Rewards Qantas Frequent Flyer credit card -with fuel discounts. Pretty impressive customer strategies.

New Zealand - 1 up?

Smartfuel is a Kiwi startup running a pilot programme in Palmerston North. Like Woolworths Australia it offers an orange card that collects fuel discounts. Unlike the Australian example these discounts can be earned at an array of retailers who print the running total of the discount at the bottom of the till slip. They also accumulate into a single large cents/litre discount which can then be used at the next fuel purchase . And there's two major chains participating : fuel discounts can be redeemed at either Mobil or Caltex.

Scott Fitchett (owner of the Caltex in Palmerston North) is the Smartfuel inventor. Ian Sutcliffe is the experienced marketer (previously head of marketing at McDonalds and Westpac and a past 1to 1 Customer Champion). The offer to customers is pretty compelling. So too is the offer to the participating retailers. While they pay for the discount at time of purchase - they don't pay for discounts which aren't used by the customer. These unused portions are credited back to the retailer.

Fuel discounts are not materially costly for the retailers who offer them (maybe a 1% to 2% discount equivalent) but they drive an out sized customer behaviour change. When fuel dockets first became popular one analyst noted that "The discount is worth $1.60. You wouldn't stop in the street to pick up $1.60 but customers are changing retailers for it."

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.