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.

Gamification - what loyalty programmes should have been delivering?

The gamification of everything is afoot. Gamification (also known as Funware) is about integrating game mechanics, such as say leader-boards, into non-game environments such as marketing campaigns and health care.

Gamification definition care of Strategic Synergy

The movement is largely lead by professional game designers from the video and online games industries. One of the first industries they've latched onto as examples of games outside of the video game industry are loyalty programmes. These programmes have "points" to keep score with, members can "level up" to more exclusive tiers and pick up "powers" such as airline lounge access while redeeming for rewards along the way.

Gabe Zichermann's view on loyalty systems

But according to these game designers - loyalty and frequent flyer programmes are not always particularly well designed games. They don't do a good job of engaging members on the journey towards redeeming a reward. Gabe Zichermann is one of gamification's leading gurus and he proposes a fifth P be added to the marketing mix - Pleasure. He describes marketing's task today as "creating a long-term engagement with the consumer that moves them along what we call, ‘the player journey’ – the long-term emotional engagement of the user with the brand.”

In Zichermann's motivational hierarchy gamers are after four things in decreasing order of importance and notably for programme operators, increasing order of cost to the provider:

1. Status
2. Access
3. Power
4. Stuff

Status, access and power are areas that frequent flyer programmes excel in. Higher status members can clearly be seen accessing the faster queues, priority check-in and better lounges. Status is only status if it's visible to others. At the same time - most airline frequent flyer programmes offer only elite status and "leveling up" for their very top members. If they were to offer a member early and multiple opportunities to climb through status tiers, they'd be more like games and, according to Zichermann, more engaging.

Stuff in all loyalty programmes are the rewards offered in exchange for points which have a hard cost to the loyalty programme provider. Stuff though is only accessed at the end of the loyalty cycle after much accrual and its impact is trumped by status, access and power.

It's hard to imagine a loyalty programme that reduced the value of the stuff on offer in exchange for more status but one has just launched in the hotel sector. The Global Hotel Alliance is offering a loyalty programme without points but with very clear status, access and power. They have Gold (1 night stay), Platinum (10 nights) and Black (30 nights) tiers to enable early and easy leveling up. Each tier provides progressively better access from free internet at 1 night to surf lessons or helicopter tours for Black.

A well gamified loyalty programme would become a reward in itself. According to Zichermann "It’s the system that’s engaging, not the reward” he says. “That’s what game designers know really well, and this is what gamification is unveiling to the marketing world.”

1 COMMENTS:

Jeremy Sweetman said...

Thank you Simon for your informative article.

Coming from a long heritage of digital communications and (more recently) game design, I'm excited to see the evolution of gamifying one's brand becoming popularized within the media.

As a practitioner, I was lucky enough to attend one of Gabe Zichermann's talks recently and, unquestionably, the concept of gamification couldn't ask for a better advocate. Obviously Gabe isn't alone in his promotion; personalities from both gaming & marketing circles are starting to validate the process of gamifying both brands and experiences.

Honestly, as marketing professionals, the concept of changing (customer) behaviour through 'fun' activity is not new, although despite 'The Horizon Report - 2011' predicting 2-3 years before the concept becomes mainstream thinking (particularly in education), I believe pioneering in this area will ultimately return significant gains and deliver better experiences all round.

Simon, as a leading practitioner within your field, I'm curious how you would evaluate whether brands would be suitable candidates for a gamified experience - beyond the currently accepted loyalty paradigm?

In addition, I'm conscious that circumstances could exist where a gamified experience could ultimately over-shadow the value of the 'thing' being sold e.g. Jet Blue and (in my opinion) Nike+. Hence are interested on your thoughts surrounding this potential scenario?

Thanks in advance for your insight.

Jeremy Sweetman

MARCH 17, 2011 4:47 PM

Rick Ferguson leaves Colloquy and joins our family

Rick Ferguson, most recently Editorial Director of Colloquy has joined our parent Groupe Aeroplan as Vice President Knowledge Development.

Rick picks up a role as thought leader for our group. If you've been to any of the key loyalty conferences in the Asia region or further afield including the USA, Europe and Canada - you'll likely have heard Rick speak. You've probably also read his analysis of our loyalty industry in the weightier publications such as the Wall Street Journal, Forbes, Fast Company and others where he is quoted as a loyalty marketing expert.

There's two major trends we've seen developing in our market that Rick has recognised and analysed on the global stage.

The first is the struggle that travel loyalty programs had in retaining both members and their engagement during the recession (while the opposite has been proving true in other industries, especially retail) . We saw Airline Frequent Flyer and Hotel Frequent Stayer Programs, along with the capital intensive industries they represent, struggle in 2008 and 2009 (and even into 2010). Quoted in AdWeek , Rick commented that “The disparity between travel and the other two industries featured in our latest research mirrors the shift in consumer spending away from the travel sector, in which both business and leisure travel have seen cutbacks, and toward retail categories, particularly in the everyday spend categories of grocery and fuel.”

Rick has also contributed some excellent analysis on another key trend that's evolving and beginning to mature in our market : the targeting and engagement of brand advocates through Word of Mouth. We define Word of Mouth as the output from a brand advocate. It's the opposite of Amway. Customers will recommend a product or service to friends and family not because they get a reward (or more sales as they would in Amway) but because they believe it's the best product or service. (The Net Promoter Score is a good way of determining who is a likely WOM candidate). Rick commented in Adweek that marketers “should find brand champions buried within their program memberships, and build relationships that reward them for positive word-of-mouth activity.”

Rick's thought leadership and deep experience is going to be let loose on a (now) very wide range of our metrics, data, experience and learnings.

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.

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.