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

There are no average customers

The Sydney Morning Herald carried an article entitiled "Consumers paying high price for loyalty card rewards". The article was based on research from Choice (most likely similar to New Zealand's Consumer magazine). Their research argued that shopper loyalty cards offer "little benefit to shoppers" and profiled the value the key grocery retail programs offered .

An average Australian shopper (according to Roy Morgan Research) spends a mere $156 per week.

To earn a $50 gift card in Fly Buys requires spend of $15,000 at Coles (or think New World in New Zealand). At an average shopper's purchase rate of $156 per week that would take 2 years.

It would be faster at Woolworths Everyday Rewards program (think Progressive Enterprises Onecard in New Zealand) with customers earning the same $50 gift card after $11,000 or 1 year and 4 months.

One could indeed argue that for the average customer a $50 gift card in return for either 1.3 (Woolworths) or 2 years (Fly Buys) worth of dedicated shopping may not be enough return. That's debatable and some of our data would say otherwise.

However the real issue here is the use of "Average". There are no average customers and loyalty programs serve to enhance differences, especially financial ones, between them.

The figure shows an extract from an actual retail program. The customer base is ranked from best (buys the most) to worst customer along the x axis. The y axis then shows total sales from these customers. It's clear that the first few customers produce significant sales and the bottom customers very little.

For instance - the customer base once laid out from best to worst - is then cut into 10 deciles of equal turnover. In this case total turnover is $44m and each of those deciles is worth $4.4m. The first $4.4m of sales (or Decile 1) comes from only 91 customers. Each spends $49,000.

The last $4.4m of sales (or Decile 10) comes from over 42,000 customers. Each of them spends only $104.

Looking at this distribution, different customers are treated differently and top customers get inordinate amounts of value. In return they provide inordinate amounts of sales.

You are what you eat

There has been a long running loyalty program battle in the UK between Tesco (who were first to launch a loyalty card strategy in 1995) and Sainsburys who are a member of the Nectar coalition loyalty program (which I've written about before here). Much of the reporting about these retailers right now relates to their use and expenditure on their respective loyalty programs.

The battle heated up just before Christmas with Tesco doubling the points customers could earn - effectively doubling the value. Sainsbury's seems ave followed suit this month with an increase in the number of nectar points offered.

Tesco also mailed out GBP 67 million of vouchers in November that would normally have been sent in February.

So - who's winning?

Christmas trading results are due out in the next few days for Tesco but there's a concern that they've not got it right. Some analysts expect that their sales growth will be below that of their rivals. They're also concerned that Tesco will include GBP 100 million worth of loyalty vouchers in their sales figures (though the same analysts suggest that if they do this - decreasing their reported figures by 1.5% will deliver a true reflection of like-for-like sales).

Sainsbury's has already reported better than expected results for the Christmas period. In headlining these results - Sainsbury's CEO Justin King noted that "There will be a big difference between the haves and have-nots, with data. Those with loyalty data can see what customers are doing. If they are going elsewhere for a certain product, we can incentivise them to buy it with us.”

This is language that, in the past, would only have been heard from Tesco and their loyalty program partners dunhumby. In the Nectar program this data is worked by LMG Insight and Communication for Sainsbury (full disclosure : LMG is a sister company to Carlson Marketing. We're both owned by Groupe Aeroplan).

At Carlson we have always promoted the use of data to drive customer programs. The data in question for these two giants of UK grocery retailing is all the food their customers buy. The data that flows from customer's purchases of food is so accurate in determining their future buying habits that, in the words of the team at LMG, "You are what you eat".

We've partnered with Welcome Real-Time for point of sale rewards

We recently inked a deal with loyalty technology company Welcome Real-time to deliver a combined solution in the Oceanic and Asia Pacific market. It's called Carlson Marketing Point of Sale Rewards and it provides personalised loyalty experience in real time, at Point of Sale (POS).

The solution enables customers to redeem points for purchases at the till (instead of using money) and helps credit and debit card issuers to deliver personalised offers at the point of sale. It provides retailers with a great opportunity to market to their customers through their cards. retailers can treat different customers differently based on the RFM (Recency, Frequency, Monetary Value) of the payment card at their outlets. They don't need to know who the customer is and can provide an automated offer at the bottom of the till slip.

Welcome Real-time has customers in 30 countries and in the past year inked two serious deals. The first is with BarclayCard in the UK and the second with Maritz in the USA. Though not yet launched, these clients will bring Welcome Real-time into the G20 frame.

Groupe Aeroplan Concludes Acquisition of Carlson Marketing

Montreal, QC – December 7, 2009 - Groupe Aeroplan Inc. (TSX: AER) today announced the

completion of the acquisition of Carlson Marketing, a privately-owned marketing services

provider headquartered in the United States.

“We are pleased to officially welcome Carlson Marketing to Groupe Aeroplan. As stated, the

combination of our companies positions Groupe Aeroplan as the global leader in loyalty

management,” said Rupert Duchesne, President and CEO. “This acquisition provides

immediate geographic diversification and accelerates Groupe Aeroplan’s international

expansion strategy into the G20 countries. Moreover, Carlson Marketing’s solid US presence

secures an important footprint in one of the largest consumer markets in the world.”

Groupe Aeroplan’s existing businesses and Carlson Marketing will continue to operate

separately and independently. Jeff Balagna, President and CEO of Carlson Marketing, and his

executive team, will continue the management of Carlson Marketing. Jeff has also been

named Executive Vice President, Groupe Aeroplan.

Carlson Marketing is widely recognized for its leading-edge global knowledge of loyalty

marketing services, and engagement and events management. It has strong client

relationships, which include some of the world’s most respected brands in important sectors

including financial services, automotive, high tech, consumer packaged goods and

pharmaceutical. Carlson Marketing has a presence in North America, Europe, Asia Pacific and

the Middle East.

Groupe Aeroplan to acquire Carlson Marketing

GROUPE AEROPLAN TO ACQUIRE
CARLSON MARKETING

COMBINATION CREATES THE WORLD'S LEADING LOYALTY MANAGEMENT PROVIDER

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MONTREAL, CANADA and MINNEAPOLIS, MINNESOTA, November, 3, 2009 - Groupe Aeroplan Inc. (TSX: AER), a leading international loyalty management corporation, headquartered in Canada, today announced that it has entered into an agreement with Carlson Companies, Inc. (CCI) to purchase Carlson Marketing, a privately-owned, US-based loyalty marketing services provider for a net purchase price of US$175.3 million (Cdn$188.0 million), including transaction costs of US$6.5 million (Cdn$7.0 million) and subject to certain working capital adjustments. In addition, Groupe Aeroplan expects to incur one-time costs of approximately US$15 million (Cdn$16.0 million), primarily related to the migration of technology infrastructure in the US out of CCI's systems. The acquisition is subject to customary closing conditions and standard antitrust approvals in the United States and Canada. The transaction is expected to close by early December 2009, and will be financed with cash on hand and bank facilities.

Carlson Marketing's solid US presence secures an important footprint for Groupe Aeroplan in the largest consumer market in the world. Moreover, the transaction provides Groupe Aeroplan with immediate geographic diversification and accelerates the company’s international expansion strategy into the G20 countries.

Carlson Marketing is widely recognized for its leading-edge global knowledge of loyalty marketing services, and engagement and events management. Carlson Marketing has strong client relationships, which include some of the world’s most respected brands in important sectors including financial services, automotive, high tech, consumer packaged goods and pharmaceutical. Carlson Marketing is truly global with a presence in North America, Europe, Asia Pacific and the Middle East, and over the last 18 months, has successfully positioned itself for growth.

"This acquisition is a logical extension for our company, as we diversify our business model to include a broader range of services within the loyalty management space in the US and internationally," said Rupert Duchesne, President and CEO of Groupe Aeroplan. "Acquiring a proven leader in the loyalty marketing space is the most cost effective and timeliest route to broadening our loyalty services offering. Carlson Marketing is widely recognized for their innovative thinking when it comes to understanding consumer behaviour, rewards and data analytics, areas that are pivotal to driving future growth in the global loyalty arena."

Groupe Aeroplan's businesses and Carlson Marketing will continue to operate separately and independently. Carlson Marketing's experienced and well-respected management team, led by President and CEO Jeff Balagna, will continue to run the operations. The two companies, with solid leadership and highly capable workforces, will benefit from leveraging intellectual capital across the entire corporation.

"This transaction is good news for the employees and customers of Carlson Marketing and a great opportunity for Groupe Aeroplan," declared Carlson President and CEO Hubert Joly. "It also frees up resources for Carlson that the company can deploy to accelerate the growth of its hotel, restaurant, and travel businesses at a time when significant opportunities exist in these markets."

"We look forward to joining forces with Groupe Aeroplan and significantly strengthening the scope of our loyalty marketing, program management, and engagement and event offering for customers, employees and distribution channels,” stated Jeff Balagna. "Together we become the world's leading loyalty management provider, able to offer a vastly-expanded network of loyalty marketing capabilities.”

"This acquisition makes good business sense," said Chief Financial Officer of Groupe Aeroplan, David Adams. "It will be immediately accretive to adjusted net earnings and free cash flow per share as Carlson Marketing is expected to generate positive free cash flow. In addition to substantially diversifying our revenue base, we will grow our consolidated top line by approximately 45% to over Cdn$2 billion. Through careful evaluation, we have concluded that this transaction truly represents a superior use of capital - even when excluding any potential synergies and including one-time transition costs related primarily to technology and infrastructure."

The Corporation will deploy a dedicated team, supported by external advisors, to pursue all forms of synergies and to identify potential collaborative initiatives to be rolled out over a period of 12 months.

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About Groupe Aeroplan
Groupe Aeroplan Inc. is a leading international loyalty management corporation. Groupe Aeroplan owns Aeroplan, Canada's premier loyalty program and Nectar, the United Kingdom's leading coalition loyalty program. In the Gulf Region, Groupe Aeroplan owns 60 per cent of Rewards Management Middle East, the operator of Air Miles programs in the United Arab Emirates, Qatar and Bahrain. Groupe Aeroplan also operates LMG Insight & Communication, a customer-driven insight and data analytics business offering international services to retailers and their suppliers. For more information about Groupe Aeroplan, please visit www.groupeaeroplan.com.

About Carlson Companies, Inc.
Carlson is a global hotel, restaurant and travel company headquartered in Minneapolis, Minnesota. Carlson brands and services include: Regent Hotels & Resorts®, Radisson Hotels & Resorts®, Park Plaza Hotels & Resorts, Country Inns & Suites By Carlson, Park Inn® hotels, T.G.I. Friday’s® and Pick Up Stix® restaurants, and Carlson Wagonlit Travel®. Carlson brands and services employ more about 150,000 people in more than 150 countries. For more information about Carlson, please visit www.carlson.com.

About Carlson Marketing
Carlson Marketing is the world’s leading relationship building company. Carlson Marketing designs and delivers loyalty, engagement and event programs for some of the world’s best known brands. Carlson Marketing’s two global service offerings – Brand Loyalty and Engagement & Events– are supported by six core capabilities: Strategy & Brand Planning; Creative and Communications; Decision Sciences; Award Services; Technology Services and Customer Service. Headquartered in Minneapolis, MN, Carlson Marketing has large regional offices in Toronto, London and Sydney. For more information about Carlson Marketing, please visit www.carlsonmarketing.com

Caution Concerning Forward-Looking Statements
This news release contains forward-looking statements. Such statements may involve but are not limited to comments with respect to Groupe Aeroplan's and Carlson Marketing's strategies, expectations, planned operations, future actions, anticipated financial performance and business prospects. Forward-looking statements, by their nature, are based on assumptions and are subject to important risks and uncertainties. Any forecasts or forward-looking predictions or statements cannot be relied upon due to, amongst other things, changing external events and general uncertainties of the business and its corporate structure. Results indicated in forward-looking statements may differ materially from actual results for a number of reasons, including without limitation, risks related to the business and the industry, Air Canada liquidity issues, dependency on top four commercial partners that purchase loyalty marketing services, including Aeroplan Miles, Air Canada or travel industry disruptions, airlines industry changes and increased airline costs, reduction in activity, usage and accumulation of Aeroplan Miles, retail market/economic downturn, greater than expected redemptions for rewards, industry competition, supply and capacity costs, unfunded future redemption costs, failure to safeguard databases and consumer privacy, consumer privacy legislation, changes to the Aeroplan and Nectar Programs, seasonal nature of the business, other factors and prior performance, regulatory matters, VAT appeal, reliance on key personnel, labour relations and pension liability, technological disruptions and inability to use third party software, failure to protect intellectual property rights, currency fluctuations, interest rate and currency fluctuations, leverage and restrictive covenants in current and future indebtedness, dilution of the Corporation's shareholders, uncertainty of dividend payments, level of indebtedness-refinancing risk, managing growth, as well as the other factors identified throughout the Management Discussion & Analysis on file with the Canadian Securities regulatory authorities. Material factors and assumptions that were applied in drawing a conclusion or making a projection or forecast are also set out throughout this document. We believe that the expectations represented by our forward-looking statements are reasonable, yet there can be no assurance that such expectations will prove to be correct. The purpose of the forward-looking statements is to provide the reader with a description of management’s expectations regarding the matters described in this news release and may not be appropriate for other purposes. The forward-looking statements contained in this discussion represent the Corporation’s expectations as of November 3, 2009, and are subject to change after such date. However, the Corporation disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required under applicable securities regulations.

Media Contacts:
Groupe Aeroplan:	Michèle Meier	514-205-7028	michele.meier@aeroplan.com
	JoAnne Hayes	416-352-3706	joanne.hayes@aeroplan.com
Carlson Marketing:	Mike Kust	763-212-1797	mkust@carlson.com
Carlson Companies Inc.:	Sam Macalus	763-212-2477	smacalus@carlson.com
Investor Contact:
Groupe Aeroplan:	Trish Moran	416-352-3728	trish.moran@aeroplan.com