Vitality is coming to New Zealand – look (actually be) busy

AIA New Zealand is set to launch the Vitality rewards program in New Zealand in 2019.  It’s kind of a big deal on two counts:

  • For customers – it’s a very rich offering relative to other rewards and loyalty programs in this market (up to 50% of flights and $680 in shopping vouchers annually in the Australian offering) .
  • For AIA – they lower their risk and claims rate because healthy customers self select in and apparently – they grow their customer base at around 20% per year while the market (and their competitors) grow at about 2%.

It’s a win for the customer

  • What is it: a rewards program offered on your insurance products (life and health typically) by AIA.  AIA offer the same in Australia.
  • What do you have to do: two things:
    • Know your health:  Get things like cholesterol and risk of heart attack checked.
    • Improve your health:  Get fitter, get healthier, fix anything that needs fixing (like cholesterol).
  • What do you get:  two things:
    1. discounted life and health insurance and
    2. discounts on healthy purchases like vegetables, flights (up to 50% off) and movies.  This is the big deal and AIA New Zealand is already tied up with Airpoints (so if you had to guess which flights are discounted – it would likely be those)

Importantly, what you the customer receives is tiered. Points are awarded for key behaviours. While the published flight benefit is up to 50% cash back on your Virgin Australia booking (Platinum tier) there’s still a 10% benefit at the base Bronze level.

It’s a win for the insurer (and proven in sophisticated markets)

Vitality operates in 19 countries (including the UK and the USA) with 11 million customers. That’s not a lot of customers for that many countries but it is the best customers in each of those countries (least likely to get sick, die early, claim a lot) because they’re healthy.

It was invented in South Africa in 1997 by Discovery Health and has spread (generally licensed to insurers but also acquisitions) around the world and across insurance products.

Source

The core premise (see above) :

  1. More sales – the licenced insurer using Vitality grows (a lot) faster than the market (in Life Insurance growth of 20%-30% and in Motor Insurance 6 times the rate of the market).
  2. To better customers – customers who join are already better risks (in health they have 28% lower hospital costs).
  3. Who work the program to their advantage and further reduce their cost to the insurer (those who run twice a week have 15% lower costs).
  4. And who stay customers longer (lapse rates are 15% to 60% better).

What it might look like in New Zealand – small at first

Nothing’s been published so nothing’s in the public domain yet. AIA New Zealand are recruiting their team and some have Vitality in their title already.

Customer base

Using a size for size comparison of UK, Australia and South Africa (leaving the USA) suggests a customer base of 130,000 New Zealanders (2.7% of the population). That’s not a lot to negotiate partners for. However AIA’s not asking the partners to fully fund all the airline discounts and shopping benefits (they will out of savings from lower claims).

Airline

AIA Australia has historically had Qantas and now works with Virgin Australia. AIA is an Air New Zealand Airpoints partner already and that may have been a smart pre-emptive move on their part. Assumption – it’s Air New Zealand unless Virgin Australia has tied it up as part of the Australian deal.

Retailers, Gyms and Movies

Australia : Myer, Woolworths, Rebel and Dymocks partner with Vitality Australia. In the past My Food Bag was a partner offering a 15% discount (smart because acquisition and retention costs in grocery subscription is expensive and unsustainable) . Hoyts is the Australian movies partner. There’s a variety of national gym chains included.

New Zealand : if the existing Australian partners see the benefit of their partnering with Vitality in Australia it’s likely they’d replicate that in New Zealand lowering AIA New Zealand’s administrative burden. Woolworths, Rebel and Hoyts would be included as would Anytime Fitness.

Small at first but potentially big in future

Vitality as a program recruits and retains the best customers in the market. They are more likely to join the program, more likely to become better customers while they’re on it and more likely to stay customers for longer : everything a good loyalty program should deliver.

Discovery launched with health insurance in South Africa in 1997. Last year Discovery launched a bank in South Africa. The bank rewards customers for addressing 5 behaviours that reduces the customers risk of not being able to meet their financial obligations.

AIA may start with health or life insurance but it’s when they or Vitality branch out into other insurance categories and the wider financial services market that it’ll be really significant.

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Apple Pay – not (yet) that cool for those of us in Asia

Apple Pay seems to have kick started a furious debate about NFC, mobile and wallets but I don’t think Apple Pay’s as cool as expected.

For context – Apple Pay is only in the USA (China to follow) which as a market is yet to really adopt chip and pin and hence Paywave and Paypass type NFC cards.  This contributes in part to to their cards having about half the globe’s fraudulent transactions.  It’s also contributes to their retailers ongoing security breaches – think Target.

Asia Pacific is way ahead of this with most of the card issuing now EMV complaint and much of the contact-less terminal work rolling out.  In fact banks in this part of the world such as CBA, Westpac and ASB have all established innovation labs to ensure they stay out in front of Apple et al and they’re inviting anyone in.

In the USA Apple Pay and the Apple Way could set the standard for mobile payments but it seems Apple Pay faces three problems in other parts of the world:

  • It’ll struggle to scale
  • It doesn’t offer much to merchants
  • And most strange of all in the age of customer data (maybe this comes in the next release)  –  it doesn’t leverage customer data 

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.

Smartfuel innovation inside the AA Rewards coalition scheme

AA Rewards – New Zealand’s number two coalition loyalty program behind Fly Buys – has struck a partnership deal with innovative loyalty start up Smartfuel. The deal means that AA Rewards points will disappear and the currency and rewards in the AA program will become accumulating fuel discounts.  AA Rewards members (and non-Members – see below) will now accumulate cents/litre discounts at AA Reward’s participating retailers.  For instance a member might earn 3c/l at TelstraClear, 4c/l at Hammer Hardware and 10c/l at Take Note during the course of a week. This accumulates to a 17c/l discount when the member next fills up at BP or Caltex.
Non-members earn too
We first met Smartfuel early last year when they were building out a pilot of their program in Palmerston North.  The program launched on Monday of this week.  I spoke to Smartfuel’s GM Ian Sutcliffe yesterday.  He said that not only was the current AA Rewards base going to benefit from this deal but those not paying an annual AA membership would also benefit (though at a lower rate).   This gives anyone the opportunity to participate.    
Ian Sutcliffe of Smartfuel 
Picture rights : MURRAY WILSON/Fairfax NZ

Richness, relevance
We know that members in the loyalty programs we operate improve their participation in the program in direct proportion to the increase in:
  1. The richness of the rewards being offered  – the more you give back the more they’ll spend with you, longer they’ll stay a customer and more they’ll recommend you
  2. The relevance of those rewards  – the closer the rewards on offer are aligned with what they want, the harder they’ll work to attain them.

Also – you have to have a match of both richness and relevance (one without the other will fail).  One criticism that’s been leveled at Smartfuel is that the rewards are only fuel discounts and therefore will struggle on the relevance continuum.  That’s possibly true but remember New Zealand has one of the highest rates of car ownership in the world so most people need to buy fuel regularly.  Looking at richness, Smartfuel seems to be offering more in some areas (not necessarily all) than comparable schemes.  For instance a WOF transaction at AA earns the member 30c/l discount.  With fuel at over $2.00, 30c/l off a $50 WOF is about a 30% discount.  Most retail programs offer less than 5% so this is pretty healthy.

Judging whether Smartfuel is rich enough or relevant enough may be missing the point though.  Their addition to AA Rewards program is a catalyst that makes the AA Rewards program far more valuable to their existing members and their existing retailers.
Education of the customer base
One of the big issues that Smartfuel is addressing is the education of customers into the accumulating portion of the program. Kiwis are used to collecting cents/litre offers from their supermarkets but not in rolling them together over 3 or 4 grocery visits into a single larger discount for their next petrol purchase.

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.”

We have re-branded as Aimia – Inspiring Loyalty

On Thursday the 6th October 2011 Carlson Marketing changed it’s named globally to Aimia.

Carlson Marketing has been operating in New Zealand for over 30 years and we’re trusted by some of the country’s largest companies and brands to manage their customer, staff or channel loyalty programmes.  There are 1.5 million Kiwis in the the loyalty programmes we manage in New Zealand.

In 2009 we were acquired globally by Canadian based Groupe Aeroplan (GA) – a global loyalty programme powerhouse.  GA had already acquired the equivalents of New Zealand’s Fly Buys coalition programme in Nectar (UK), Air Miles (Middle East) and Aeroplan (Canada).  They also owned one of the UK’s leading loyalty and retail analytics companies in Loyalty Management Group.

We’ve spent the last 2 years integrating with our sister companies in the GA fold.  GA have expanded further around the globe with Nectar launching in Chile and Italy and investments in Club Premier (Aeroxexico’s Frequent Flyer Programme) and Cardlytics (the USA’s leading card transaction based marketing company).  They have also won the leading Australian supermarket Coles as a customer for loyalty analytics services.

Today we are Aimia.  Our new name cements the integration of our businesses into a global loyalty marketing leader.  Aimia is modern and distinctive and resonates in many languages.

  • There is dialogue and movement within the name itself. The creation of Aimia was inspired by palindromes – words that read the same backwards and forwards, as they give the sense of two way conversation, a clear reflection of our approach to delivering value to our customers and consumers.
  • It alludes to pinpoint precision – where two aims cross over. Whether it’s the sweet spot where the needs of clients and the wants of consumers overlap or the insight garnered from two different vantage points.
  • It is inspired from the word ‘aim’: highlighting focus and precision, describing our expertise in targeting the right consumers with the right messages.  It is also from the French words ‘aimer’ or ‘ami’ emphasizing the importance of partnership and relationships and denoting a friendly tone and approach.
  • The symmetry of Aimia mirrors the balance and partnership that sits at its core. A crosshair of aims, a meeting of minds. We see relationships differently.
We have over 3,700 Aimia colleagues in 20 countries around the world of which approximately:
  • 1,885 are in Canada
  • 850 are in the US
  • 650 are in the Europe, Middle East and Africa region as well as in South America
  • 475 are in the Asia-Pacific region

In New Zealand we are the same team with the some commitment to our client’s success.  We will be transitioning over to Aimia during the remainder of this year.

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.” 

Socialnomics Revolution 3

Erik Qualman yesterday updated the Social Media Revolution YouTube video which, once again, reiterates the growth of social media in the world.

What does this mean for Loyalty Programmes? It means serious adaptation is required to ensure the customer remains engaged.

The Ford Explorer Facebook launch, which generated more traffic than a Super Bowl advert, reiterates the opportunity for engaging with customers utilising alternative media channels. This combined with the 80 million Farmville Farmers across the world, reiterates the untapped Gamification opportunity.

What Gamification shows us, is not just a new way to encourage consumers to shop with you, but the importance of how those consumers engage with you outside the bricks and mortar. With 90% of consumers trusting peer recommendations versus 14% trusting advertising, marketing investment needs to be focused on encouraging consumers to share their positive experiences and to reward them for doing so. Because your customers are talking about you, whether or not you have a dedicated Facebook page, Twitter or YouTube account. So you can either leave it to chance, or, like Starbucks with their MyStarbucksIdea.com, you can get involved with your consumers to help grow your business

“Prehaps sizes could be in, you know, English?”

Bob Pearson, Dell’s VP of Communities and Conversations says it all – “Is it better to listen to tens of thousands of customers’ vote on ideas, discuss them and participate with them over a period of a couple of months, or get 10 customers in a room, feed them sandwiches and listen to them behind smoked glass?”

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.