W W W . C O L L O Q U Y . C O M

FEBRUARY 2017

ASIA PACIFIC REPORT

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C O N N E C T I N G C O N S U M E R S A C R O S S B O R D E R S , C U R R E N C I E S Gabi Kool, CEO, PINS

I T ’ S T I M E F O R A C - L E V E L R E T H I N K O F L OYA LT Y I N A S I A PA C I F I C Dominic Powers, investor, adviser and connector for marketing and consumer- focused startups

G R O C E RY C A M PA I G N I N C H I N A F E E D S S H O P P E R S ’ E X C I T E M E N T Richard Petignaud, general manager, North Asia, BrandLoyalty

T H E J O U R N E Y F R O M P R I C E TO VA L U E , F R O M P R O S P E C T S TO C U S TO M E R S Caroline Papadatos, senior vice president, LoyaltyOne Global Solutions

W H AT ’ S T R E N D I N G N OW A N D W H AT T H E F U T U R E C O U L D H O L D F O R L OYA LT Y I N I N D I A Vikas Chandak, head of partnerships, alliances and strategic businesses, JetPrivilege Private Ltd.

E D I TO R ’ S L E T T E R A N e w L o o k a t G l o b a l L oy a l t y Caroline Papadatos, senior vice president, LoyaltyOne Global Solutions

I N A U S T R A L I A , BA N K S O F T E N F O R G E T T H E C U S TO M E R S I N FAV O R O F T H E C A S H Damon Pal, sales director, Australia and New Zealand, Epsilon

C L I C K T H E Q O N A N Y P A G E T O R E T U R N T O T H E TA B L E O F C O N T E N T S .

I N T H I SREPORT

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I’m a long-haul flyer, spending most of my days meeting retailers and loyalty leaders across multiple time zones. LoyaltyOne operates

in more than 50 countries worldwide, and my grueling travel schedule gives me a unique lens on global changes to customer attitudes, payments, fintech, data, shopping, experience and technology that could transform customer management. I’ve been astonished by the groundbreaking loyalty innovations in Asia and Australia, and I believe some of those innovations are setting the stage for the next generation of global customer management.

Think the sun only rises and sets in North America? Think again. While there is a general perception that retail sophistication and customer-centricity are more advanced in mature consumer markets where competition is high and margins are razor-thin, it might be time to take a second look. Innovation is fueled by changing competitive

forces, regulatory pressures, consumer attitudes, digital platforms, technology adoption and unsettling social conditions. With the majority of the world’s youth population growing up in Asia with smartphones in hand, disruptive change is moving at lightning speed in the East, with few of the legacy constraints that slow growth in mature markets.

In 2002 in Australia, the Reserve Bank mandated a drop in interchange rates charged on credit cards. It was the shot heard around the world by every loyalty leader and bank credit card issuer! Since the launch of the Diners Club card in the

Think the sun only rises and sets in North America? Think again.

E D I T O R ’ S L E T T E R

Caroline Papadatos

In Asia and Australia, change is constant — in competitive forces, consumer attitudes, technology, regulations and social conditions. This creates a loyalty landscape that is innovative and always interesting.

GLOBAL LOYALTYA NEW LOOK AT

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1980s, interchange had funded a significant portion of bank loyalty and frequent flyer program reve-nues. Roll forward to May 2016, when interchange fees in Australia were halved again! Now issuers all over the world are watching to see how Qantas, Virgin Australia and the big four Australian banks will rethink cardholder loyalty. (Read our article on page 6 by Damon Pal, from Epsilon Australia, on bank strategies in Australia.)

Let’s move to India, the world’s largest consumer market, where loyalty is a relatively nascent strategy. With retail competition just heating up to capture the attention of the 200 million-strong emerging mid-dle class by 2020, how will Indian loyalty leaders deliver value to consumers with smaller baskets and a reduced funding base? India is rapidly becoming a data, technology and digital hub. Vikas Chandak gives us a window into market shifts — including the rise of program commoditization and increasing complexity as programs interact in new models — and shares his predictions on the future of loyalty on page 9.

In Hong Kong, we upgrade to business class with Dominic Powers, who brings his unique perspective to the chase for top-tier spending from frequent flyers. When Cathay Pacific’s Marco Polo program reallocates reward value to the most profitable customer segments, how can it create differentiated customer experiences and financial benefits for the base of occasional travelers? Read Powers’ perspective on page 19.

Japan and Turkey are different stories altogether, and PINS is breaking new ground in bringing tradi-tional loyalty practices to non-traditional arenas like media, healthcare, insurance and highways. Consumers are being rewarded for all manner of beneficial behaviors, and loyalty-program metrics are

Editor’s Letter

being recalibrated to measure unexpected social and economic benefits. Increasingly, we’re also see-ing the focus of loyalty programs shifting to fungible currencies that can be easily collected, converted and redeemed for branded experiences and travel that are both attainable and relevant.

Finally, in the world’s biggest loyalty market, we are witnessing the highs and lows of the digital push. While the number, scale and sophistication of cus-tomer programs is intensifying in China, the customer is still largely disengaged. In fact, member devotion to the WeChat message platform is perhaps the greatest demonstration of brand loyalty in the market, followed closely by one or two payment platforms that have captured consumer attention. The consumer is rapidly becoming attuned to disloyalty

and behaves with the constant expectation of deals and discount offers. With the explosion of e-commerce growth, offline retailers are fighting hard to maintain market share and retain their base of loyal customers. BrandLoyalty gives us a stunning example of how local grocers are fighting back, using digital means to deliver tangible value to customers and lifting sales by more than 4%. See these stories on pages 14 and 22.

As West meets East, I invite you to take a second look at global loyalty through the lens of local operators and practitioners. We know full well that innovation in customer management in mature retail markets will not come from further incrementalism, so as Tom Peters would say, “Swipe from the best, then adapt.” ‹

Caroline Papadatos is senior vice president of LoyaltyOne Global Solutions. She can be reached at cpapadatos@loyalty.com.

Editor’s Letter

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To generate better loyalty, they must embrace a top-to-bottom commitment to better experiences.

Damon Pal

Banks Often Forget the Customers in Favor of the Cash

Take the money and run: That seems to be the customer relationship principle for many banks in Australia. It has been my experience that the retail banks in the Australia/New Zealand region have spent very little effort getting to know their clients.

But that is likely about to change thanks to several market forces — users’ evolving demands, the maturation of digital services and, perhaps most importantly, the coming cap on interchange

fees — that will open up a world of customer-ex-perience opportunities. Beginning in July 2017, new government regulations will limit the fees charged to businesses to process credit card payments, including on high-end rewards cards.

Perhaps it isn’t entirely banks’ fault that they don’t know their clients well, as most of them probably spend the majority of their time dealing with the perception that the four big banks in Australia (NAB, Westpac, Commonwealth Bank and ANZ)

already have a stranglehold on customers. As a result, the need to nurture loyalty and enhance the experience have not been seen as critical. Instead, banks spend more energy being reactive, addressing complaints about inadequate advice and disproportionately high interest rates.

Meanwhile, news about aggravation with over-drafts or call-center issues surfaces with depressing regularity, and resentment runs high. It is not surprising to see that, as a general sentiment,

IN AUSTRALIA

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trust in banks is low. Along with the coming impact of lower interchange rates on loyalty programs, there is a general feeling that banks pile on for a bad customer experience.

One of the most important changes I expect to see in the Australian bank-ing loyalty space is a deep emphasis on creating a great customer expe-rience. Banks will need to focus on solutions that are simple yet satisfying and help put users in control, testing and adapting over time to be in tune with consumer priorities. The cus-tomer life cycle, from the nurturing process to purchase, is tantamount to developing this deeper loyalty, and I look to see more focus on a single view of the customer along with CRM programs that target specific user groups. These will be driven by the use of analytics and, more importantly, insights.

In recent years, with the help of new technologies, consumers have more choices as to which companies they want to buy from and how they want to interact with brands. Many banks have started to recognize that pro-viding a good experience is good for their business. In fact, that can not only get them higher satisfaction scores on the annual Net Promoter Score survey and shareholder value externally; it can also make banks more profitable in the long run.

One way banks have begun to look to enhance experience, and will need to do more of, is by developing a 360-degree view of their customers. With insights from this holistic view, banks can better engage people with relevant messages and targeted offers. This allows a good experience

Banks will need to focus on

solutions that are simple yet satisfying and help put users

in control.

Australia

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to blossom and motivate loyalty. Such a 360- degree view improves the quality and satis-faction of each interaction and maximizes the profitability of each relationship. It turns the retail interaction between a bank and a consumer from an adversarial encounter to a win-win situation.

These types of customer-centric programs do not happen overnight; there certainly isn’t any magic bullet or wand that companies can use to produce loyal customers. Good experiences happen when there is a comprehensive market-ing strategy that works hand in hand with tech-nology programs, and the entire organization, from top to bottom, buys into the cause.

In addition, customer experience practices must always be evolving with consumers’ needs and

behaviors. Engaging from all touch points via an omnichannel approach is key. Customer experience must be aligned in the different channels, including research, before a person opens an account, as well as at the bank, online, on the mobile app, in social media and during phone conversations with customer service representatives.

Some observers suggest that the coming cap on interchange fees could be devastating to the way banks and financial institutions operate in the market. But I believe it is generally good for the consumer, forcing issuers to be more competi-tive and better use customer experience, agency services and technology platforms. In a Darwin-ian twist, they’ll have to determine how much they rely on homegrown programs and third

parties to innovate and help drive loyalty back to their brands.

Banks must get better at using data insights for contextual relevancy during interactions over time. They must provide a great customer experi-ence that is simple, rewarding, affordable, satis-fying and available to all users. In fact, all of us in the industry — the agencies, technology platform providers, system integrators and analytics/in-sights providers — are challenged to achieve this for all users. Only then will customer satisfaction rise — along with their loyalty to their bank. ‹

Good experiences happen when there is a comprehensive marketing strategy that works hand in hand with technology programs,

and the entire organization, from top to bottom, buys into the cause.

Damon Pal is sales director, Australia and New Zealand, for Epsilon. He can be reached at damon.pal@epsilon.com.

Australia

Vikas Chandak

Working together is vital — through mini-coalitions, partnerships and shared technology. And data is still king.

WHAT THE FUTURE COULD HOLD FOR LOYALTY IN INDIA

Loyalty programs provide an information advantage to brands and therefore thrive in mature oligopolistic markets. As more information becomes available and players consolidate, loyalty programs proliferate. However, the traditionally simplistic program is quickly evolving into some-thing more interactive, collaborative, insightful and tech-savvy.

As the Indian loyalty market gets ready to adapt to the next wave of change, it’s an apt time to take a look at the trends shaping it.

WHAT’S TRENDING NOW AND

The traditionally simplistic program is quickly evolving.

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Current trendsThe move away from plastic Moving on from tangible membership tokens, mobile numbers (and sometimes email IDs) are fast becoming norms as member IDs. This means easier identification at the till and higher tagging rates on in-store transactions (cards being infa-mously absent in wallets) as well as cost savings. Programs like Payback and most newly launched retail programs are good examples.

Embracing shared technology Mobile apps have become commonplace, re-placing the “so many cards” problem with a “so many apps” one. Tech suppliers are looking to offer white-label solutions with integrated (across multiple programs) back-end engines, and with currency exchange and clearinghouse services for various programs. Programs battle with the role the app must play (beyond self-service) in member engagement and with the amount of information that should be made available to tech-service providers. easyrewardz and Loylty Rewardz are examples of shared technology with integrated back ends.

Currency partnerships and multi-motivator plays Brands have grown wiser to the attainability problem for low purchase frequency, small ticket size and small-margin categories. CFOs have acknowledged that they cannot or do not want to fund the entire liability or manage the end-to-end engagement on their own. Currencies (unless they come from an extremely strong brand ego or program strength) have become friendlier and more fungible. Programs have adopted the partnerships and multi-motivator route as a recourse. It is therefore not uncommon to see cross-redemptions or crossover rewards,

sometimes known as points conversion, extend-ed among loyalty programs. While this has the potential to undermine a currency, the customer value proposition will become more flexible and offers an opportunity for a natural balance (in liability trading) to set in once the winning cur-rencies are identified and equitably leveraged.

Closed-group mini-coalitions India is a country with large corporate houses, of-ten diversified in their business interests. As most brands and services start to meet hygiene expec- tations, groups have started acknowledging the importance of their customers spread across multiple business units and are keen to bring them onto the same platform to cross-leverage retained and happy ones. This has resulted in multiple group-level programs sprouting up, acting as mini-coalitions and looking to generate value for the group. Some of those include Reliance One — Reliance Retail; Future Group’s Loyalty and Analytics business unit; Tata One — from Tata Insights and Quants; and Shoppers Stops’ attempt to bring the various loyalty programs together.

India

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Commoditized currencies An increasing number of retailers are launching loyalty programs on the back of a good tech deal and a need to collect data, but quantity does not imply quality. There is a real risk that most of these “me-too” versions of currencies will have very little to differentiate themselves.

Changing program economics With the above changes — a move away from plastics, shared and pay-as-you-go tech, multi-motivator, crossover rewards and partnerships or group-level programs — there is an inevitable shift in loyalty-program economics. The breakage versus redemption conversation is being impacted for the smallest of currencies, and there will eventually be a natural transfer of value from the weaker to the stronger currencies. Brands that can see this happening should adopt a more deliberate approach to facilitate this value transfer and seek stra-tegic advantages through relevant partnerships with such stronger currencies.

Data is still the king; relevance is the enforcer Relevant value proposition with relevant marketing has been the holy grail of loyalty programs since conception. There is no perceptible shift in this, and data collection, insights and analytics continue to be selling points for loyalty programs in India.

India

Data collection, insights and analytics continue to be

selling points for loyalty programs in India.

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Possible future trendsNew entrants As data and data mining become important to all businesses for customer acquisition, interaction and policies, newer industries are looking at different forms of loyalty to collect and analyze relevant data. Companies in healthcare (Max Bupa), insurance, entertainment (PVR, BookMyShow) and more are dabbling with dif-ferent forms of customer-interaction data.

Real-time interaction Data analytics has been limited by the ability to do something with the output it provides. As technology enables more real-time interactions, loyalty programs will likely employ real-time offers and triggers for customers based on transactions and behavior through multiple channels and me-diums. Those include app notifications, real-time alerts, near-field communication, device recogni-tion and more. Examples of those exploring new technologies include Capillary and Pine Labs, among others.

The wallet story This is one story that could fundamentally disrupt the way the industry works. Wallets are integral to any virtual currency, and loyalty programs have long acted as stored-value closed wallets for their members. With enabling technology, wallets are quickly becoming a solution to achieve fungibility, acceleration and easy currency utilization. Expect wallets to play a large role in changing loyalty-program dynamics and user experiences. We’re already seeing examples of MobiKwik and Citrus playing with loyalty currencies.

The social story Currencies that are successful in the intimate social network space will find a higher-than- average longevity of member affiliation and much stronger ROI for marketing efforts. But stepping into this volatile media requires boldness and a surrendering approach, which has proved difficult for many a strong brand. We are bound to see a few gamification attempts at breaking into this space.

India

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Member management As loyalty programs proliferate, so do membership accounts. We will see some interesting plays in this area with aggregators attempting to secure a preference with the largest member sets. Given the exchange of informa-tion this will enable, this will present both an opportunity and a threat for programs.

Distributed ledger story There are murmurs of block-chain technology finding commercially viable use cases, which has the potential to disrupt this space entirely. A virtual cur-rency ecosystem could benefit immensely from such a technology, but will each program find relevant economic use cases and bite the bullet?

Regulations There will be growing attention from the regulators as large corporate houses run separate firms to manage their group programs; currencies start playing with wallets; and data analytics and relevant real-time interactions become more frequent and conflict with privacy norms. The regulatory at-tention will impact how loyalty operators design, run and account for their programs.

Change is afoot, with multiple forces acting on a traditionally passive indus-try. I urge each of you to look afresh at the loyalty industry, its contours and possible interplays and frame your own opinion of how you see it evolving. Should you find something interesting or want to discuss any of the above further, please get in touch. ‹

India

Vikas Chandak is head of partnerships, alliances and strategic businesses for JetPrivilege Private Ltd. He can be reached at vikaschandak@outlook.com and vikas.chandak@jetprivilege.com.

Richard Petignaud

A multifaceted program with Jiajiayue Group delivered major returns for the grocer, shoppers, suppliers and BrandLoyalty, which saw its best-performing digital program in the region.

Feeds Shoppers’ ExcitementGROCERY CAMPAIGN IN CHINA

BrandLoyalty recently worked with Jiajiayue Group to create a rewards campaign in China that built tremendous excitement among shop-pers and helped the supermarket giant increase sales and share of wallet, attract new customers and give consumers an enhanced experience.

For BrandLoyalty, the Jiajiayue (JJY) engagement was our best-performing digital program to date in the region. It was an opportunity to deepen our relationship with the grocer, help it exceed its goals and learn some lessons that will inform both parties going forward.

Gunawan Efendi, chief operating officer of Jiaji-ayue Group, said the campaign really delivered for the company and its customers.

“This program is something new in China, and we wanted to be the first — because we can learn

something that people have not yet learned,” Efendi said. “We always try to engage our customers, to make shopping easy, and they are finding something happy and fun with this program.”

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Deployed in 560 stores with average sales of 182 million RMB (approximately 27 million euros) per week, the campaign was straightforward: Shop-pers downloaded the Bright Stamps app, spent money with JJY, collected bonus stamps and redeemed them for goods. While we made sure it was simple from the consumer’s end, it was a complex campaign that racked up some pretty staggering results.

Among them: More than 350,000 cookware rewards were redeemed. Sales increased 4.2%, in contrast to an overall drop in grocery retail in the market. And shoppers increased their spend-ing 48% over the same period the previous year, while their basket size increased 10% over the previous year.

Digital results for the campaign were even more impressive: A whopping 183,700 people downloaded and used the app, and there was a 32% digital redemption versus the 16% current program average. Spending by app users was 23.2% higher than that by paper redeemers. Im-portantly, redemption increased 5% in response to daily push messaging, and 31% of push mes-sages resulted in shoppers opening the app.

This campaign was multipronged and involved four targeted efforts: among the JJY staff; in stores; on mobile and digital; and with consumer packaged goods brands. Here are just a few highlights of how the campaign worked.

Jiajiayue staff:• Targeted training was provided to managers at district headquarters.

• All JJY employees downloaded the app in ad-vance of the launch.

• To build excitement, we created an app down-load contest. The store at which the most shop-pers downloaded the app won 50,000 RMB.

In stores:• Cooking demonstrations with local chefs were held at eight flagship stores in the first two week-ends.

• In-store radio broadcasts ran during the first three weeks. In-store video screens played mov-ies explaining how to activate, promoting pro-gram value and more.

• A variety of promotional banners and collateral were displayed at key points throughout stores. For the first four weeks of the campaign, 80% of all store point-of-sale information focused on the campaign, with 60% including supplier collabo-ration events.

China

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Mobile and digital:• At a kickoff event to coincide with JJY’s 20-year anniversary, the top 10 shoppers were made ambassadors of the program, with tie-ins and promotion on social media like WeChat, Weibo and Tieba.

• We invested in in-store Wi-Fi to promote app download.

• We employed digital integration with the loyalty card.

• We introduced gamification to boost the campaign at its midway point, with extra stamps for shoppers. In fact, 2,500 participated in WeChat games, collecting 10,900 stamps.

• All digital collectors participated in a lottery in the later part of the campaign for prizes such as airline tickets and cookware.

CPG suppliers:• Branded in-store displays with supplier part-ners were placed in prominent locations.

• For two weeks, shoppers received double stamps for the purchase of partners’ products.

• One-to-one communication with the app promoted supplier partners’ latest offers.

• Twenty-eight partners were involved with 122 SKUs, and they saw an average sales lift of 20%.

The campaign was a huge success by every measure. Being honored with the “Most Inno-vative” award by the Jiayue Group at its annual supplier event was humbling evidence that when BrandLoyalty, grocers and shoppers work together, exciting things can happen. ‹

China

183,700 people downloaded and used the app

Richard Petignaud is general manager, North Asia, BrandLoyalty. He can be reached at Richard.Petignaud@Brandloyalty-int.com.

Latvia-based virtual currency PINS expands beyond its success in Europe, launching its strategy in Asia with new efforts in Japan and Turkey.

CONNECTING CONSUMERS ACROSS BORDERS, CURRENCIES

After seven years of growing success in Northern Europe, the newest destination for PINS is Asia, where the Latvia-based coalition loyalty program recently started projects in Japan, Turkey and Indonesia.

As an emerging cross-border financial technology solution that bridges countries and businesses through its virtual currency, PINS has gained many users in Europe in a relatively short time. Now the company is working with Tokyo MX

and Asia Business Support, establishing a joint venture to develop virtual-currency platforms in Asian markets. In August, PINS gathered partners from all over the world to Tokyo to exchange views on the market and the future of virtual cur-rency at the PINS Talks X JAPAN DRIVE event.

During a panel discussion, guest speakers joined me to share their views on mileage service world trends and other industry developments. Other guests included Baiba Zuzena, CEO of MTG, the

largest media group in Northern Europe; Alp Gurdil, CEO of Turkish Highway Public Corp.; Celerina Judisari, CEO of Indonesian media group MAHAKA; Nobu Shirota, general director of International Department of Tokyo MX TV; Shingo Okamura, President of Yokohama Stadium Co. Ltd.; and Shigeki Tanaka, producer of Asia Business Support.

As part of the PINS entry into the new markets, Tokyo MX filmed and produced a TV series to

Gabi Kool

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pique interest in Japan and its culture and people. It tells a love story about a young man from the Tohoku region and a young woman in Indonesia, and it created considerable interest in Japan.

The TV project also employs some of the hall-marks of the PINS loyalty philosophy. All the products and travel destinations featured in the series were commercialized, and consumers could purchase the products as well as travel experiences using PINS points. In addition, cus-tomer data garnered from this project can later be used to develop new products and services. Through these efforts, PINS aims to gather up to 1 million new users by the end of 2017.

Helping to drive Turkey highway project Another example of the inroads PINS is making in the region comes in the form of a campaign it’s involved in with the Turkish Highway Public

Corp., which hopes to decrease accidents on a major new highway under construction to con-nect Istanbul and Izmir. The company recently launched an experimental incentive effort using the PINS virtual currency as the service hub.

The smart-highway project will use both a point system and insurance services. It will provide maps and music services via a mobile app, as well as points to drivers who observe speed limits and demonstrate other safe driving habits. The points can be used for shopping and eating at restaurants along the highway route.

Insurance company incentives to encourage safe driving have been used in South Africa and Italy, decreasing the number of accidents on desig-nated roads by 30%, panelists at the PINS Tokyo event said, and Turkish Highway Public Corp. hopes to see similar results from the partnership with PINS in Turkey.

One of the hallmarks of the success of PINS in Europe has been its smart use of data, and this will be just as crucial as it expands in Asia. Its goal is to bridge different countries, communi-ties, cultures and businesses, such as aviation, retail, media, finance, sports, travel and more.

PINS is aiming for the incentives of a so-called information bank, the personal information trade that has been anticipated by the European Union. If we imagine that big data represents a person, the possibilities of this data usage will become limitless. ‹

Japan

If we imagine that big data represents a person, the possibilities of this data usage will become limitless.

Gabi Kool is CEO of PINS, a virtual currency in Latvia.

Rewards programs must be viewed as the potential revenue and business driver they are.

LOYALTY IN ASIA PACIFICIT’S TIME FOR A C-LEVEL RETHINK OF

Dominic Powers

I joined Cathay Pacific’s Marco Polo Club when it launched in 1999. After more than 10 years of Cathay speaking publicly about the need to reassess its loyalty program, the region’s largest carrier relaunched the club in April 2016. The reason? It was becoming apparent that its most loyal

members in the Diamond tier, and the two super-exclusive non-published invitational tiers above this, felt the value equation had shifted to leave them less valued — and less rewarded.

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Images © Cathay Pacific

A glance at any boarding gate for a Cathay flight was a clear barometer that change was needed: The courtesy queue for Marco Polo members was longer than that for economy!

The changes to the program have brought in much-demanded mid-tier rewards of guaranteed upgrades and supplementary cards for spouses at the Diamond tier. While there is still no imple-mentation of the lifetime recognition many North American airlines offer loyal customers who head off into retirement, Cathay now offers the ability to take sabbaticals and still retain status.

However, those in the lower tiers of Silver and Gold did not take the changes well at all. They now have to maintain a relationship financially weighted toward Cathay Pacific just to enjoy previously expected rewards of boarding and queuing privileges, along with upgrade avail-ability. It’s clear from social media that a number of regular but not necessarily frequent travelers are voting with their feet and wallets and giving their business to other carriers where airfares are significantly cheaper, even if the experience is not as memorable.

But perhaps that is the outcome Cathay was looking for. Why not attempt to drive more yield in challenging times from a passenger segment that would embrace these changes, while at the same time reducing the cost of servicing the lower, less-valuable tiers of the club purely through migration? The changes were ultimately about bringing a sparkle back to what is already a high-quality product that has no need to offer blatant financial incentives or rewards for the masses at a cost to the airline.

Asia Pacific

Consumers move away from the need for discounts and coupons and look for real, tailored loyalty experiences that differentiate them

because of their loyalty at those moments that matter.

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Status has always been held in high regard in Asia. As markets and economies mature and segments grow, consumers move away from the need for discounts and coupons and look for real, tailored loyalty experiences that differenti-ate them because of their loyalty at those mo-ments that matter.

Other carriers, such as Australia’s Qantas, contin-ue to operate their clubs much as they have for the last 15 years. Qantas undoubtedly has the best first-class lounge in the region, and possibly the world, at Sydney’s Kingsford Smith Airport, but it is falling short on some of the softer as-pects that could bring the sparkle back.

Exclusive event invitations are a mainstay of the top tiers in any airline loyalty program. On the surface, many would see this as a great perk, but as a former colleague and frequent Austra-lian-based traveler told me, “They know when I’m flying; they can see my itinerary weeks and months in advance. So why do they offer me access to exclusive events when I am 5,000 kilo-meters away or have only just landed? It’s clear they’re not thinking about me as an individual.”

That is a challenge for many programs, whether in retail, travel, luxury goods or entertainment. In the age of mobile connectivity, with terabytes of consumer data available to drive real-time interactions, brands fail to connect in a relevant and timely way, missing the critical moments that matter — moments that could drive real experi-ences, loyalty and dollars.

The biggest challenge to remedying this in Asia Pacific: Loyalty and reward programs are still seen by local C-level executives as a marketing cost center as opposed to a revenue and busi-ness driver. This often keeps funding levels and strategic importance low and provides marketers with very little room to prove their worth in driv-ing revenue. A real mind-set shift is needed, and many brands need to take the bold step Cathay did to rebalance the scales between consumer offerings and true loyalty.

And let’s be clear: Loyalty is fundamentally driven by a quality product and delivering on the brand promise. Far too many large brands still think it’s about discounts and offers and struggle to break through the communication

clutter as they compete for a share of the mobile wallet and consumer attention. In this region, the challenge is amplified further as we are not just one homogenous market and need to address language, market and cultural sensitivities.

So what’s needed to drive loyalty in Asia Pacific? Deliver a quality product and you’re a long way down the road to being successful. But don’t re-ward everyone for their different levels of loyalty in similar ways and at a similar time; it just cheap-ens the experience. Get the balance right, and you have almost 60% of the world’s population, in the world’s fastest-growing region, appreciat-ing the benefits true loyalty can bring and driv-ing your business growth. ‹

Asia Pacific

Dominic Powers is an investor, adviser and connec-tor for marketing and consumer-focused startups in the Asia Pacific region. Formerly the executive vice president and managing director for International at Epsilon based out of Hong Kong. He can be reached at me@dominicpowers.com.

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The customer paradox of China: There are so many customers for retailers to build market share and so many e-commerce players to build a marketplace that the focus has been on attracting customers rather than keeping them.

FROM PROSPECTS TO CUSTOMERSTHE JOURNEY FROM PRICE TO VALUE

Newly enabled digital experiences and constant deals and discounts are the order of the day, with exploding numbers of new shopping apps being released every week. The sheer volume of offers and personalized communications through WeChat cover up the fact that retailers really don’t know their own customers. Surprisingly, for all the talk of Big Data and AI, the use of custom-er information to drive customer basket lift, shop-ping visits and retention is very limited, and that is further evidenced by retailers’ loyalty results.

China is poised for a customer revolution. The energy, excitement and economic clout are palpable; the International Monetary Fund has deemed China the world’s largest economy in terms of purchasing power, and the disposable income of urban consumers is predicted to dou-ble by 2020 from 2010 levels.

While the market is ripe for success, the retail marketing focus may need to shift from platforms to people. Every retailer has a loyalty program, but they are targeted to new prospects and few

Caroline Papadatos

of them deliver on the promise of customer engagement. Consumers have become wise to the lack of value, and while sign-up rates are in line with retail norms, continued activation rates are shockingly low. But there is great potential to harness the power of customer data in ways that drive meaningful customer experiences.

LoyaltyOne conducted qualitative research in North and South China, as well as Shanghai, and quantitative research in 10 cities of varying sizes throughout China to understand the rich retail landscape and complex attitudes toward loyalty. In general, consumers were cynical about retail loyalty programs and generally favored bank programs over others. As compared to their Western counterparts, survey respondents were generally unconcerned about data collection. Also, in all 10 markets, consumers favored the idea of a coalition where they could accumulate value, achieve attainable rewards and get quality products.

China

Consumers favored the idea of a coalition where they could accumulate value, achieve attainable rewards and get quality products.

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China

To raise the bar on loyalty, retailers must heed several important considerations:

Enrolled, but not engaged. Loyalty programs are prevalent, and most consumers are members — but

that’s often where it ends. While two-thirds of consumers in China (66%) belong to a program and 25% belong to three or more, 10% have let those memberships lapse and program activity levels are very low. Customers enroll easily, but the financial value proposition is disappointing and few continue to participate. A smart model must provide a mix of discounts and rewards to engage them and build excitement, including promotional pricing, personalized rewards, VIP treatment, exclusive offers and more.

Don’t make it so difficult. Consumers consistently say they hate restrictive expiry policies and are

discouraged by low dividends — realities they encounter from most brands in the market, limit-ing their points-earning and restricting rewards

accessibility. In fact, dividends are consistently half those of other markets, well below 1% in high-frequency retail and financial services, and loyalty marketers need not kid themselves — consumers always notice this. As for unfavorable expiry rates, the issue gets right under consum-ers’ skin in China: Half of those surveyed by LoyaltyOne (47%) cited “program points that never expire” as a desired program feature.

What is this junk!? It doesn’t get more direct than what one rewards member told us: “I didn’t do all

this work to get a pair of Hello Kitty chopsticks!” Consumers frequently mention their frustration with the quality of rewards offered by loyalty programs in China; 35% told LoyaltyOne they want a wider choice. Rewards don’t have to come just in the form of prizes or merchandise: Consumers value perks such as event access, personalized experiences and exclusive privileges; 37% say they want to be recognized for being a best customer.

Go beyond points. The simple fact is that points have a stigma. Consumers strongly prefer dis-

counts, which are more tangible and immediate. Retailers have trained consumers to devalue points by overinvesting in discounts and under-investing in their own loyalty currencies. Loyalty operators that devalue their own programs — and reputations — in this way should not be surprised when the programs underperform.

Promiscuous, or just bored? Chinese consumers have been painted as indiscriminate discount-hunters who

show little allegiance to brands or rewards programs. But retailers can do something about this by changing focus — from the typical intense, undifferentiated price competition to a strategic, personalized and customer-centric approach. The loyalty market must evolve; consumers tell us that programs are designed to be almost entirely for the benefit of the retailers rather than them.

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China

Loyalty as it exists in China — with conventional approaches, proprietary pro-grams and a reliance on discounts — just isn’t driving sustainable behavior change. But that doesn’t mean loyalty can’t create amazing, deep relation-ships: 73% of consumers told LoyaltyOne they felt more or equally loyal to brands in the presence of effective loyalty programs.

As West meets East, there are lessons to be learned in China from loyal-ty operators in smaller countries that do not have the luxury of attracting a never-ending stream of prospects. A loyalty model that combines Old World data and customer experience best practices and New World digital

applications can deliver excitement and value to consumers while helping retailers get the most out of their data assets and customer engagement efforts. For consumers, this would spell greater value, excitement, trust and long-term engagement. For retailers, it would resolve hurdles including un-der-penetrated share of wallet, declining customer acquisition and market share, and increasing customer attrition. ‹

Caroline Papadatos is senior vice president of LoyaltyOne Global Solutions. She can be reached at: cpapadatos@loyalty.com.

73% of consumers told LoyaltyOne they felt more or equally loyal to brands in the presence of effective loyalty programs.

COLLOQUY serves as a leading publishing, education and research practice, bringing together loyalty practitioners from around the world. A pioneer in the industry, COLLOQUY is the first publication dedicated expressly to the art and science of loyalty marketing and has since become the go-to resource for loyalty intelligence. Today COLLOQUY delivers industry-leading loyalty benchmarking reports and educational workshops, webinars and speeches. Advertising, sponsorship and publishing opportunities are available via the COLLOQUY Network, a global partnership of loyalty service providers. COLLOQUY is an independently operated division of LoyaltyOne. To learn more, visit colloquy.com.

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