The Aimia Loyalty Lens: 2013 Q4 Report

THE AIMIALOYALTY LENS

2013 Q4 Report

A quarterly research report which explores trends in consumer loyalty, attitudes to technology and views on sharing personal data

2 / The Aimia Loyalty Lens

© 2013 Aimia Inc. All Rights Reserved.

The Aimia Loyalty Lens is the first in a series of quarterly research reports, which are designed to explore trends in consumer loyalty, attitudes to technology and views on sharing personal data. The first report includes findings from research conducted in May 2013 and again in August 2013, based on a nationally representative sample of over 2,000 customers.

The intent is for the Aimia Loyalty Lens to become a regular survey, which will provide updates and commentary on consumer loyalty and its impact on both businesses and consumers alike.

Aimia has been helping businesses build better relationships with their customers for nearly 30 years. Aimia runs its own loyalty programmes — Nectar in the UK and Italy, Air Miles in the Middle East and Aeroplan in Canada — and on behalf of some of the world’s leading brands.

Twenty years ago £1 in every £100 of household spend was linked to loyalty. Today, £1 in every £7 spent earns rewards. As technology creates more ways to engage with consumers, so it leads to a proliferation of customer data. This pushes privacy issues into the spotlight, so raising a question as to whether or not customers are aware of how companies are using this information. And furthermore do they care?

Is technology really creating better connections between the brand and its customers or actually pushing them further apart? While it is easy to be seduced by these new capabilities and short term deals, they do little to engender true loyalty to a brand — a long-term, mutually beneficial relationship between a business and its customers.

INTRODUCTION

1 Calculation based on ONS statistics, market share data, retailer revenues and relevant loyalty schemes.

The Aimia Loyalty Lens / 3


In the wake of the 2008 credit crunch, customer appetite for loyalty has grown dramatically. Two-thirds

of consumers use loyalty currency to help them economise. Eight out of ten loyalty collectors claim points

whenever they can, with one third collecting more rewards now than they did before the recession. Aimia

has seen evidence of this with Nectar. Since 2009 an additional three million members joined the programme

and 44 percent more Nectar points were issued. This research confirms that 87 percent of consumers

participate in loyalty schemes with high penetration across all types of households.

Being savvy and taking advantage of loyalty schemes has entered the psyche of all consumers with the

wealthy, or “thrifty rich”, participating in more programmes than any other group.

Whilst there is an obvious correlation with the wealthy and niche programmes like frequent flyers, the “thrifty rich”

are also embracing more everyday schemes like the Ikea Family Card. While affluent consumers were best situated

to weather the recession’s impact with their high household income and stable careers, they spend less and appear

to embrace loyalty more to help make their money stretch further.

ONE THIRD OF CONSUMERS COLLECT MORE LOYALTY REWARDS NOW THAN THEY DID PRE-RECESSION

LOYALTY

LOYALTY CARDLOYALTY CARDLOYALTY CARDLOYALTY CARDLOYALTY CARDLOYALTY CARDLOYALTY CARDLOYALTY CARD

LOYALTY CARDLOYALTY CARDLOYALTY CARDLOYALTY CARD

7.2 Cards THOSE EARNING OVER

£90,000 HOLD 7.2 CARDS ON AVERAGE4 Cards

THOSE EARNING BELOW £30,000 HOLD 4 CARDS

ON AVERAGE

£30K

£90K

The Aimia Loyalty Lens © 2013.



From a list of 12 categories, respondents were asked to identify the top three sectors they felt most loyal to.

Supermarkets top the table with 29 percent ranking them in the number one position and 57 percent picking

them in their list of top three categories.

Banks and building societies trail in second place. Only 16 percent of consumers state they are most loyal to

this sector while 38 percent list them in their top three.

The infographic below demonstrates that again, supermarkets top the table when it comes to loyalty

programme membership. Just 12 percent are part of a mobile phone, fashion retail or airline loyalty scheme.

SUPERMARKETS TOP THE LOYALTY LEAGUE TABLE

LOYALTY

TOP CATAGORIES CONSUMERS ARE MOST LOYAL TO

SUPERMARKETS AND GROCERY

57%BANKS AND BUILDING

SOCIETIES

38%

FOOD AND DRINK ESTABLISHMENTS

27%

TECHNOLOGY BRANDS

21%

FASHION RETAILERS

16%

MOBILE PHONE

29%£


73% 32% 27% 24% 17% 13% 12% 12% 12%

PH

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CONSUMERS ARE MOST LOYAL TO SUPERMARKETS WITH 73% BEING A MEMBER OF THE LOYALTY SCHEME

SU

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RM

AR

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AN

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With supermarkets being first off the rank in the 90s with loyalty cards that provided them with real insight

into their customers, it is not surprising that they lead the pack by such a wide margin. However as loyalty

is engendered through other tools at less cost this margin between supermarkets and other sectors should

be reduced.

It appears that supermarkets are also getting it right in the way they communicate with customers. They scored

the highest in terms of sending out relevant communication to their customers. It can be assumed that they

are using the customer data collected via their loyalty programmes to help them deliver more engaging offers.

By contrast, the financial services sector scored the worst. What is most surprising about the finding is

that this sector holds considerable customer data and should be in a better position to offer more relevant

communication to their customers.

3 IN 4 ARE MEMBERS OF A SUPERMARKET LOYALTY SCHEME

LOYALTY

Banks and building societies should take note of the reason why their customers remain loyal to them.

Thirty-three percent of respondents said it is because “I have been with them many years” and a further

16 percent said “I can’t be bothered to change”. At the moment inertia is the greatest friend to the financial

services sector. However, as the seven day switch designed to make it easier and less time-consuming for

people to move bank accounts has taken effect in September, it is clear that the sector needs to take the

opportunity to transform and rebuild customer relationships.

INERTIA AND FINANCIAL SERVICES

SUPERMARKETS SCORE HIGHEST WITH CUSTOMERS FOR RELEVANCE OF COMMUNICATIONS

SUPERMARKETS AND GROCERY

BANKS AND BUILDING SOCIETIES

56%RELEVANT

58%IRRELEVANT

CREDIT CARD PROVIDERS

66%IRRELEVANT

3




The unceasing pace of technological change offers companies around the world an ever-expanding horizon

of marketing possibilities. Sixty-four percent of UK consumers own a smartphone, and this figure rises to

81 percent amongst 18-24 year olds. And with 67 percent of consumers using their laptops for online shopping,

the potential for consumers to be discovering and eventually making purchases online means we now have a

network of shoppers who are “always-on”. Nevertheless, what the findings reinforce is the old adage that early

implementation and uptake is often gradual and that for technology to be effective it must first and foremost

serve its customers’ needs.

Digital wallets are one of the most recent additions to the consumer arsenal. Their potential has been

celebrated by some influential companies including Google, Apple and Samsung to name but a few. Yet less

than 1 in 10 consumers believe they would be very likely to use a digital wallet on a mobile device at present.

This figure doubles (to 22%) when it comes to those who consider themselves “early adopters” of technology

but even here digital wallets are currently seen as something they are not likely to use on the whole (49%).

The precursor to the digital wallet is often considered to be the contactless card. While awareness of this

technology is high (83%), the vast majority of respondents do not use them (24%). As with digital wallets,

early adopters and the younger cohort show an increased likelihood to use contactless cards. Despite this,

technology and payments companies still need to go further in convincing people of the digital worth of

mass adoption.

CONSUMERS CLING TO PLASTIC — CONTACTLESS PAYMENTS AND DIGITAL WALLETS HAVE A LONG WAY TO GO…

TECHNOLOGY

24% OF THE

GENERAL PUBLIC

36% 18-34 YEAR

OLDS

37% EARLY

ADOPTERS

USE OF CONTACTLESS CARDS FOR PAYMENT




In contrast, perhaps it is the slightly more familiar nature of the coupon that has led to its relative success in an

electronic format. In total, 26 percent of consumers have downloaded an electronic coupon for redemption at

a later stage with most of them (79%) accessing them from home rather than on the go.

In short, while the payments industry has been the key driver for technological developments per se, the key

to mass adoption may well be the loyalty industry’s ability to incentivise and reward new behaviour.

CONSUMERS CLING TO PLASTIC — CONTACTLESS PAYMENTS AND DIGITAL WALLETS HAVE A LONG WAY TO GO…

TECHNOLOGY

18-24 YEAR OLDS

CONSUMERS WHO HAVE DOWNLOADED

AN ELECTRONIC COUPON VIA MOBILE DEVICE

36%

THOSE WITH

CHILDREN

EARLY ADOPTERS

COUPON25%OFF

25%OFF


ALL CONSUMERS

26% 33% 46%



GENERATIONAL PRIVACY DIVIDE

ARE YOUR CUSTOMERS WHO THEY SAY THEY ARE?

PRIVACY

HOW HAPPY ARE RESPONDENTS TO SHARE DIFFERENT TYPES OF PERSONAL INFORMATION?

49%

NAME

45%

EMAIL

£

23%

INCOME

22%

ADDRESS

17%

MOBILE

21%

WEB HISTORY

48%

HOBBIES


Debate around the collection and use of data has never been more prominent and as the proliferation of data

is set to grow it is only natural that scrutiny from consumers, government and the media should intensify.

An obvious contrast is the difference between how the younger respondents feel about sharing data and

the older cohorts. Having grown up with the internet and Facebook they appear to have a different set of

“rules of engagement” when it comes to personal data.

The 18-24 year old cohort are more likely to share a wide range of information online (45%) versus the older

cohorts who are more guarded (just 26% for those aged between 55-64).

When asked to rate how happy respondents would be to share different types of personal information, name,

hobbies and interests and email address top the list. The most guarded information sets are mobile numbers,

web history, addresses and income level details.

When people were asked whether they have provided false information to companies in the past 38 percent

of them admitted to doing so. This phenomenon actually rises to a half (50%) among 18-24 year olds. Mobile

numbers, date of birth and false names are the most common details falsified. The main reason for doing so is

to avoid companies contacting them in the future (72%).

With such a high percentage of the 18-24 year olds providing false information, we can assume that the rules

of engagement differ from the older cohorts who were brought up in an “offline” era and were often asked to

provide personal details for important documentation. Given that the younger age groups are more likely to

engage with companies online and sign up to offers on the go, this could explain the higher numbers providing

false information. For businesses this poses a real concern to the quality of the information that is being shared

by their customers. They will need to look towards other information to build a more robust understanding of

their customers.



When signing up to a new product or service 29 percent of consumers claim to always read the privacy policy.

Among the millennial generation this drops to 22 percent. Remarkably, 27 percent of the same age group say

that companies are clear about how they use customer information, 5 percent more than have actually read the

privacy policy!

HAVE YOU READ THE SMALL PRINT?

PRIVACY

AD SERE, ES REC OC, SENA L.

IQUAM ETI SERUM SCERENA

RIONSILIS MACIT; HOCRIS POS M.

LUS, MOD FORBIS. VALICONICTUS

VIDIN REO VICIEM ME INPRORU

NCULTUS VERE ACTANUM EORA

COMPLIC VE, US. GRATIU INA,

CULLA L. ET; EST? NOS, QUIT.

MULABESTRE, NUM DICTOR UNUM

POS FACIBUS VID INATIS CONSU-

LICI SE, CONDUM SENE DEN DE

QUOS BONSIMI STIENAT PRI IM

NOS TANT. SP. FECERBIS, QUODI-

UM RENAM IAM SICAUC FURNIQUE

AUDETER NIMILI IAM, MOR ACIE

HOC, NEMNIHI LINATUDELIS; NIHILI,

PERRACR UMUNUNTE CONFIN IAM

NOSSENDAM MANUM NUM RE, AD

SERE, ES REC OC, SENA L. IQUAM

ETI SERUM SCERENA RIONSILIS

MACIT; HOCRIS POS M. LUS, MOD

FORBIS. VALICONICTUS VIDIN REO

VICIEM ME INPRORU NCULTUS

VERE ACTANUM EORA COMPLIC

VE, US. GRATIU INA, CULLA L. ET;

EST? NOS, QUIT.MULABESTRE,

NUM DICTOR UNUM POS FACIBUS

VID INATIS CONSULICI SE, CON-

DUM SENE DEN DE QUOS BONSIMI

STIENAT PRI IM NOS TANT. SP.

FECERBIS, QUODIUM RENAM IAM

SICAUC FURNIQUE AUDETER

NIMILI IAM, MOR ACIE HOC,

NEMNIHI LINATUDELIS; NIHILI,





































































FECERBIS

AD SERE, ES

REC OC, SENA

L. IQUAM ETI

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RIONSILIS MACIT;

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VIDIN REO VICIEM

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COMPLIC VE,

US. GRATIU INA,

CULLA L. ET; EST?

NOS, QUIT.MU-

LABESTRE, NUM

DICTOR UNUM

POS FACIBUS VID

INATIS CONSULICI

SE, CONDUM SENE

DEN DE QUOS

BONSIMI STIENAT

PRI IM NOS TANT.

SP. FECERBIS,

QUODIUM RENAM

IAM SICAUC FUR-

NIQUE AUDETER

NIMILI IAM, MOR

ACIE HOC, NEM-

NIHI LINATUDELIS;

NIHILI, PERRACR

UMUNUNTE

CONFIN IAM NOS-

SENDAM MANUM

NUM RE, AD SERE,

ES REC OC, SENA

L. IQUAM ETI

SERUM SCERENA

RIONSILIS MACIT;

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LUS, MOD FORBIS.

VALICONICTUS

VIDIN REO VICIEM

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NCULTUS VERE

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COMPLIC VE,

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CULLA L. ET; EST?

NOS, QUIT.MU-

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POS FACIBUS VID

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SE, CONDUM SENE

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SP. FECERBIS,

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IAM SICAUC FUR-

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NIMILI IAM, MOR

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DAM MANUM

NUM RE,

2% DON’T KNOW

7% NEVER READ

20% RARELY READ

29% ALWAYS READ

PERCENTAGE OF CONSUMERS WHO READ THE PRIVACY POLICY

42% SOMETIMES READ




When consumers were asked to rank how comfortable they are with companies handling their personal data, the

financial services sector came out on top with a mean score of 8.2 followed by place of work with a score of 6.9.

Such high levels of customer assurance are likely to be driven by the highly confidential nature of banking

and places of work and the data security policies involved with both. A surprising finding in this area is that

supermarkets rank third for handling customer data (6.7 ranking) compared to utility companies (6.1) mobile

phone providers (5.9) and online retailers (5.6). Given that supermarkets assess what is in a shopping basket as

opposed to the highly personal nature of information that is shared with banks and employers, it is a high score

for this sector and again could be as a result of the way supermarkets have proven themselves in managing

their customers’ data.

In contrast, the more aggressive privacy policies of some online businesses are only strengthening the public’s

notion that social media networks are not being upfront about collecting and using data. Instead, they have

become a “necessary evil” which, albeit beneficial, are not doing enough to spell out exactly how our data is

being used.

BANKS AND PLACES OF WORK MOST TRUSTED WITH PERSONAL DATA — ONLINE AND SOCIAL MEDIA NETWORKS NEED TO BE MORE TRANSPARENT

PRIVACY

FIN

AN

CIA

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RV

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CONSUMERS ARE MOST COMFORTABLE WITH BANKS AND PLACES OF WORK HANDLING THEIR DATA

8.2 6.76.9 6.1 5.6 5.3 2.55.9 5.3 2.6




Consumers and companies are embracing loyalty — whether it’s through a traditional plastic card or virtual schemes. Technology has made it easier for companies to not just understand customer transactions but also the interactions they have with the company — from searching online before they buy through to writing a review post purchase — and these tools are likely to proliferate over the next few years.

In the Big Data era, our research shows that many consumers aren’t clear about how their data is used or why. For many, they are unaware of the exact ramifications of the privacy contracts they are entering into. There is also a clear divide between the millenials who are more likely to share a wide range of information versus the older cohorts who are more guarded. Companies will need to take this on board and clearly have further to go in being transparent about how they are using or intend to use their customers’ data.

The overwhelming positive response to supermarkets and the way they are using customer data based on the relevancy of their communications shows that customers are happy to trade information as long as the rewards are relevant. However, with the seven day switch taking effect, the financial services industry in particular needs to understand it can no longer rely on consumer inertia. Banks and building societies will need to start providing customers with more relevant communications in order to retain them.

CONCLUSION

About Aimia

Aimia Inc. (“Aimia”) is a global leader in loyalty management. Employing more than 4,000 people in over 20 countries worldwide, Aimia offers clients, partners, and members proven expertise in launching and managing coalition loyalty programs, delivering proprietary loyalty services, creating value through loyalty analytics, and driving innovation in the emerging digital, mobile, and social communications spaces. Aimia owns and operates Aeroplan, Canada’s premier coalition loyalty program, Nectar, the United Kingdom’s largest coalition loyalty program and Nectar Italia, Italy’s first independent loyalty coalition program. In addition, Aimia owns stakes in Air Miles Middle East, Mexico’s leading coalition loyalty program, Club Premier, Brazil’s Prismah Fidelidade, and i2c, a joint venture with Sainsbury’s offering insight and data analytics services in the UK to retailers and suppliers. Aimia also holds a minority position in Cardlytics, a U.S.-based private company operating in transaction-driven marketing for electronic banking. Aimia is listed on the Toronto Stock Exchange (TSX: AIM).

Visit us at www.aimia.com.

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The Aimia Loyalty Lens: 2013 Q4 Report