Aimia Insights:Rewarding Interactions

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Information about Aimia Insights:Rewarding Interactions

Published on March 7, 2014

Author: DavidNickelson



"Real loyalty isn’t created at the close of the sale. It’s created when the brand & the customer become intimate through multiple interactions before, during & after the purchase." Read more in Aimia's report, 'Rewarding Interactions; Are You Ready for Customer Intimacy'

REWARDING INTERACTIONS ARE YOU READY FOR CUSTOMER INTIMACY? INSIGHTS Cindy Faust, Vice President, Global Product Marketing Mark Sage, Director, Global Loyalty Product Paul Sage, Product Management Director, Loyalty Management Systems

B / Rewarding Interactions PEOPLE BETTER RESULTS PLATFORM On your journey from chaos to competitive edge, Aimia unites unmatched global expertise with our highly configurable secure loyalty platform to give you a loyalty advantage unlike any other. To see how our loyalty insights can deliver results for your business, contact © 2014 Aimia Inc. All Rights Reserved.

Rewarding Interactions / 1 AUTHOR’S NOTE Money can’t buy love, but loyalty marketers have always counted on bestowing points on those who buy, and they in turn use points on rewards. By doing this, companies hope consumers will return for more… and more. But offering rewards for purchase behaviour — “Buy this, and I’ll give you that,” — is no longer enough in a competitive marketplace where products are commoditized and loyalty programs are ubiquitous. Behavioural measurement is at the core of loyalty programs and is as valuable today as ever, but… it’s not enough. In a competitive market where loyalty programs are ubiquitous, brands must set themselves apart to drive customer experiences to build real relationships. It’s about distilling smart, customer-centric data to deliver a customer experience that not only rewards them, but transforms them into brand ambassadors. We believe marketers need to look at the customer more holistically — across all interactions and across the purchase cycle — to better shape the customer journey and drive brand loyalty. In other words, organizations must find creative ways to use their loyalty programs to foster attitudinal loyalty; to build and capitalize on the emotional connections engaged customers have with their preferred brands. Real loyalty isn’t just created at the checkout counter, but at every touch point, before and after purchase. If you want true customer intimacy instead of a quid pro quo, you must reward these interactions — not just the transaction. Gathering and analyzing interaction data helps develop a holistic, real-time view of the customer throughout the buying cycle, not just at the point of purchase, and on multiple channels from in‑store to smartphone apps. Who will have the ultimate competitive advantage? Those companies who build trust with consumers and provide better experiences through the use of multi-dimensional insights at pivotal moments in time, beyond just the transaction. — Cindy Faust, Vice President, Global Product Marketing Table of Contents 1 Author’s Note 2 Introduction 4 The Power of Social, Mobile and Digital Interactions 6 Beyond Transactions: The Benefits of Adding Interaction Data 8 The Loyalty Challenge: Connecting the Cross-Channel Dots 10 Motivating Consumers to Share Interactions: Utility and Relevance 12 Motivating Consumers to Share Interactions: Using Additional Currencies for Recognition 14 Motivating Consumers to Share Interaction 16 Taking Control: Customers and Their Data 18 Conclusion: Breaking Through to Customer Intimacy 20 About the Authors © 2014 Aimia Inc. All Rights Reserved.

2 / Rewarding Interactions INTRODUCTION By some measures, loyalty programs have never been more beloved: According to a new study by Nielsen, nearly 60 percent of global respondents said loyalty programs were available where they shopped, and of those, 84 percent were more likely to visit those retailers. But according to the Accenture 2013 Pulse Survey, in the US, customer satisfaction fell by one percent since 2012. Additionally, the rate of loyalty rose just one percent and customers’ willingness to recommend a company rose by just two percent. a temporal view of the customer over their “lifetime” to measure the real incremental value of marketing spend. In a competitive market where loyalty programs are ubiquitous, brands must set themselves apart to drive customer experiences to build real relationships. It’s about distilling smart, customer-centric data to deliver a customer experience that not only rewards them, but transforms them into brand ambassadors. Focusing primarily on transactions means that loyalty programs typically don’t reward or communicate with This dissatisfaction can be a true members, in real time, during the loyalty crisis, one we believe is due many non-purchase moments when to the transaction-based focus of a customer is actually interacting with most loyalty programs, particularly the brand — whether she is searching, those which put the emphasis on overarching data points such as total sharing, linking, comparison-shopping, commenting, asking questions, spend or campaign ROI rather than or actually using the product and looking at the customer holistically. recommending it to others. As shown on the following page in the simple example from the Nectar coalition program in the UK, looking In the Nectar example, this sort of detailed knowledge on the at one offer and campaign ROI at a transaction is illuminating, but there point in time does not tell the true is still a challenge. The customer story from a customer perspective. is viewed one dimensionally… as a customer at point of purchase. We Loyalty programs enhance campaign can’t see the decision process that management measures by enabling customer has gone through to put the items in her basket, or what happens after her purchase. Did the customer even like the products when she used them? We have to infer information at just this one moment in time when they transact. Interactions can help us get a better view on these gaps in knowledge. Unfortunately, that means a true interactive dialogue, which leads to deep customer insights across touch points, is missing. In fact, according to a 2012 Acxiom/Loyalty360 study, while marketers said one-to-one marketing was one of their most often-used customer retention initiatives (used by 64 percent), only 8.7 percent of them use data insights to personalize loyalty program rewards and offers. Aimia’s previous Retail Brief, Inflection Points: Seizing the Moments of Customer Loyalty, discussed the importance of © 2014 Aimia Inc. All Rights Reserved. 10 essential customer interaction moments, including the consumer’s first encounter with a brand, through her first purchase, at each touch point she encounters in a loyalty program, as well as each postpurchase service encounter. On the one hand, loyalty program owners know these interactions are important: When Aimia asked in a 2013 poll why companies would want loyalty programs to focus more on interactions, the overwhelming response (77 percent) was customer engagement. Loyalty currency rewards can induce customers to interact. The challenge is to reward non‑earning interactions with loyalty currency sustainably. We believe marketers don’t yet truly have a way to value these interactions or a simple way to gain access to them. Nectar rewards a non-earning interaction of internet search. It’s through detailed customer analysis, predictive modeling and a constant reward adjustment that enables this interaction stream to be rewarded sustainably and to eventually become a significant additional revenue stream to that program. Internet search is just one data source, and no one data source provides a complete picture of customer behaviour. Ultimately, the power to influence loyalty comes from connecting the dots across a variety of data sources and interactions — particularly social interactions. Marketers’ first tentative steps have been to focus on the idea of “opting in” — allowing consumers to choose to share their interactions, transactions, and viewing habits in exchange for rewards. The next logical step should be to recognize and reward customers differently; for example, when they check in at the store and then make a purchase, or when they make a purchase and then discuss it on Facebook. This is not consistently happening in loyalty programs. In this edition of Insights, we’ll discuss the benefits of adding interaction data and tying it in with transaction data to boost loyalty and foster intimacy with engaged customers.

Rewarding Interactions / 3 ARE YOU MEASURING THE RIGHT THINGS? BUTTER R 2 FO BUY .00 £3 23% SKU Sales Lift New customer response +503% 20% SKU Sales Lift OFF 50% +196% New customer response 51% Existing customers increasing spend 56% Existing customers decreasing spend Positive Return Negative Return Example: Nectar Coalition The transaction knowledge is illuminating, but there is still a challenge. The customer is viewed one dimensionally… as a customer at point of purchase. We can’t see the decision process that customer has gone through to put the items in her basket, or what happens after her purchase. © 2014 Aimia Inc. All Rights Reserved.

4 / Rewarding Interactions THE POWER OF SOCIAL, MOBILE AND DIGITAL INTERACTIONS Nearly 45 percent of all US adults have adopted smartphones — up 10 percent since May 2011. Facebook reached a whopping one billion active users in October 2012. Artisan, a mobile app creation firm, found that 71 percent of retail executives surveyed believe that homegrown mobile apps will offer the single most important customer touch point within one to three years. So the fact that social media, mobile, and loyalty are inextricably linked is old news. But loyalty programs still tend to be kept separate from social, mobile, and other digital interaction tracking, without any real-time feedback mechanisms, so marketers haven’t yet been able to fully take advantage of the power of rewarding social interactions. © 2014 Aimia Inc. All Rights Reserved. preferences. Through analysis, you will have the ability to target key influencers and those who are loyal to extend the reach of targeted communications and amplify the message, leveraging social graphs and targeting communications to “a segment of one.” If someone in the target member’s social network simply shares information about promotions, they receive points at increasing levels depending on uptake as it expands through the chain. A purchase in that chain of sharing increases the interaction earning throughout the social network of influencers. This is also a much more intuitive way to deliver the “member get member” activities. Don’t ask your members to get another member. Make the offer open to all via their social networks. Non‑members get a chance to sign up by opting-in to the offer and And there is tremendous opportunity the brand can reward the original member with points and status. for the marketer who can take advantage of social and mobile Brands that combine technology interactions and tie them into and expertise to harness interactions essential transaction data analytics taking place on social networks and efforts to get a total view of the on mobile devices will be able to customer. The Aimia/Columbia offer better customer support, higher Business School study found perceived value, and more positive 60 percent of M-Shoppers are customer experiences, all of which more likely to buy a product while lead to greater customer intimacy. By in the store when they find online motivating customers to connect their reviews on their smartphone while social networks to loyalty program 55 percent are willing to sign up for memberships and/or encouraging a store loyalty program in order to mobile engagement through a reward gain benefits on their smartphone while in the store, and 31 percent are program app that uncovers location, offer response, and even in-store interested in interacting with a store behavioural data, marketers can on social networks like Facebook. gain tremendous insight into how The key to leveraging both properties these interactions influence purchase decisions. They’ll also learn how to is to overlay the social graph of present offers that enrich the entire each individual with the detailed loyalty program profile and customer customer experience. These days, customers spend more and more time online researching options, reading reviews, and gathering information before ever setting foot in a store. A 2013 Aimia/Columbia Business School study, Showrooming and the Rise of the Mobile-Assisted Shopper, found that 21 percent of consumers are M-Shoppers — they use mobile devices while in retail stores to assist with their shopping decisions. In addition, once they have purchased a product or service, consumers are now accustomed to giving feedback to their social network connections about their experience and interactions with a product. The pre-purchase social discovery period and post-purchase advocacy (or non‑advocacy) have become as important to the process of building loyalty as the purchase itself.

Rewarding Interactions / 5 REWARDING INTERACTIONS TAKES TIME AND PROPER ANALYSIS AMANDA Amanda buys offered product and achieves (John 50 Points) opts-in to offer (John 5 Points) Amanda shares offer New member and new influencer: Sharing is treated as a form of member-get-member activity while sharing valuable offers JOHN is targeted based on social graph and loyalty profile as an influencer John shares a social offer SUSIE WENDY looks at offer, but does not opt-in Susie shares offer opts-in to offer (Susie 5 Points) MARK opts-in to offer (John 5 Points) Mark does not buy product (John keeps points) Number of Interactions Ramp-up period to sustainability for rewarding interactions not transactions Number of Months Facebook message Loyalty web message © 2014 Aimia Inc. All Rights Reserved.

6 / Rewarding Interactions BEYOND TRANSACTIONS: THE BENEFITS OF ADDING INTERACTION DATA Transactional data is the final proof of purchase, and always will be essential to prove the incremental revenue and profit that a program delivers. Loyalty marketers have long understood the power of rewarding at the point of purchase, and the loyalty industry has always been at the forefront of data analytics. But the true potential of big data lies in going beyond transaction data, to include data points or observations from customer interactions throughout the purchase cycle to create a richer view of the customer over time. This combination, we believe, will power-charge loyalty programs into the future. the point of purchase creating Data can be gathered from a variety of consumer interactions — from sustainable incremental lift with loyalty programs, web analytics, a consumer beyond ROI on a shopping baskets, social media, campaign. Loyalty programs can mobile, CRM, and third parties. become the enablement of a These cross‑channel data sets can customer lifestyle journey. help illuminate, anticipate, and reinforce purchase behaviour, as the > Leverages and validates insights they yield provide levers to investments in new communication reinforce positive relationships and channels. Marketers need to boost long-term loyalty. That said, reach today’s consumer where, customers don’t think of themselves when, and how she wants to as transaction‑based robots that be reached. Today’s Millennial are only worth a second look in the consumers are greatly influenced checkout line. Consumers experience by mobile and social channels, an entire purchase-related journey while Generation X is more likely from the moment they recognize to use a mix of traditional and the need to purchase something, cutting-edge channels. Harnessing through the research and search unstructured interaction data process, to shopping for, choosing, points across internal business silos buying and actually using the into the loyalty program enables product, and possibly recommending a bi‑directional communication it to others or sharing the experience with the consumer throughout with the company. the purchase cycle. Experience suggests that linking consumer Transaction data is just the buying segments to their true acquisition of the product or service which is a and influencing sources and very small moment in time to build actual usage/endorsement post customer relationships. It is the purchase, delivers better return interactions, tied into those transaction on investments and ensures a real data points, which can create an entire contribution to the business. customer profile that leads to true customer intimacy. There are several important benefits of ultimately adding interaction data to the mix: > reates new revenue streams. C Customer data has been called “the new oil” from which marketers extract, process, and refine information into the fuel that runs their company operations. Interaction data is an untapped resource, and there is new revenue stream value in the interactions themselves. > rives incremental revenue D from the loyalty base. Tying interactions to transactions creates a three dimensional, customer‑centric view beyond © 2014 Aimia Inc. All Rights Reserved. > owers the cost to serve, while L increases value. Seeing the consumer holistically through interactions and moving from the one-dimensional view of loyalty, we are now supporting the consumer on her lifestyle journey. Extending beyond the brand enables a wider array of partnerships to be formed, lowering the cost to run the program while increasing value to the consumer. In addition, bringing new types of loyalty currencies into the mix can influence customer behaviour while lowering the points liability to the program through greater redemptions and engagement.

Rewarding Interactions / 7 BENEFITS OF ADDING INTERACTION DATA Creates new revenue streams Drives incremental revenue from the loyalty base Leverages and validates investments in new communication channels Lowers the cost to serve, while increasing value © 2014 Aimia Inc. All Rights Reserved.

8 / Rewarding Interactions THE LOYALTY CHALLENGE: CONNECTING THE CROSS-CHANNEL DOTS Marketers understand that no single channel drives loyalty. Consumers see brand advertising on and offline. Consumers conduct product research by reaching out to friends socially before they shop or while looking at brand web sites. Consumers visit stores to research a product before searching for a lower price comparison and using coupon “apps.” In this environment, a silo-driven channel mindset no longer works. By combining insights from transactional analysis with data points from the entire purchase cycle (e.g. Groupon®, SEO, Google Remarketing, online reviews), marketers can infuse loyalty programs with these cross-channel experiences. However, companies need technological solutions capable of collecting and connecting these data dots into useful, real-time recognitions — ones which can seamlessly connect into different social networks. There is an endless array of questions that marketers want to answer in order to get “closer to the customer.” Some answers are now available because of mobile and social technologies and consumer behaviour in their view of sharing their interactions. Keep in mind that customers already measure themselves in terms of a wide variety of activities, from health and wellness to finance. For example, MyFitnessPal is an app that measures food intake. Fitbit® is a small device and app that measures movement and sleep. RunKeeper measures exercise routines, while AskMeEvery measures moods like a mini-diary log. Many customers have no problem sharing information with their iPhones, via a plethora of apps and with social media. However, there are two challenges for a marketer: How to motivate consumers to share their relevant interactions across channels throughout the buying cycle at the pivotal moments and how to have the technology capable of collecting and connecting the dots from interactions into capabilities that can be acted upon in real time. For many organizations, social media and digital strategy activities are separate from their more traditional loyalty efforts. The temptation for marketers is to simply import interactions into an existing program and reward the consumer with a few points for checking in or send the consumer an offer while in a store. But if the reward is not linked to the customer’s actual journey or profile, it can actually erode value and increase complacency. Instead, building loyalty with today’s consumers, especially Millennials (consumers between © 2014 Aimia Inc. All Rights Reserved. the ages of 20 and 30), requires a reciprocal “conversation” driven from a complete view of the customer relationships with the brand, their journey and “friend” networks. Connecting the dots with interaction data at every stage may still be in the future for most companies — but rewarding and recognizing best customers throughout the purchase cycle should be the goal of every loyalty marketer today. We see adding social data as one of the key pillars of better loyalty, but no one data source provides a complete picture of customer behaviour. We need to be able to connect the dots, so we can recognize a customer differently — across the purchase cycle — when they check-in in-store and then go on to make a purchase, or when they make a purchase and then share it on Facebook, for example. We need solutions capable of collecting and connecting these dots into useful, real-time recognitions, and solutions that can seamlessly connect into the different social networks that exist today and are coming tomorrow. New loyalty platforms and solutions hold the potential to take interaction data and turn it into the fuel for sustainable, reciprocal, and strong customer relationships. And any technology should be focused on seizing the moments to create the optimal customer journey and providing a value exchange that encourages engagement. The world is changing quickly and customers have increasing expectations around their experience… and marketers need to be ready to respond.

Rewarding Interactions / 9 CONNECTING DOTS SOCIALLY IS CHANGING LOYALTY Re-marketing data is an additional data source for offer targeting The loyalty model has an expanded ecosystem of brand interactions across traditional and new platforms and channels — all shared socially Customer purchase information is tracked with loyalty token Customers are motivated to provide data, link data sources and identify themselves on interactions Coupon selection helps with targeting compelling, yet sustainable offers Linking Foursquare provides insight into view vs. buy inside and outside the program Linking search provides ability to target more relevant offers Linking Facebook provides friend and preference information © 2014 Aimia Inc. All Rights Reserved.

10 / Rewarding Interactions MOTIVATING CONSUMERS TO SHARE INTERACTIONS: UTILITY AND RELEVANCE Customers want every touch point to be useful, relevant, and seamless — in short, friction free. Finding ways to make it easier for your customers to do business with you can be a uniquely powerful driver for gathering interaction data. This requires new ways to motivate customers to share information with you, to make it easier for them to do business with you, and to make interactions more relevant — reducing friction. Technology companies have been on the forefront of reducing friction. For example, payment company Square® is focused on creating “frictionless commerce,” founder Jack Dorsey told Slate. Square’s long-term aim, he says, is “to make accepting payments a breeze for businesses, and... to make paying for stuff invisible — for everyone, across the entire economy, for all types of goods and services.” The current Square app, installed on the user’s phone, allows the merchant or restaurant to simply see the customer, click on his or her photo, and authorize payment. There are no cards, no PINs, just a simple, quick exchange that offers frictionless utility. Loyalty marketers are catching on to the idea of keeping interactions simple and seamless: Starbucks®, for instance, offers a great example of a company beginning to understand how to support the customer’s entire buying journey with a friction‑free experience: > Improved acquisition quality and improved enrollment/new member experience. > Starbucks offers offline brand awareness with stores, cups, and every item in the store. All social media and digital access points reinforce the same message. © 2014 Aimia Inc. All Rights Reserved. > Customers can find the outlets through research instantly. > App supports customers’ needs in real time before they are in the store. > Rewards card supports pre‑purchase because customers can preload value. Square customers don’t even need an account. > At purchase, customers can buy instantly with the Starbucks app or Square — it’s all the same to them from an ease-of-use perspective. > Customers are rewarded with points and encouraged to share the joy with all their friends socially post-purchase. > Then, the process repeats for incremental sales and profit. Reducing friction in customer interactions can bring customer intimacy to a whole new level: By making interactions seamless and simple as well as useful and relevant, customers will be motivated to share more of those interactions. And the more they share interactions, the more a marketer can learn about their wants and needs and how to make the customer journey even more friction free.

Rewarding Interactions / 11 THE WORLD IS CHANGING In today’s environment, interactions with brands are as important as transactions and span the purchase cycle. Loyalty is changing as it now means wherever you go and whenever you want it. ase h rc Awa ren e ss urchase e-P Pr se ha c ur INTERACTIONS Research Post -P u STARBUCKS TRUE LOGOS. GENERATED BY CHI NGUYEN (CHISAGITTA) © 2014 Aimia Inc. All Rights Reserved. P

12 / Rewarding Interactions MOTIVATING CONSUMERS TO SHARE INTERACTIONS: USING ADDITIONAL CURRENCIES FOR RECOGNITION As we see in airline frequent flyer programs, tiering within the program develops the feeling of belonging, achievement, and respect which are essential to the program’s success in maintaining their best customer segments. Social currency in the form of recognition — making a person feel like she belongs — is the equivalent of the tier mechanic for new online models and is a fast‑growing phenomenon in the world of loyalty. Loyalty is no longer just about being rewarded; it’s about being recognized particularly by peers and social groups that a person cares about. In order to leverage customer interactions, there needs to be a new value exchange. Product influence, special content access, virtual badges, status rankings, or exclusive communications are all rewards for interactions that are based on more than just tangible cash or prizes. Recognition is a new reward of choice to add into the mix. According to mobileYouth®, a research advisory firm, recognition in the form of social currency consists of “things that help me belong” and “things that make me significant.” Unlike tangible rewards such as cash, which typically have personal value and are designed to make recipients feel special, social currency instead is about making the recipient “look special” to others within the dynamic groups and networks each consumer is building in their online and offline interactions. If social interactions are exposed to other people — whether on Twitter, Foursquare, Facebook or LinkedIn® — they attract implicit or explicit visibility to the dynamic groups the customer prefers. Social currency also taps into the fast-growing phenomenon of the gift economy — an attitude prevalent among, but not limited to, Millennials. This generation doesn’t have the wealth or income of previous generations, but it does have a great deal of comfort with online resources, and readily embraces shared or borrowed items, such as municipal bicycle programs. Currently, the “sharing economy” as it was called in a BBC report, is small: The BBC puts its value at $US 3-4 billion, but claims that figure could quadruple during the next five years. Furthermore, Imagination for People, an organization that trumpets creativity as a source of ideas for public good, says that gifting, sharing, and other aspects of what it terms “collaborative consumption” represent “a new economic model.” The idea behind these concepts is simple enough: It’s about connecting people directly with other people to exchange goods and services, whether it’s borrowing a car for the day (RelayRides) or a room for the night (Airbnb), or exchanging promotion codes. The question is whether loyalty marketers can turn this sharing/collaborating instinct into activities that benefit both their own © 2014 Aimia Inc. All Rights Reserved. data‑gathering needs as well as their customers’ wants. Gift economies are much more focused on relationships and sharing, and are typically between friends or close communities. In a gift economy, it’s not the value of the gift or the expectation of return that is important. For loyalty programs looking to gather interaction information, it’s essential to create an emotional connection with members that transcends the basic transaction. For example, the Pampers Rewards program is not just about diapers. Its about the journey of being a mother and the emotional connection with the brand that results from the program’s value, which extends beyond discounts. The program allows mothers to track and celebrate milestones; ties promotions and offers of lifestyle items such as child development toys, gift cards, or charitable donations; and provides opportunities for many interactions with the brand and others in the community, as mothers tackle the challenges of raising children together. Members get social recognition or social currency from sharing, as well as bonus codes they can give out or share with others. Twitter parties, Facebook sharing, and community advice are all just part of the entire journey facilitated by the program, which reaps tremendous insights about its member base that it can use to boost long-term customer loyalty. 1.7 million Facebook fans and all their friends are exposed to the Pampers loyalty program, with an app publishing strategy that delivers 10x better response rates than other online tactics. And through this one slice of information, the lifetime value of Facebook app users can be measured for how they interact with the Pampers brand in that forum, as well as their re‑engagement rate. These are just a sample of the insights gained from one small piece of a larger strategy.

Rewarding Interactions / 13 MAKING THE EXPERIENCE MORE REWARDING, LASTING, AND FUN FOR MOTHERS Enroll and Welcome Rewards, Promotions, and Charities Promote and Offer Capture Purchases Sharing and Rewarding via Facebook Targeted Offers Members Engage Others via Twitter Partners and Progress Tracking © 2014 Aimia Inc. All Rights Reserved.

14 / Rewarding Interactions MOTIVATING CONSUMERS TO SHARE INTERACTIONS: GAMIFICATION In order to start rewarding interactions in real-time, loyalty marketers need a new approach to leveraging and gathering data. The combination of game mechanics and big data offers a tantalizing mashup for today’s loyalty marketers. According to a survey released in August 2013 by Monash University’s Australian Centre for Retail Studies, national retailers are increasingly incorporating gamification elements to make their progress more appealing to fickle consumers who have multiple digital and offline channels at their disposal. Traditional loyalty programs typically have only one or two gaming mechanics — points and tiers. Additional game mechanics, such as badges, levels, check-ins, and progress bars, can now help drive a wide variety of behaviour changes on social networks, on mobile apps, and websites. These features help marketers engage with consumers and motivate and encourage them to share interaction data, which will lead to true customer intimacy and loyalty. My Starbucks Rewards™ offers an example of a program that uses gamification tactics to boost the customer experience and tie interactions to its loyalty program. Players register for My Starbucks Rewards through an app, and each time they purchase a Starbucks product, they accumulate stars, to earn benefits such as birthday gifts and personalized offers. There are three “levels” depending on the degree of user loyalty: Frequent visitors get awarded with a level upgrade. The following page represents a simple example of a Foursquare badge for Starbucks that incorporates many of the elements in one communication. 1. Social Currency. All my friends see my badge and the badge is not points, it’s status. 2. Gift Economy. It encourages me to share and buy my friend a coffee. © 2014 Aimia Inc. All Rights Reserved. 3. Relevant and Useful. It’s relevant and useful because I’ve just checked in at the coffee shop after five visits and unlocked the badge for status — and by doing so, I get a benefit that I can share with my friends. Starbucks is clearly a brand that understands how to use game mechanics and their business results reflect this understanding. According to the October online issue of Marketing Week, Starbuck’s recent analyst report outlined plans to enhance mobile, digital and loyalty operations as they look to secure future sales in a highly competitive coffee market. They are adding new features to My Starbucks Rewards, and the company wants the rewards program to establish a “Starbucks currency” that can be used across multiple platforms to build more loyalty customers. Starbucks is also planning updates to its mobile apps, including mobile ordering and digital tipping. Howard Schultz, chief executive of Starbucks, as saying that “no single competency and capability had amplified the brand more than its investment in all three platforms.” The announcement came in the same week the brand began allowing customers to buy coffees for a friend via Twitter. This is being tested in the US.

Rewarding Interactions / 15 STARBUCKS INCORPORATES MANY OF THESE PRINCIPLES Social Currency Gift Economy Relevant and Useful © 2014 Aimia Inc. All Rights Reserved.

16 / Rewarding Interactions TAKING CONTROL: CUSTOMERS AND THEIR DATA Building intimacy means creating a trusting, safe environment where both parties can share freely. It remains to be seen whether consumers will feel comfortable sharing increasingly personal information for added benefits and rewards or whether they will choose to clam up due to concerns about privacy and safety. According to Aimia’s 2013 Loyalty Lens, the 18-24-year-old cohort is more likely to share a wide range of information online (45 percent) versus the older cohorts, which are more guarded (just 26 percent for those between the ages of 55-64). But no matter what the age, we believe two primary variables are at play when it comes to motivating consumers to share interaction data over the long haul: > Control: Do consumers have perceived control over the use and “ownership” of their data? > Engagement: Will marketers use data wisely for long-term relationship building, or will they focus on short-term promotional activity? In the past, consumers didn’t deeply consider how the data they gave to websites would be used. That, however, is starting to change. Online consumers are gaining more control of their brand experiences and exercising power over their own data. For example: > hey limit what marketers can learn T about them online. Web browsers are including do-not-track tools to enable consumers to lock down what can be shown within their browser experience. > hey control the online messages T they see. Facebook provides a one‑click solution to consumers to hide any brand messaging they don’t like, even if they have a previously established relationship with that brand. > They can avoid television advertising altogether. On‑demand services like NetFlix, Spotify®, or simply a home personal video recorder are enabling the consumer to opt out of advertising completely. > They can prevent direct mail from reaching their mailboxes. Outbox — a Texas-based start-up — allows consumers to filter their direct mail, with options to have unsolicited mail or mail from known brands (using logo recognition) thrown away. Your marketing efforts will be compromised unless you support proper data use. Aimia has developed a framework globally called TACT to support © 2014 Aimia Inc. All Rights Reserved. the need customers have about their data. Marketers looking to glean interaction data from their customers and gain trust from your brand, should make sure the following is at the heart of what you do: > ransparency: You must provide T customers with information on the specific data being collected, the manner in which it is being collected, and how it will be used. The language and access must be in a consumer-friendly and easily understandable format. > dded Value: You must make your A customers aware that they’re being compensated in a specific manner for providing personal data. Whether that compensation comes in the form of loyalty program rewards, partner benefits, exclusive experiences, or other exclusive information, this value exchange must be made explicit. > ontrol: You must give customers C control over the data they have provided by telling them with whom you’re sharing it and giving them the ability to opt out of data collection at any time. > rust: You must give consumers T confidence in the security of the data. Trust results from using personal data only in the manner in which you promise it will be used, and by sharing it only with partners named up front. You must collect only the data you need, and use the data collected to build consumer value.

Rewarding Interactions / 17 INTERACTING SOCIALLY IS BASED ON TRUST Aimia’s TACT framework ensures customers are at the heart of what we do. TRANSPARENCY Customers have information on what is collected, from where, and for what purpose CONTROL ADDED VALUE Customers understand there is a value exchange through recognition, rewards, and offers CUSTOMERS Customers have control over what they provide, how it is used, and how it is shared TRUST Comes from confidence that data is held securely and used in mutually agreed way © 2014 Aimia Inc. All Rights Reserved.

18 / Rewarding Interactions CONCLUSION: BREAKING THROUGH TO CUSTOMER INTIMACY As with any relationship, developing intimacy isn’t easy. Humans have a basic desire to belong and become attached, but bond-building doesn’t happen one-dimensionally with just an economic proposition. This is true with the brand-customer relationship, as well: Getting close to your customers means getting to know them whenever and wherever they interact with your brand, not just at the checkout counter. But this goal requires going beyond the points and tiers of traditional loyalty programs that focus on purchases and transactions. Companies are beginning to figure out how to reward customers for the important interactions that precede and follow a purchase. Brands are especially cognizant of the social interactions that translate to engagement and advocacy. Whether customers are searching online, commenting on Facebook pages, or viewing YouTube videos, adding their interactions to their transaction data can help generate the next level of customer loyalty. Loyalty is changing. For customers, it now means the experience they have at any time they interact with a brand, no matter when that interaction happens, or through which channel. And they expect those interactions to take place when they want them, not when a brand provides the opportunity for them. Customers have increasing expectations around their experiences, and marketers need to be ready to respond. Companies must find creative ways to use their loyalty programs to build and capitalize on the emotional connections engaged customers have with their preferred brands. By looking at the customer more holistically — across all interactions and throughout the purchase cycle — marketers can better shape the customer journey and drive brand loyalty. To review, these are four powerful pillars you can build to use interaction data to create intimacy and long-term loyalty: > hink utility and relevance. T Customers want all aspects of their dealings with brands to work together seamlessly, without friction and supported by data-based decisions. If you can provide that, customers are more likely to let you capture the interactions that help you fuel marketing insight, boost segmentation efforts, and leverage new communication channels. > Recognition will reinforce loyalty. Rewards in the form of cash or discounts are no longer enough in today’s loyalty landscape. Recognition, which makes the customer look special to others, is an essential reinforcement, particularly when it comes to sharing social interactions with a brand. > cale with new technologies S and methodologies. Combining © 2014 Aimia Inc. All Rights Reserved. interactions with transaction data requires new solutions, not legacy technologies and budgets. For example, your loyalty platform needs to be agile and in the cloud if you want to compete, because the volume, velocity, and variety of interaction data can’t be handled with old tools and thinking. > Remember that the customer owns the data. Companies will not succeed or build loyalty by abusing the trust of their customers. Seek permission, use data transparently, and reward consumers for voluntarily sharing personal information. In return, they will reward you by sharing their experiences with your brand and remaining loyal. According to Rajat Paharia, author of Loyalty 3.0: How to Revolutionize Customer and Employee Engagement with Big Data and Gamification, loyalty is poised to go to the next level: “What loyalty actually means is that we have a relationship that transcends the transactional; it’s about something else. So what is that something else and how do you drive that level of engagement to escalate that relationship?” At Aimia, we believe that the “something else” is the power of customer interaction data combined with transactions. Marketers are close to being able to truly connect the dots using existing technologies. However, they need to proactively position their businesses by placing data and technology in service of their customers. This is the difference between using these tools to spy on customers and sell to them, and using these tools to see the world through their eyes. The latter is the key to loyalty marketing success and developing real customer intimacy.

Rewarding Interactions / 19 Think utility and relevance Recognition will reinforce loyalty Scale with new technologies and methodologies Remember that the customer owns the data © 2014 Aimia Inc. All Rights Reserved.

20 / Rewarding Interactions ABOUT THE AUTHORS Cindy Faust, Vice President, Global Product Marketing In her role as VP, Global Product Marketing, Cindy provides leadership to drive the overall go-to-market strategy for Aimia technology products. Her role includes sales packaging, client services strategy and the evaluation of revenue-generation programs for existing and new proprietary global products, ensuring the introduction of new products is coordinated across departments internally and through external product launch to maximize commercial success. In addition, Cindy focuses on customer advocacy programs as well as understanding and synthesizing customer insights and market needs. Mark Sage, Director, Global Loyalty Product Mark Sage is a subject matter expert and advisor in the area of customer retention and specifically loyalty marketing. He is a highly skilled relationship marketing professional, with a considerable range of best practices and case experiences to contribute. With a background in software systems design and a passion for marketing, Mark is able to unite the strategy and theory around customer retention marketing with the art of the possible regarding technical delivery. Mark is a keen advocate of social computing and the psychology of customer behaviour. Prior to her current role, she was VP, Product Management for the US region and VP, Loyalty Technology Services, delivering technical solutions for clients in the financial services, travel and hospitality, retail, CPG, telecom, automotive, pharma and high tech industries. She joined the company in 2005 with a focus on business development for new loyalty programs. Prior to joining Aimia, Cindy held various IT leadership positions with Carlson Companies and GE Capital ITS. She started her career at Entex Technical Solutions as a consultant on the American Express® account. Cindy has earned various collegiate degrees including an MBA from the University of Minnesota’s Carlson School of Management. Mark’s views on the future of loyalty have also been published within a number of journals. Mark is also a keen advocate of loyalty marketing and maintains a popular blog which discuss trends and thoughts on customer loyalty. Mark has worked for Aimia for over 15 years and has experience with technology development, loyalty program design and loyalty marketing. He has gained extensive experience of consumer-oriented marketing programs, having implemented and consulted on loyalty solutions for clients such as LTSB, Starwood® Hotels, Best Buy®, Barclaycard, RBS, Brother®, MBNA, First Data™, Visa® and Coca-Cola®. Paul Sage, Product Management Director, Loyalty Management Systems brought on board three fully integrated loyalty programs in CPG and retail during 2011 and 2012. Paul Sage is responsible for product strategy and positioning of Aimia’s Loyalty Platform within the US region. Paul coordinates client collaboration, market analysis, and industry leader feedback to inform the global product development of requirements for ongoing investments in the Loyalty Platform. His responsibilities extend to delivering sales tools, product management processes, content, and positioning for all aspects of the product. Prior to Aimia, Paul was on the board of a UK social enterprise organization supporting NGOs, charities and not-for-profits in their efforts to leverage social media to drive donations and communications. As well, Paul is owner of a UK marketing consultancy firm specializing in securing government digital presences. Prior to his current role, Paul managed the IT architecture and consulting team in the US region. As part of his responsibilities, he repositioned the team to a product strategy and sales engineering team which secured and © 2014 Aimia Inc. All Rights Reserved. With two decades of international experience Paul has worked extensively with marketing services and data analytics organizations in the United Kingdom, United States and Asia for clients in oil and gas, financial services, retail, high tech, government, non-profit and CPG verticals.

Rewarding Interactions / 21 EMOTIONAL ENGAGEMENT REAL RELATIONSHIPS HIGH DATA CONTROL About Aimia Aimia Inc. (“Aimia” or the “Corporation”) 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, Nectar Italia and Smart Button a leading provider of SaaS loyalty solutions. In addition, Aimia owns stakes in Air Miles Middle East, Mexico’s leading coalition loyalty program Club Premier, Brazil’s Prismah Fidelidade, China Rewards — the first coalition loyalty program in China that enables members to earn and redeem a common currency, 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 US-based private company operating in card-linked marketing for electronic banking. Aimia is listed on the Toronto Stock Exchange (TSX: AIM). For more information, visit us at © 2014 Aimia Inc. All Rights Reserved.

YOUR BUSINESS RESULTS DELIVERED OUR INSIGHT With more than 4,000 talented professionals in 20 countries, we can deliver results for your business using our loyalty insights. We see relationships differently. Visit us at © 2014 Aimia Inc. All Rights Reserved.

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