As sports organizations strive to adapt to the challenges of modern fan engagement, one successful model offers a wealth of insights: Frequent Flyer Programs (FFPs). The best frequent flyer programs have revolutionized customer engagement for airlines, creating ecosystems that not only reward customers for their loyalty but also provide valuable data and unlock new revenue streams.

The good news, as was discussed in a recent episode of the Loylogic Podcast, From Frequent Flyer Programs to Fan Engagement Programs: How Loyalty Can Be the Savior of Sport,the principles that make FFPs successful can easily be applied to Fan Engagement Programs (FEPs), helping sports clubs and leagues build deeper connections with their audiences.

In this article we explore some of the key learnings from FFPs that loyalty experts Gabi Kool and Philip Shelper believe can transform how sports loyalty programs work. To listen to the podcast in full, simply click below, or read on to find out more.

1. Building a partner ecosystem for broader engagement

One of the most powerful elements of FFPs is their ability to create extensive partner networks, allowing customers to earn miles not just from flights but from everyday activities, such as shopping, dining, and using credit cards. Gabi, in the podcast, highlighted this key advantage: “Frequent flyer programs have built loyalty by creating ecosystems. Sports organizations should do the same, allowing fans to earn points through different touchpoints.”

FEPs can emulate this model by partnering with businesses and brands that resonate with fans, extending the ways in which they can engage. Fans could earn points not only from attending games but also from buying merchandise, subscribing to content, or interacting with a team’s sponsor network. This allows sports organizations to keep fans connected, even outside of game days, and opens up additional revenue opportunities.

2. Flexible and meaningful rewards are critical

FFPs succeed because they offer flexible ways for travelers to accrue points and redeem them for rewards that matter—whether it’s a free flight, an upgrade, or access to exclusive airport lounges. The key is in offering rewards that provide real value to customers, incentivizing them to stay loyal over the long term.

Fan Engagement Programs should also focus on offering a diverse range of rewards that appeal to different segments of their fanbase. As Philip explained, “Redemption is key. If fans can only use their points for things they don’t care about, it’s not going to work.”

For sports fans, valuable rewards could range from VIP tickets and exclusive team merchandise to once-in-a-lifetime experiences like meeting players or attending a training session. Offering a variety of options allows FEPs to cater to both casual and passionate fans, increasing the likelihood of sustained engagement.

3. Creating emotional bonds with fans

One of the strengths of FFPs is their ability to create emotional bonds between the airline and its customers. FFPs don’t just offer material rewards; they make customers feel recognized and valued. Priority boarding, access to lounges, and personalized offers are designed to make frequent flyers feel like part of an exclusive community.

In the sports world, the emotional connection between fans and teams is already strong, but FEPs can enhance this by offering personalized experiences that deepen that bond. Gabi noted, “Loyalty is about emotion. Offering a fan the chance to meet their favorite player or get behind-the-scenes access—that’s about creating memories.”

By offering exclusive experiences as rewards, FEPs can turn fan loyalty into something much more personal and meaningful, ensuring long-term support and engagement.

4. Unlocking hidden value in non-traditional fans

Just as FFPs allow even infrequent travelers to stay engaged through partner programs, FEPs can tap into non-traditional fans who may not attend games regularly but are passionate about the team. Philip emphasized, “There’s a huge segment of fans who aren’t going to games regularly but are engaging digitally. These fans are incredibly valuable.”

By allowing fans to earn points through digital interactions, such as watching live streams, following social media, or purchasing merchandise, FEPs can engage a wider audience and unlock value from fans who may otherwise be overlooked. This helps teams build a more inclusive engagement strategy that caters to fans wherever they are, whether in the stadium or at home.

5. Data is a key asset for tailored engagement

As discussed in a previous episode of the Loylogic Podcast - click here to listen - FFPs are known for generating vast amounts of data on customer preferences and behaviors, allowing airlines to tailor their offerings and communications. As Gabi noted, “Data is the future of fan engagement. Loyalty programs give you the tools to understand exactly how your fans are interacting with the club.”

FEPs can harness the same potential by using fan data to personalize the fan experience. By tracking how fans engage with digital content, attend games, or interact with sponsors, teams can create targeted marketing strategies, offer tailored rewards, and strengthen sponsor relationships. The data can also help sports organizations make smarter decisions, refine their offerings, and create fan experiences that are more aligned with individual preferences.

6. It is possible to monetize fan engagement

One of the biggest advantages of modern FFPs is their ability to monetize engagement across a wide range of activities, beyond just air travel. In the same way, FEPs can monetize fan interactions that go beyond the stadium. Philip observed, “Loyalty programs are a great way to monetize digital behavior. You don’t need fans to come to every game for them to stay loyal.”

By encouraging fans to engage with the team through multiple platforms—whether it’s mobile apps, live streams, or social media—FEPs can turn every interaction into a revenue opportunity. This approach is particularly effective for digital-first fans who may engage heavily online but don’t attend games in person. Monetizing fan engagement across platforms ensures that the club can capture value from fans wherever they are.

Fan Engagement Programs have the potential to revolutionize how sports organizations interact with their audiences. By learning from the success of frequent flyer programs, fan engagement programs can create broader ecosystems, offer meaningful rewards, and build emotional connections that deepen fan loyalty. With the right strategy, sports clubs can harness fan data, monetize digital engagement, and extend their reach to non-traditional fans.

In a rapidly changing sports landscape, the lessons from FFPs provide a proven model for success in the future of sports loyalty programs, helping organizations at all levels to overcome some serious challenges along the way.

As sports organizations strive to adapt to the challenges of modern fan engagement, one successful model offers a wealth of insights: Frequent Flyer Programs (FFPs). The best frequent flyer programs have revolutionized customer engagement for airlines, creating ecosystems that not only reward customers for their loyalty but also provide valuable data and unlock new revenue streams.

The good news, as was discussed in a recent episode of the Loylogic Podcast, From Frequent Flyer Programs to Fan Engagement Programs: How Loyalty Can Be the Savior of Sport,the principles that make FFPs successful can easily be applied to Fan Engagement Programs (FEPs), helping sports clubs and leagues build deeper connections with their audiences.

In this article we explore some of the key learnings from FFPs that loyalty experts Gabi Kool and Philip Shelper believe can transform how sports loyalty programs work. To listen to the podcast in full, simply click below, or read on to find out more.

1. Building a partner ecosystem for broader engagement

One of the most powerful elements of FFPs is their ability to create extensive partner networks, allowing customers to earn miles not just from flights but from everyday activities, such as shopping, dining, and using credit cards. Gabi, in the podcast, highlighted this key advantage: “Frequent flyer programs have built loyalty by creating ecosystems. Sports organizations should do the same, allowing fans to earn points through different touchpoints.”

FEPs can emulate this model by partnering with businesses and brands that resonate with fans, extending the ways in which they can engage. Fans could earn points not only from attending games but also from buying merchandise, subscribing to content, or interacting with a team’s sponsor network. This allows sports organizations to keep fans connected, even outside of game days, and opens up additional revenue opportunities.

2. Flexible and meaningful rewards are critical

FFPs succeed because they offer flexible ways for travelers to accrue points and redeem them for rewards that matter—whether it’s a free flight, an upgrade, or access to exclusive airport lounges. The key is in offering rewards that provide real value to customers, incentivizing them to stay loyal over the long term.

Fan Engagement Programs should also focus on offering a diverse range of rewards that appeal to different segments of their fanbase. As Philip explained, “Redemption is key. If fans can only use their points for things they don’t care about, it’s not going to work.”

For sports fans, valuable rewards could range from VIP tickets and exclusive team merchandise to once-in-a-lifetime experiences like meeting players or attending a training session. Offering a variety of options allows FEPs to cater to both casual and passionate fans, increasing the likelihood of sustained engagement.

3. Creating emotional bonds with fans

One of the strengths of FFPs is their ability to create emotional bonds between the airline and its customers. FFPs don’t just offer material rewards; they make customers feel recognized and valued. Priority boarding, access to lounges, and personalized offers are designed to make frequent flyers feel like part of an exclusive community.

In the sports world, the emotional connection between fans and teams is already strong, but FEPs can enhance this by offering personalized experiences that deepen that bond. Gabi noted, “Loyalty is about emotion. Offering a fan the chance to meet their favorite player or get behind-the-scenes access—that’s about creating memories.”

By offering exclusive experiences as rewards, FEPs can turn fan loyalty into something much more personal and meaningful, ensuring long-term support and engagement.

4. Unlocking hidden value in non-traditional fans

Just as FFPs allow even infrequent travelers to stay engaged through partner programs, FEPs can tap into non-traditional fans who may not attend games regularly but are passionate about the team. Philip emphasized, “There’s a huge segment of fans who aren’t going to games regularly but are engaging digitally. These fans are incredibly valuable.”

By allowing fans to earn points through digital interactions, such as watching live streams, following social media, or purchasing merchandise, FEPs can engage a wider audience and unlock value from fans who may otherwise be overlooked. This helps teams build a more inclusive engagement strategy that caters to fans wherever they are, whether in the stadium or at home.

5. Data is a key asset for tailored engagement

As discussed in a previous episode of the Loylogic Podcast - click here to listen - FFPs are known for generating vast amounts of data on customer preferences and behaviors, allowing airlines to tailor their offerings and communications. As Gabi noted, “Data is the future of fan engagement. Loyalty programs give you the tools to understand exactly how your fans are interacting with the club.”

FEPs can harness the same potential by using fan data to personalize the fan experience. By tracking how fans engage with digital content, attend games, or interact with sponsors, teams can create targeted marketing strategies, offer tailored rewards, and strengthen sponsor relationships. The data can also help sports organizations make smarter decisions, refine their offerings, and create fan experiences that are more aligned with individual preferences.

6. It is possible to monetize fan engagement

One of the biggest advantages of modern FFPs is their ability to monetize engagement across a wide range of activities, beyond just air travel. In the same way, FEPs can monetize fan interactions that go beyond the stadium. Philip observed, “Loyalty programs are a great way to monetize digital behavior. You don’t need fans to come to every game for them to stay loyal.”

By encouraging fans to engage with the team through multiple platforms—whether it’s mobile apps, live streams, or social media—FEPs can turn every interaction into a revenue opportunity. This approach is particularly effective for digital-first fans who may engage heavily online but don’t attend games in person. Monetizing fan engagement across platforms ensures that the club can capture value from fans wherever they are.

Fan Engagement Programs have the potential to revolutionize how sports organizations interact with their audiences. By learning from the success of frequent flyer programs, fan engagement programs can create broader ecosystems, offer meaningful rewards, and build emotional connections that deepen fan loyalty. With the right strategy, sports clubs can harness fan data, monetize digital engagement, and extend their reach to non-traditional fans.

In a rapidly changing sports landscape, the lessons from FFPs provide a proven model for success in the future of sports loyalty programs, helping organizations at all levels to overcome some serious challenges along the way.

Welcome to the latest episode of the Loylogic Podcast, From Frequent Flyer Programs to Fan Engagement Programs: How Loyalty Can Be the Savior of Sport.

The past few months have seen us enjoy a wonderful summer of sport, with the Paris Olympics and Paralympics, the Euro football championships, and an incredible Tour de France to name just some. But what happens once those big events are over? How can sport remain at the forefront of people’s attention? How can sports continue to drive participation and engagement with the help of loyalty?

In this episode, we focus on how fan engagement programs (FEPs) can offer a lifeline for clubs, leagues and sports federations amid changing media consumption trends and financial challenges. We discuss how loyalty can better engage fans, including those who attend games every week and the masses of hidden fans, and unpick how sports organizations can replicate the success and engagement expertise of frequent flyer programs (FFPs), to leverage fan loyalty to drive financial growth and emotional connection.

Joining us to share their views are Philip Shelper, CEO of loyalty consultancy and Loylogic partner Loyalty & Reward Co, and Loylogic’s CEO, Gabi Kool, who both have experience of the international sports arena. Philip has worked on a number of loyalty programs for international sports federations and an English Premiership football club. Gabi, away from his time at Loylogic, is president of the International Korfball Federation, which is an IOC Recognized Federation, where he’s a passionate advocate for the development of Korfball, which he hopes to see make it to a future Olympic Games.

To find out loyalty can be the savior of sport, listen below or read the full transcript further down the page.

(2:08) Gabi, for context, can you provide a quick overview of who the key stakeholders in the world of sport are and how it's structured?

Gabi: "The world of sport is a very complex ecosystem, so let me maybe run you through almost like a top 10 of the key players in there. So, if you start maybe at the top, it's the international sports organization level. That's where you will find the IOC. The IOC, of course, governs the Olympic Games and also recognizes the International Federations. In short, they're called the IFS who manage the individual sports and there are about 72 recognized by the by the IOC.

"Then you also have national Olympic Committees at that same level, so they represent the IOC at the national level and oversee the participation in the Olympics and also promote sports within their countries. Then at the second level, you have got something which is called national governing bodies, in short, called NGBs. In that group, you will find national federations who govern specific sports within individual countries. They're quite often under the umbrella of an IF so, for example, this would be the FA in England for football, but could also be professional leagues which organize and regulate professional competition within the country or region. To build on the FA example, which will be, then the Premier League in the UK, or the NFL or Serie A in Italy for football.

"At the third level, what you have in the ecosystem is clubs and teams. So, these are professional clubs who are competing in various leagues and competitions. But also, of course, national teams. Fourth layer would be athletes. Within there you've got professional athletes who compete at the highest level. But of course, maybe even more importantly, also the grassroots level, which are the amateur athletes.

"If you go to the next levels, you have event organizers. So often there are event management companies involved. Also host cities are a player in that ecosystem for large events. Another level would be sponsors and advertisers, where, basically, very often, you will find the investment in sports through the sponsorships. And then there are broadcasters and media rights. These are television networks, streaming platforms, media outlets etc.

"And then you've got the fans and spectators, who are another big group in the ecosystem, and then the last two would be government and regulatory bodies. So, for example, national governments often play an important role in the sport ecosystem, also via their financing and support, but also organizations like WADA, who are the anti-doping agency, or CAS, which is the Court of Arbitration for Sport.

"And then lastly, you've also got agents and managers playing a role there. All in all, it's a very interconnected ecosystem, especially I think in the topic of today's discussion around loyalty. It's interesting to think about what kind of fans and followers and kind of individual consumers are in connection to these kinds of layers, and how can you come up with compelling propositions there."

(5:12) As mentioned, there's lots of different stakeholders at different levels, and the ecosystem is interconnected. Are there any common challenges that you can draw out that all of these different stakeholders are facing?

Gabi: "So maybe I can start before Philip shares lots and lots of examples and experience as well dealing with a lot of the sport bodies around the world. The two key topics that I see coming across a lot is, of course, attracting income via sponsorship and media rights. It doesn't matter who I speak to, it's a topic that always comes up. It's always a challenge for a lot of the sports bodies. And then the second part, which is a bit linked to that, is the ability to reach the younger generation, especially because of their different media consumption patterns. So of course, there's tons and different kind of topics that will come up for all these examples that I mentioned previously, but those probably will be two major ones that I often see coming across."

Philip: "I think the main thing is the recognition that they're incredibly complex organizations. So, a major sports club would have numerous divisions covering ticketing, food and beverage, they'd have a merchandise team, people who look after the stadium, all the hospitality, sponsorships, media, they might have an Academy for teaching junior sport. They'll be doing some grassroots investment. They've got the memberships, transport for fans for away games and more. Compared to the average company, they're way more complex and have got so much more going on, and they never really know which way their fortunes are going, because that internal team can be doing everything perfectly, and yet the team is losing and so the amount of money that they get coming in for ticket sales or for media or for future seasons drops away. There's a lot that I think they need to take into account in planning what their future is going to be."

(7:24) Gabi, coming back to one of the challenges that you mentioned there, that I know you're very interested in, what are the specific problems around the current media landscape and the changing consumption habits, and how is that impacting sport?

Gabi: "I will give some examples, basically, kind of to paint the picture there a little bit. But if you take a step back, kind of what most sports organizations are dealing with, and especially also the larger ones as well, there's a fragmentation of viewership. With the rise of the streaming platforms, you see that audiences are increasingly spread across multiple channels, so it becomes much harder for traditional broadcasters to capture the large and unified audiences compared to what it used to be. So nowadays, with this fragmentation, you would have linear TV, these are companies like ESPN or Fox, you got streaming exclusive partners, which could be YouTube or Apple doing kind of a specific event via their kind of channels. There are streaming bundles, there's direct from leagues platforms like mlb.tv or like nba.tv and then, of course, you've got the second screens like TikTok or instar or snap, who are also starting to broadcast particular matches or content kind of in there. So, it becomes much more fragmented than what the sports organizations were used to dealing with. In light of that, they also see a declining traditional TV viewership, because, especially the younger generations, they prefer on demand mobile content and so that starts affecting the advertising revenues for the broadcasters.

"Then you'll also see topic of piracy in that space. So basically, a lot of people are consuming it via less formal kind of channels, in that sense. So, the ease of accessing illegal streams undermines the legitimate broadcaster’s revenue potential in there.

"All of that paints quite a complicated media landscape for them. And if I give you a numeric example, if you think about people in their 50s, 60s, they are probably worth about 1,000 euros per year for when it comes to sports media distribution. Then slightly younger, 30 to 40, probably they sit now at around 800 euros per year of what they represent in media distribution value. But then the younger ones are going to 700 euros and often quite far below. If you look at the Serie A as an example in the Italian Football League, all in all, it basically means that series lost about 304 million euros per season in the latest cycle. And of course, that financial shortfall creates all kind of challenges for the clubs associated so it's an example of where it starts hurting. And probably the main way to keep the attention or get the attention of the sports administrators is to follow the money in that part, because that's where usually it affects their ability to run their clubs or their organizations."

(9:13) Given this whole changing media consumption, does it mean that there's a whole untapped fan base that sport is now failing to engage and therefore monetize?

Philip: "I think there definitely is, that's what we refer to as hidden fans. And it's not just a modern phenomenon. It's something that has always existed, ever since television was invented. Actually, clubs are doing a better and better job of making it easier and easier for fans all around the world to engage with them, but there is a lot of fans who don't go to the games. They might buy merchandise, but there's no record of them buying that merchandise. They watch the games, but they might do it at the pub. So, they don't have any sort of subscription. There's no tracking of it. They go to work on a Monday and talk obsessively about how good or bad the game was, and so on and so forth. So in our estimates, that could be as much as 60 to 80% of the total fan base is completely hidden by a club, and that means that all the different opportunities for the club to drive engagement with that base and to monetize them, but also to recognize them and make them feel closer to the club  don't exist.

"From our perspective, there's enormous opportunity there that would be better for the clubs, but also better for the fans as well. And it's all about making it an easy and rewarding experience that they're attracted to enough to take the step of doing that formal engagement."

(12:08) Is that why sport is perfectly suited to loyalty?

Gabi: "I think if you if you look at the comparison to the frequent flyer program model, which has probably been the most successful in that particular space and has created enormous valuations for the airlines who own those loyalty programs, Qantas in kind of Philip's backyard, of course, is a great example. But also, if you look at all the US-based carriers, also European carriers, very often, their valuations are in the millions, even billions of dollars. And if you take a look at their model and basically unpack that, I think there's a very great blueprint for sports organizations to write on that part.

"If you look at an FFP, the key thing why that's so profitable is that on one hand side, they've got accrual partners where people can earn those miles. And basically, those accrual partners buy the miles from the airline at a relatively high cost per mile or per point, and then when those miles are being redeemed, there is a very high perceived value of the reward, i.e. the perishable airline seat, but the actual cost for the airline is much lower. So one of the big kind of secrets or tricks in these FFP models is like, you sell it at a much higher cost per point, and then when the member exchanges that for the reward, it's actually a much lower cost to you, but it has a very high perceived value.

"If you draw that parallel to the sports world, basically you would have to find a lot of accrual partners who are willing to buy a sports-related currency, either a currency linked to a club or a federation, or something like IOC level, maybe even in there. But then, when they use these sport-related points, you need to be able to offer them something which is relatively low cost to you as a program operator, but has got very high perceived value, so access to games, money can buy type experiences. There's a whole range of examples that we'll unpack a little bit more so, but the ecosystem of an FFP model is perfectly replicable in the sports world."

Philip: "I think one of the unique aspects of a sports team is a loyalty program is not needed to generate loyalty. The fans are already loyal. Some of them are obsessively loyal. And so, unlike an airline, where the airlines have to keep working very, very hard to maintain that share of wallet and stimulate the base to travel more, the sports teams kind of already have that. And actually, for many of the bigger sports teams, they don't have enough tickets to sell to each game, and so there is a slightly different dynamic there. So, I think the big opportunity for a loyalty program is to provide that better recognition and reward fans and make them feel like they do have that deeper connection in the same way that a good quality loyalty program would build emotional engagement between the member and the brand. It's that establishment of that formalized two-way relationship is where the big opportunity is.

"Now to Gabi's point and the frequent flyer model. I tend to agree. I think there is definitely some parallels there. You've got the club, you've got the obsessed fan base, you've then got sponsors, but you've also got other companies who would be interested in being connected to the club, that can't afford sponsorship, who might be happy to be earn partners. There's definitely the opportunity to build out that engaged ecosystem of companies that are buying points to give to the fans.

"Then on the other side, you've got all the money can't buy experiences that a club would be able to provide to the fans that they can redeem those points on as well. I think it's a really fascinating model."

(15:55) There's obviously a lot of opportunity there. Philip, what's the current situation when it comes to sport and loyalty, is the sports industry tapping into the benefits loyalty can bring, or you've touched on it already, is there so much more that can happen to drive engagement?

Philip: "They're barely scratching the surface at the moment. I think traditionally, teams have focused much more on memberships that provide fans with access to games, dedicated seating, discount hospitality packages. So, it's more that subscription loyalty program strategy, but they can definitely do a lot more to engage fans who can't or don't want to attend the live games. There are enormous amounts of fans out there who actually don't want to go to a game. They're obsessed about and would live and die for the team, but the idea of going to a game actually isn't that interesting to them. They might go to one or two, or they just can't get tickets, and all the tickets are too expensive, so they don't bother. So, building out a loyalty program that provides fans with a lot of other ways that they can engage in a way that is meaningful to them, is definitely something that clubs could do a lot better at."

Gabi: "I would build on Philip's input there. It also depends a little, if you think about a club, they need to do their kind of strategies, and they are only scratching the surface right now, but you see some interesting propositions coming. If you think about a national federation, the Football Federation, their national team only plays X number of times per year. So how do you basically keep the engagement going in between those kinds of games? If you think about an IOC when it's every two years when there's a winter games and a summer Olympics, you get massive attention during these kinds of games, but then how do you keep that ongoing engagement? There are different kind of propositions you can build on there. So, it also depends a little bit on how you design, what you design for whom, in that sense, on the proposition, because they've got different needs.

"I think in general, there are lots of opportunities. You see some emerging loyalty programs, but in terms of the sponsorship synergies or the data utilization, it's quite often still a bit ad hoc. It's not kind of a master plan embedded in a larger strategy of the organization."

Philip: “At a league level, the next level up, we're not really seeing anything at all, and I feel that's quite disappointing, because some of the leagues, particularly bigger leagues, could play a critical role in helping clubs to roll out comprehensive loyalty strategies. Loyalty is complex, it requires technology, it requires expertise, and you need to get the proper design. You need the right commercial model; you need operational excellence. So where we see a big opportunity is a league engaging a loyalty consultancy or company to design out a program, bring in the technology and enable that to be cascaded down to the teams, so that the teams can get access to something with shared cost and maybe a centralized operations team to run it for them, so the whole league can actually have a good quality design loyalty program for their club with a fraction of the cost of what it would be if they tried to design it out themselves."

(19:17) I guess a big part of that is knowing what excites fans and what actually drives engagement. So, Gabi, how do you see that playing it? What are the trends that you're seeing?

Gabi: "I just came back from the Paris Games at the opening ceremony in my other kind of hat, as President of the International Korfball Federation. I had a chance to speak with a lot of the presidents of other International Federations. And exactly to Phil's point, how can you maybe do things collectively together, for big impact, because you might not have the individual resources available between each of the IFs. But if you bundle your kind of efforts, you can do much bigger things, and also you might have got a couple of million followers there, and another Federation is kind of there, so the scale can be enormous, right?

"I think it comes down to what are these fans kind of looking for. It varies a little bit. Is it the exclusive content and behind the scenes access? There are some notable examples on fan tokenization, NFTs, what people can do with it. But also, what we see is a lot of interest on how can you bring the physical sport world together with the eSports world? The esports world is also massively growing. Saudi Arabia just signed an agreement with the IOC for the next 12 years to have the Olympic esport games in Saudi and they're expecting that to turn into a $13 billion kind of industry just for the Kingdom of Saudi Arabia alone. You see massive groups of youngsters also in that kind of space. When you think about the rewards and the content. The sky's the limit actually."

(21:03) Coming back to what you were saying earlier about the airline loyalty program side of things. What can sport learn from those frequent flyer programs, and how can they bring that success to the fore for the good of the sporting community?

Gabi: "The internal tagline that we're using when we talk about how we see ourselves helping and supporting sports organizations, we call it from FFP to FEP: from frequent flyer programs to fan engagement programs.

"Where we think that sport communities can learn best is to replicate a lot of the great thinking on how you set up such an ecosystem? How do you manage it? How do you commercialize it? It starts by creating a big idea. It doesn't matter if it's a club or a federation or an IF, basically whatever the audience is in there. So, you create a big idea with a high-level engagement vision. Then based on that, you define the blueprint of your program, which should include all the key elements for such a fan engagement proposition. Program concept, program organization, business case. And then when you've done that, you validate that blueprint with all the stakeholders involved in your FEP, including the sponsors, the fans, and especially also the accrual partners, if you think about kind of a point space, because they will have to fund the currency.

"On the redemption side, you need to make sure you've got a very robust and creative offering in place which the members can spend their currency on. Probably the question is, do you go alone as an organization, or do you go together with a group of organizations? And then there's kind of people like us out there to help. There's so much knowledge in there, and you don't need to reinvent the wheel, right? That's kind of, I think, one of the key things for these sports organizations, because loyalty is complex, and therefore you need to make sure you don't make it more complex than it needs to be."

(23:12) Philip, what would be the right loyalty strategy?

Philip: "I definitely would always lean towards the club or the league owning the program so that they've got full control. I think the likes of socios.com has been attractive to a lot of clubs because it's very much a plug and play solution, and it provides some instant revenue for the club without them having to do anything. But certainly, the opportunity, the monetization and having control of that fan experience is going to work much better if they do own the program.

"So, I think if it's a big club, they should definitely be going their own. They're going to have the scale of fans to be able to layer a loyalty program over that very effectively. If it is smaller clubs, then, as I was talking about earlier, getting the league to build out the capabilities which can then cascade down to individual clubs would be a great way to do it, and it save them a lot of cost. But also building up those partnership networks could work across multiple teams and provide fans with lots of opportunities to earn points or currency or credits, whatever it might be to then use with their specific club."

(24:26) So where does loyalty come into play in overcoming the challenge of the changing media kind of situation?

Gabi: "I think there's an enormous monetization opportunity there, like if we draw back to the parallel to the ecosystem of how frequent flyer programs are being run, if you would replicate setups like that, you can create enormous income for the entities, but you need to design it properly. You need to think it through carefully on who those accrual partners would be for your fan base, what kind of brands would like to get in touch with your community. We tend to refer to this as Brands 2 Communities, which means if you understand the DNA of your community, then you understand what kind of brands would like to get their content or stories or offers in front of that particular community.

"Of course, you've got existing sponsors of clubs or federations or IFs out there, but you can also basically extend that to the accrual partnership network very easily. So I think the with the media income under pressure, loyalty offers a great opportunity for sports bodies to generate new income, and if designed well, also these media partners that need a helping hand in there can also find their way within such a loyalty ecosystem to get their media rights and media opportunities much better monetized in a very fragmented kind of landscape. So that's how I see the opportunity for large sports organizations."

(25:52) Wrapping up a lot of what we've already talked about here, what's the member value in this new loyalty led world of sport?

Gabi: "I think to the earlier discussion, fans are deeply in love with their sport or their club, right? What they're looking for is personalization, recognition if they've been a lifelong fan, to being part of the community. So really, that sense of belonging, but also having some kind of an influence or access to certain kinds of content in the recognition element, the exclusive access special rewards are what I think the fans are looking for, in this case, the members.

"The flip side of the what the clubs or the federations are looking for comes from the fact that a lot of these people in sports, would love, basically, for people to support their club or their sport, but they also are very passionate about getting people to move in general, because we see a lot of data out there of the world getting more obese, younger generations being less involved in clubs and organized sport. The true enemy is not moving and not being involved in sport. Yes, you try to do your best for your federation, your club, to get people involved in there and highly competitive on the pitches, as Philip mentioned. But basically, the much, much bigger opportunity that people are deeply passionate about, I've seen, is how you get people connected to sport, and I think that's where, integral loyalty platform or ecosystems can really play a role."

(27:24) So for sporting organizations, where do they start? What challenges do you think they should aim to solve, first through loyalty programs?

Philip: "I definitely think that they should start with better recognition of their long-term fans. If they try to do anything else, then they'll get those long-term fans offside. But it's very easy to do it. One of the clubs that we're working with identified when a fan who was having their birthday was going to be at a club, going to be at a game, and they actually delivered a cake to them during half time, right? There are a lot of very small, quite low-cost things you can do to really make someone provide them with an experience they're going to remember the rest of their life.

"I think providing more opportunities to for fans to influence hard decisions would be a really great thing. Clubs generally do not like this. They don't want to be giving control over to the fans, but even giving them some say on a few different things, I think would definitely appeal to them. Then, it's all about reaching out to that hidden fan base and engaging them as best as possible, and then providing better sponsor promotion. Sponsors are paying a lot of money for the right to put their brand on the team jersey, and anything that can be done in order to better support sponsors, particularly through a loyalty program stimulating fans to go and spend with the sponsors and be able to track that is going to be hugely beneficial to the sponsor in demonstrating the value they're getting from the sponsorship, as well as for the club, in getting the sponsor to sign up for the next."

(29:14) Gabi, how should sports organizations move forward?

Gabi: "I think the old saying of go slow in order to go fast is also valid here, because you do basically get a lot more value if you think as a sports organization, "Okay, what is kind of our plan? What do we want to kind of build in there?" And then, create your big idea, create a program blueprint, validate it, then kind of launch it. I think that would be the right approach in there.

"On a practical level, the examples that Philip referred to, it’s true that sponsors, you can almost draw a parallel between them and the number one funding partner in airline loyalty programs, which are co-brand credit card offerings. But if you see how difficult it is even for that organization to communicate directly via the airline's database. Basically, you can see similarities there between the sponsor community with a sports organization on how difficult it is for them to get in touch with the fans directly, so facilitating that direct engagement in that ecosystem, whereas airlines need to almost think like becoming marketing machines for their partners, sports organizations also have that opportunity, and quite often it's not well enough thought through by a sponsor, and how can you then leverage and engage with that community kind of in there, right? So that's, that's one thing in the design.

"I think in the next step, what I would encourage sports organizations to think about and understand and learn how valuable these loyalty entities could become, just in their own right, as an additional asset for a sports organization. And there's some really good examples out there, and that's kind of what I would encourage them to do as a next step."

(30:57) Coming back to the bold claim that we made at the outset of the discussion, how can loyalty be the savior of sport?

Gabi: "I do think this from FFP to FEP idea might be the proposition here, right? So how can you go from the frequent flyer program thinking to a fan engagement program thinking in there? The opportunity is there for the first number of sports organizations to create multi billion-dollar valuations via such an entity. But the airlines also didn't get that overnight, right? They basically had to build it, the technology, the thinking, the fan base, the offering kind of in there. So, while there are learnings to be taken in there, and plenty of support from companies such as ourselves, Loylogic and Loyalty and Reward Co, it will not happen as a miracle overnight, right? This is kind of a long-term engagement, and therefore you also need to think about what you want to do. It's not like a marketing gimmick where you just kind of do something and then basically, the dollars will fly in. That's not how it works. It needs to be an integral part of the club's or the Federation's strategy. There will be early movers in there that will take the time to think about it in that way, and there will be more tactical, ad hoc type initiatives, and I think the first group will be more successful with that."

Philip: I agree. I think the reality is that a lot of sports clubs and even leagues are not as lucrative and cashed up as what fans and people might perceive them to be. Certainly, there is a small number of clubs that are doing incredibly well, but they tend to be in the minority. Most clubs are trying to get together enough revenue and most of that goes into buying new players and putting on games. Any opportunity for a club to be able to build out a sizable new revenue stream should be highly attractive to them.

"And as per Gabi's talk of the frequent flyer program or the fan engagement program using the points earn and redemption economics, there's a really great opportunity there, but it does need to be symbiotic. It's not just enough to say, great, let's monetize our highly loyal fan base. It needs to be done in a way that provides fans with desirable, motivating value, so that they're getting something out of it, and the club is also getting something out of it. And

Really, the key to that is access. That's what the fans really want. They want access to players. They want access to the games. They want access to limited edition merchandise value offers, things that are really going to get them excited about engaging with that program, and then you've got a winning, successful recipe there."

Welcome to the latest episode of the Loylogic Podcast, From Frequent Flyer Programs to Fan Engagement Programs: How Loyalty Can Be the Savior of Sport.

The past few months have seen us enjoy a wonderful summer of sport, with the Paris Olympics and Paralympics, the Euro football championships, and an incredible Tour de France to name just some. But what happens once those big events are over? How can sport remain at the forefront of people’s attention? How can sports continue to drive participation and engagement with the help of loyalty?

In this episode, we focus on how fan engagement programs (FEPs) can offer a lifeline for clubs, leagues and sports federations amid changing media consumption trends and financial challenges. We discuss how loyalty can better engage fans, including those who attend games every week and the masses of hidden fans, and unpick how sports organizations can replicate the success and engagement expertise of frequent flyer programs (FFPs), to leverage fan loyalty to drive financial growth and emotional connection.

Joining us to share their views are Philip Shelper, CEO of loyalty consultancy and Loylogic partner Loyalty & Reward Co, and Loylogic’s CEO, Gabi Kool, who both have experience of the international sports arena. Philip has worked on a number of loyalty programs for international sports federations and an English Premiership football club. Gabi, away from his time at Loylogic, is president of the International Korfball Federation, which is an IOC Recognized Federation, where he’s a passionate advocate for the development of Korfball, which he hopes to see make it to a future Olympic Games.

To find out loyalty can be the savior of sport, listen below or read the full transcript further down the page.

(2:08) Gabi, for context, can you provide a quick overview of who the key stakeholders in the world of sport are and how it's structured?

Gabi: "The world of sport is a very complex ecosystem, so let me maybe run you through almost like a top 10 of the key players in there. So, if you start maybe at the top, it's the international sports organization level. That's where you will find the IOC. The IOC, of course, governs the Olympic Games and also recognizes the International Federations. In short, they're called the IFS who manage the individual sports and there are about 72 recognized by the by the IOC.

"Then you also have national Olympic Committees at that same level, so they represent the IOC at the national level and oversee the participation in the Olympics and also promote sports within their countries. Then at the second level, you have got something which is called national governing bodies, in short, called NGBs. In that group, you will find national federations who govern specific sports within individual countries. They're quite often under the umbrella of an IF so, for example, this would be the FA in England for football, but could also be professional leagues which organize and regulate professional competition within the country or region. To build on the FA example, which will be, then the Premier League in the UK, or the NFL or Serie A in Italy for football.

"At the third level, what you have in the ecosystem is clubs and teams. So, these are professional clubs who are competing in various leagues and competitions. But also, of course, national teams. Fourth layer would be athletes. Within there you've got professional athletes who compete at the highest level. But of course, maybe even more importantly, also the grassroots level, which are the amateur athletes.

"If you go to the next levels, you have event organizers. So often there are event management companies involved. Also host cities are a player in that ecosystem for large events. Another level would be sponsors and advertisers, where, basically, very often, you will find the investment in sports through the sponsorships. And then there are broadcasters and media rights. These are television networks, streaming platforms, media outlets etc.

"And then you've got the fans and spectators, who are another big group in the ecosystem, and then the last two would be government and regulatory bodies. So, for example, national governments often play an important role in the sport ecosystem, also via their financing and support, but also organizations like WADA, who are the anti-doping agency, or CAS, which is the Court of Arbitration for Sport.

"And then lastly, you've also got agents and managers playing a role there. All in all, it's a very interconnected ecosystem, especially I think in the topic of today's discussion around loyalty. It's interesting to think about what kind of fans and followers and kind of individual consumers are in connection to these kinds of layers, and how can you come up with compelling propositions there."

(5:12) As mentioned, there's lots of different stakeholders at different levels, and the ecosystem is interconnected. Are there any common challenges that you can draw out that all of these different stakeholders are facing?

Gabi: "So maybe I can start before Philip shares lots and lots of examples and experience as well dealing with a lot of the sport bodies around the world. The two key topics that I see coming across a lot is, of course, attracting income via sponsorship and media rights. It doesn't matter who I speak to, it's a topic that always comes up. It's always a challenge for a lot of the sports bodies. And then the second part, which is a bit linked to that, is the ability to reach the younger generation, especially because of their different media consumption patterns. So of course, there's tons and different kind of topics that will come up for all these examples that I mentioned previously, but those probably will be two major ones that I often see coming across."

Philip: "I think the main thing is the recognition that they're incredibly complex organizations. So, a major sports club would have numerous divisions covering ticketing, food and beverage, they'd have a merchandise team, people who look after the stadium, all the hospitality, sponsorships, media, they might have an Academy for teaching junior sport. They'll be doing some grassroots investment. They've got the memberships, transport for fans for away games and more. Compared to the average company, they're way more complex and have got so much more going on, and they never really know which way their fortunes are going, because that internal team can be doing everything perfectly, and yet the team is losing and so the amount of money that they get coming in for ticket sales or for media or for future seasons drops away. There's a lot that I think they need to take into account in planning what their future is going to be."

(7:24) Gabi, coming back to one of the challenges that you mentioned there, that I know you're very interested in, what are the specific problems around the current media landscape and the changing consumption habits, and how is that impacting sport?

Gabi: "I will give some examples, basically, kind of to paint the picture there a little bit. But if you take a step back, kind of what most sports organizations are dealing with, and especially also the larger ones as well, there's a fragmentation of viewership. With the rise of the streaming platforms, you see that audiences are increasingly spread across multiple channels, so it becomes much harder for traditional broadcasters to capture the large and unified audiences compared to what it used to be. So nowadays, with this fragmentation, you would have linear TV, these are companies like ESPN or Fox, you got streaming exclusive partners, which could be YouTube or Apple doing kind of a specific event via their kind of channels. There are streaming bundles, there's direct from leagues platforms like mlb.tv or like nba.tv and then, of course, you've got the second screens like TikTok or instar or snap, who are also starting to broadcast particular matches or content kind of in there. So, it becomes much more fragmented than what the sports organizations were used to dealing with. In light of that, they also see a declining traditional TV viewership, because, especially the younger generations, they prefer on demand mobile content and so that starts affecting the advertising revenues for the broadcasters.

"Then you'll also see topic of piracy in that space. So basically, a lot of people are consuming it via less formal kind of channels, in that sense. So, the ease of accessing illegal streams undermines the legitimate broadcaster’s revenue potential in there.

"All of that paints quite a complicated media landscape for them. And if I give you a numeric example, if you think about people in their 50s, 60s, they are probably worth about 1,000 euros per year for when it comes to sports media distribution. Then slightly younger, 30 to 40, probably they sit now at around 800 euros per year of what they represent in media distribution value. But then the younger ones are going to 700 euros and often quite far below. If you look at the Serie A as an example in the Italian Football League, all in all, it basically means that series lost about 304 million euros per season in the latest cycle. And of course, that financial shortfall creates all kind of challenges for the clubs associated so it's an example of where it starts hurting. And probably the main way to keep the attention or get the attention of the sports administrators is to follow the money in that part, because that's where usually it affects their ability to run their clubs or their organizations."

(9:13) Given this whole changing media consumption, does it mean that there's a whole untapped fan base that sport is now failing to engage and therefore monetize?

Philip: "I think there definitely is, that's what we refer to as hidden fans. And it's not just a modern phenomenon. It's something that has always existed, ever since television was invented. Actually, clubs are doing a better and better job of making it easier and easier for fans all around the world to engage with them, but there is a lot of fans who don't go to the games. They might buy merchandise, but there's no record of them buying that merchandise. They watch the games, but they might do it at the pub. So, they don't have any sort of subscription. There's no tracking of it. They go to work on a Monday and talk obsessively about how good or bad the game was, and so on and so forth. So in our estimates, that could be as much as 60 to 80% of the total fan base is completely hidden by a club, and that means that all the different opportunities for the club to drive engagement with that base and to monetize them, but also to recognize them and make them feel closer to the club  don't exist.

"From our perspective, there's enormous opportunity there that would be better for the clubs, but also better for the fans as well. And it's all about making it an easy and rewarding experience that they're attracted to enough to take the step of doing that formal engagement."

(12:08) Is that why sport is perfectly suited to loyalty?

Gabi: "I think if you if you look at the comparison to the frequent flyer program model, which has probably been the most successful in that particular space and has created enormous valuations for the airlines who own those loyalty programs, Qantas in kind of Philip's backyard, of course, is a great example. But also, if you look at all the US-based carriers, also European carriers, very often, their valuations are in the millions, even billions of dollars. And if you take a look at their model and basically unpack that, I think there's a very great blueprint for sports organizations to write on that part.

"If you look at an FFP, the key thing why that's so profitable is that on one hand side, they've got accrual partners where people can earn those miles. And basically, those accrual partners buy the miles from the airline at a relatively high cost per mile or per point, and then when those miles are being redeemed, there is a very high perceived value of the reward, i.e. the perishable airline seat, but the actual cost for the airline is much lower. So one of the big kind of secrets or tricks in these FFP models is like, you sell it at a much higher cost per point, and then when the member exchanges that for the reward, it's actually a much lower cost to you, but it has a very high perceived value.

"If you draw that parallel to the sports world, basically you would have to find a lot of accrual partners who are willing to buy a sports-related currency, either a currency linked to a club or a federation, or something like IOC level, maybe even in there. But then, when they use these sport-related points, you need to be able to offer them something which is relatively low cost to you as a program operator, but has got very high perceived value, so access to games, money can buy type experiences. There's a whole range of examples that we'll unpack a little bit more so, but the ecosystem of an FFP model is perfectly replicable in the sports world."

Philip: "I think one of the unique aspects of a sports team is a loyalty program is not needed to generate loyalty. The fans are already loyal. Some of them are obsessively loyal. And so, unlike an airline, where the airlines have to keep working very, very hard to maintain that share of wallet and stimulate the base to travel more, the sports teams kind of already have that. And actually, for many of the bigger sports teams, they don't have enough tickets to sell to each game, and so there is a slightly different dynamic there. So, I think the big opportunity for a loyalty program is to provide that better recognition and reward fans and make them feel like they do have that deeper connection in the same way that a good quality loyalty program would build emotional engagement between the member and the brand. It's that establishment of that formalized two-way relationship is where the big opportunity is.

"Now to Gabi's point and the frequent flyer model. I tend to agree. I think there is definitely some parallels there. You've got the club, you've got the obsessed fan base, you've then got sponsors, but you've also got other companies who would be interested in being connected to the club, that can't afford sponsorship, who might be happy to be earn partners. There's definitely the opportunity to build out that engaged ecosystem of companies that are buying points to give to the fans.

"Then on the other side, you've got all the money can't buy experiences that a club would be able to provide to the fans that they can redeem those points on as well. I think it's a really fascinating model."

(15:55) There's obviously a lot of opportunity there. Philip, what's the current situation when it comes to sport and loyalty, is the sports industry tapping into the benefits loyalty can bring, or you've touched on it already, is there so much more that can happen to drive engagement?

Philip: "They're barely scratching the surface at the moment. I think traditionally, teams have focused much more on memberships that provide fans with access to games, dedicated seating, discount hospitality packages. So, it's more that subscription loyalty program strategy, but they can definitely do a lot more to engage fans who can't or don't want to attend the live games. There are enormous amounts of fans out there who actually don't want to go to a game. They're obsessed about and would live and die for the team, but the idea of going to a game actually isn't that interesting to them. They might go to one or two, or they just can't get tickets, and all the tickets are too expensive, so they don't bother. So, building out a loyalty program that provides fans with a lot of other ways that they can engage in a way that is meaningful to them, is definitely something that clubs could do a lot better at."

Gabi: "I would build on Philip's input there. It also depends a little, if you think about a club, they need to do their kind of strategies, and they are only scratching the surface right now, but you see some interesting propositions coming. If you think about a national federation, the Football Federation, their national team only plays X number of times per year. So how do you basically keep the engagement going in between those kinds of games? If you think about an IOC when it's every two years when there's a winter games and a summer Olympics, you get massive attention during these kinds of games, but then how do you keep that ongoing engagement? There are different kind of propositions you can build on there. So, it also depends a little bit on how you design, what you design for whom, in that sense, on the proposition, because they've got different needs.

"I think in general, there are lots of opportunities. You see some emerging loyalty programs, but in terms of the sponsorship synergies or the data utilization, it's quite often still a bit ad hoc. It's not kind of a master plan embedded in a larger strategy of the organization."

Philip: “At a league level, the next level up, we're not really seeing anything at all, and I feel that's quite disappointing, because some of the leagues, particularly bigger leagues, could play a critical role in helping clubs to roll out comprehensive loyalty strategies. Loyalty is complex, it requires technology, it requires expertise, and you need to get the proper design. You need the right commercial model; you need operational excellence. So where we see a big opportunity is a league engaging a loyalty consultancy or company to design out a program, bring in the technology and enable that to be cascaded down to the teams, so that the teams can get access to something with shared cost and maybe a centralized operations team to run it for them, so the whole league can actually have a good quality design loyalty program for their club with a fraction of the cost of what it would be if they tried to design it out themselves."

(19:17) I guess a big part of that is knowing what excites fans and what actually drives engagement. So, Gabi, how do you see that playing it? What are the trends that you're seeing?

Gabi: "I just came back from the Paris Games at the opening ceremony in my other kind of hat, as President of the International Korfball Federation. I had a chance to speak with a lot of the presidents of other International Federations. And exactly to Phil's point, how can you maybe do things collectively together, for big impact, because you might not have the individual resources available between each of the IFs. But if you bundle your kind of efforts, you can do much bigger things, and also you might have got a couple of million followers there, and another Federation is kind of there, so the scale can be enormous, right?

"I think it comes down to what are these fans kind of looking for. It varies a little bit. Is it the exclusive content and behind the scenes access? There are some notable examples on fan tokenization, NFTs, what people can do with it. But also, what we see is a lot of interest on how can you bring the physical sport world together with the eSports world? The esports world is also massively growing. Saudi Arabia just signed an agreement with the IOC for the next 12 years to have the Olympic esport games in Saudi and they're expecting that to turn into a $13 billion kind of industry just for the Kingdom of Saudi Arabia alone. You see massive groups of youngsters also in that kind of space. When you think about the rewards and the content. The sky's the limit actually."

(21:03) Coming back to what you were saying earlier about the airline loyalty program side of things. What can sport learn from those frequent flyer programs, and how can they bring that success to the fore for the good of the sporting community?

Gabi: "The internal tagline that we're using when we talk about how we see ourselves helping and supporting sports organizations, we call it from FFP to FEP: from frequent flyer programs to fan engagement programs.

"Where we think that sport communities can learn best is to replicate a lot of the great thinking on how you set up such an ecosystem? How do you manage it? How do you commercialize it? It starts by creating a big idea. It doesn't matter if it's a club or a federation or an IF, basically whatever the audience is in there. So, you create a big idea with a high-level engagement vision. Then based on that, you define the blueprint of your program, which should include all the key elements for such a fan engagement proposition. Program concept, program organization, business case. And then when you've done that, you validate that blueprint with all the stakeholders involved in your FEP, including the sponsors, the fans, and especially also the accrual partners, if you think about kind of a point space, because they will have to fund the currency.

"On the redemption side, you need to make sure you've got a very robust and creative offering in place which the members can spend their currency on. Probably the question is, do you go alone as an organization, or do you go together with a group of organizations? And then there's kind of people like us out there to help. There's so much knowledge in there, and you don't need to reinvent the wheel, right? That's kind of, I think, one of the key things for these sports organizations, because loyalty is complex, and therefore you need to make sure you don't make it more complex than it needs to be."

(23:12) Philip, what would be the right loyalty strategy?

Philip: "I definitely would always lean towards the club or the league owning the program so that they've got full control. I think the likes of socios.com has been attractive to a lot of clubs because it's very much a plug and play solution, and it provides some instant revenue for the club without them having to do anything. But certainly, the opportunity, the monetization and having control of that fan experience is going to work much better if they do own the program.

"So, I think if it's a big club, they should definitely be going their own. They're going to have the scale of fans to be able to layer a loyalty program over that very effectively. If it is smaller clubs, then, as I was talking about earlier, getting the league to build out the capabilities which can then cascade down to individual clubs would be a great way to do it, and it save them a lot of cost. But also building up those partnership networks could work across multiple teams and provide fans with lots of opportunities to earn points or currency or credits, whatever it might be to then use with their specific club."

(24:26) So where does loyalty come into play in overcoming the challenge of the changing media kind of situation?

Gabi: "I think there's an enormous monetization opportunity there, like if we draw back to the parallel to the ecosystem of how frequent flyer programs are being run, if you would replicate setups like that, you can create enormous income for the entities, but you need to design it properly. You need to think it through carefully on who those accrual partners would be for your fan base, what kind of brands would like to get in touch with your community. We tend to refer to this as Brands 2 Communities, which means if you understand the DNA of your community, then you understand what kind of brands would like to get their content or stories or offers in front of that particular community.

"Of course, you've got existing sponsors of clubs or federations or IFs out there, but you can also basically extend that to the accrual partnership network very easily. So I think the with the media income under pressure, loyalty offers a great opportunity for sports bodies to generate new income, and if designed well, also these media partners that need a helping hand in there can also find their way within such a loyalty ecosystem to get their media rights and media opportunities much better monetized in a very fragmented kind of landscape. So that's how I see the opportunity for large sports organizations."

(25:52) Wrapping up a lot of what we've already talked about here, what's the member value in this new loyalty led world of sport?

Gabi: "I think to the earlier discussion, fans are deeply in love with their sport or their club, right? What they're looking for is personalization, recognition if they've been a lifelong fan, to being part of the community. So really, that sense of belonging, but also having some kind of an influence or access to certain kinds of content in the recognition element, the exclusive access special rewards are what I think the fans are looking for, in this case, the members.

"The flip side of the what the clubs or the federations are looking for comes from the fact that a lot of these people in sports, would love, basically, for people to support their club or their sport, but they also are very passionate about getting people to move in general, because we see a lot of data out there of the world getting more obese, younger generations being less involved in clubs and organized sport. The true enemy is not moving and not being involved in sport. Yes, you try to do your best for your federation, your club, to get people involved in there and highly competitive on the pitches, as Philip mentioned. But basically, the much, much bigger opportunity that people are deeply passionate about, I've seen, is how you get people connected to sport, and I think that's where, integral loyalty platform or ecosystems can really play a role."

(27:24) So for sporting organizations, where do they start? What challenges do you think they should aim to solve, first through loyalty programs?

Philip: "I definitely think that they should start with better recognition of their long-term fans. If they try to do anything else, then they'll get those long-term fans offside. But it's very easy to do it. One of the clubs that we're working with identified when a fan who was having their birthday was going to be at a club, going to be at a game, and they actually delivered a cake to them during half time, right? There are a lot of very small, quite low-cost things you can do to really make someone provide them with an experience they're going to remember the rest of their life.

"I think providing more opportunities to for fans to influence hard decisions would be a really great thing. Clubs generally do not like this. They don't want to be giving control over to the fans, but even giving them some say on a few different things, I think would definitely appeal to them. Then, it's all about reaching out to that hidden fan base and engaging them as best as possible, and then providing better sponsor promotion. Sponsors are paying a lot of money for the right to put their brand on the team jersey, and anything that can be done in order to better support sponsors, particularly through a loyalty program stimulating fans to go and spend with the sponsors and be able to track that is going to be hugely beneficial to the sponsor in demonstrating the value they're getting from the sponsorship, as well as for the club, in getting the sponsor to sign up for the next."

(29:14) Gabi, how should sports organizations move forward?

Gabi: "I think the old saying of go slow in order to go fast is also valid here, because you do basically get a lot more value if you think as a sports organization, "Okay, what is kind of our plan? What do we want to kind of build in there?" And then, create your big idea, create a program blueprint, validate it, then kind of launch it. I think that would be the right approach in there.

"On a practical level, the examples that Philip referred to, it’s true that sponsors, you can almost draw a parallel between them and the number one funding partner in airline loyalty programs, which are co-brand credit card offerings. But if you see how difficult it is even for that organization to communicate directly via the airline's database. Basically, you can see similarities there between the sponsor community with a sports organization on how difficult it is for them to get in touch with the fans directly, so facilitating that direct engagement in that ecosystem, whereas airlines need to almost think like becoming marketing machines for their partners, sports organizations also have that opportunity, and quite often it's not well enough thought through by a sponsor, and how can you then leverage and engage with that community kind of in there, right? So that's, that's one thing in the design.

"I think in the next step, what I would encourage sports organizations to think about and understand and learn how valuable these loyalty entities could become, just in their own right, as an additional asset for a sports organization. And there's some really good examples out there, and that's kind of what I would encourage them to do as a next step."

(30:57) Coming back to the bold claim that we made at the outset of the discussion, how can loyalty be the savior of sport?

Gabi: "I do think this from FFP to FEP idea might be the proposition here, right? So how can you go from the frequent flyer program thinking to a fan engagement program thinking in there? The opportunity is there for the first number of sports organizations to create multi billion-dollar valuations via such an entity. But the airlines also didn't get that overnight, right? They basically had to build it, the technology, the thinking, the fan base, the offering kind of in there. So, while there are learnings to be taken in there, and plenty of support from companies such as ourselves, Loylogic and Loyalty and Reward Co, it will not happen as a miracle overnight, right? This is kind of a long-term engagement, and therefore you also need to think about what you want to do. It's not like a marketing gimmick where you just kind of do something and then basically, the dollars will fly in. That's not how it works. It needs to be an integral part of the club's or the Federation's strategy. There will be early movers in there that will take the time to think about it in that way, and there will be more tactical, ad hoc type initiatives, and I think the first group will be more successful with that."

Philip: I agree. I think the reality is that a lot of sports clubs and even leagues are not as lucrative and cashed up as what fans and people might perceive them to be. Certainly, there is a small number of clubs that are doing incredibly well, but they tend to be in the minority. Most clubs are trying to get together enough revenue and most of that goes into buying new players and putting on games. Any opportunity for a club to be able to build out a sizable new revenue stream should be highly attractive to them.

"And as per Gabi's talk of the frequent flyer program or the fan engagement program using the points earn and redemption economics, there's a really great opportunity there, but it does need to be symbiotic. It's not just enough to say, great, let's monetize our highly loyal fan base. It needs to be done in a way that provides fans with desirable, motivating value, so that they're getting something out of it, and the club is also getting something out of it. And

Really, the key to that is access. That's what the fans really want. They want access to players. They want access to the games. They want access to limited edition merchandise value offers, things that are really going to get them excited about engaging with that program, and then you've got a winning, successful recipe there."

In the latest episode of the Loylogic Podcast, we discuss the story of PREMIO, Nescafé Dolce Gusto’s world-leading multi-market international loyalty program.

Along with Yves-Louis Pigueller, Nescafé Dolce Gusto’s Global Data and Digital Ecosystems Lead, Joël Muller, digital marketing advisor for Nescafé Dolce Gusto and Dani Schmidt, Loylogic’s Head of Growth, we hear how this world-class loyalty program, designed to build engagement and boost consumption of  products, has developed from initial idea to the global success it is today.

Topics discussed include:

- The challenges PREMIO was designed to overcome
- How PREMIO enables the brand to directly connect with consumers through personalized communication
- How the program delivers an appealing value proposition in a consistent yet locally relevant way across multiple geographies
- The data and measurement behind the program
- The reward shops driving engagement 
- Future plans for PREMIO and much, much more.

A must listen for any internatonal brand looking to scale-up a loyalty program globally, or create a new international engagement stratgey, listen here, or read the transcript below.

(1:20) A good place to start is with the story of Nescafé Dolce Gusto and PREMIO. So Yves-Louis, what's the background that led to the creation of the program?

Yves-Louis: "Nescafé Dolce Gusto is a pod coffee system, offering consumers the ability to prepare at home, all the beverages that are made in a regular coffee shop. The range includes espresso, americano, but also the latte macchiato, the cappuccino and chocolate and teas. You can even find, since a couple of years, all of Starbuck's iconic recipes in the portfolio.

"Nescafé Dolce Gusto is available now in 70 markets, mostly in retail channels for the machine, but also for the coffee pods. We also use our own DTC to sell pods and machines. The overall yearly turnover has exceeded more than 1 billion USD in the past year."

Joël: "We like to call ourselves billionaires!"

Yves-Louis: "We're already there, Joël!

"Nescafé Dolce Gusto is operated by each of our markets and the central function provides support for anything which is a common solution, process or capability. This is the case for the Nescafé Dolce Gusto digital ecosystem, which is made up of a direct to consumer, CRM, but also PREMIO, our loyalty scheme, all of which is operated above market."

(3:17) Joël, I'll bring you in here. What challenges has PREMIO been designed to solve?

Joël: "Well, like any brand sold in retail, our challenge is to have a direct engagement with our consumers. This direct engagement provides the ability to collect precious insights on our consumers, and also the ability to engage with them through our own channel in a relevant matter.

"One of the other big challenge we have is the pressure from compatible capsule solutions, and inflation on top, which has increased the need to maintain brand value perception to engage with consumers. So PREMIO, our loyalty scheme, has been designed to answer those challenges."

(4:07) PREMIO has been in play now for a number of years. So what have been the main stages of development since its launch? How has it adapted to meet those challenges and overcome the barriers to success?

Yves-Louis: "It has been a long journey, not an easy ride every day. To design, to build and also to roll out PREMIO across the world did not happen overnight. We invested upfront a firm enough time and effort to define the concept, but also to build a sustainable business case. Loyalty is not really a frequent practice in our industry, so it took time to get everyone on board and to be convinced about the concept. Then, in order to validate all of the business assumptions and to harness the concept, we worked with a pilot market over a period of two years.

"Following these two years, where we had good results, and for the past four years, we've focused on two folds. Number one was to roll out PREMIO to our top DTC markets. And now today we're covering more than 80% of our total revenue. The other fold is about fine tuning the value exchange. What is very important to find is the right balance between an appealing proposition for a consumer, but also for us to remain ROI positive. And this is where we are now."

(5:26) Dani, what role does Loylogic play in supporting this development?

Dani: "Well, as mentioned by Yves-Louis, a major focus in recent years has been on opening up new markets on various continents. And what I mean by launch is, of course, beyond the technical implementation. It's about acquiring members and driving engagement from the program registration, and the very first can onwards. This requires a lot of effort and provides a lot of learning opportunities for all involved parties, including us. Hence, our role is to support NDG in line with its strategy and focus, and while there will be additional market launches, the next one is just around the corner in May, the engagement and value for the brand will mostly come from existing markets and its millions of members. Hence our job is to evolve and support the mentioned initiatives from both the conceptual and executional perspective."

(6:20) Joël, bringing you in again here. What are the core pillars of success for the PREMIO program?

Joël: "The first pillar is the simplicity of the user experience. It is super user-friendly. So concretely, as a consumer, you just have to flash the code which is printed inside every box of Nescafé Dolce Gusto beverage, and each scan will increment your point balance. So you can redeem your points in a gift catalog. And with our latest coffee machine generation, NEO, earning points is even easier. Once you connect your machine to your Wi Fi points are automatically granted for every cup brewed. So no more QR codes to scan so it's even more user friendly.

"The second pillar for the success is the reward catalog itself. So not only we can select for each market, the relevant rewards for all type of points, but consumers can also select many types of appealing rewards like virtual gift cards, physical gifts, vouchers for our own web shop, and so on."

Yves-Louis: "I will add two further pillars. The third pillars is definitely the solution. So we went for a cloud solution that enables two benefits: the first one is easier to roll out than the other solutions that are hosted on premise, but also to get, with a quicker time to market, all the latest innovation from the cloud solution. And to conclude, the latest pillar is in the communication, which is key. One of the main success factors is the ability to be able to advertise on the back in order to reach our acquisition target."

(8:06) Taking that point to the next stage. You were quoted in a recent press release that Nescafé Dolce Gusto was able to establish a strong personalized intimacy with its customers through PREMIO. So can you elaborate on that further?

Yves-Louis: "Indeed, PREMIO is a goldmine of data points. Thanks to these small QR codes, we're able to track the consumption behavior at the consumer level. And with reach of this data, we can push to our consumers the right message at the right time. So any activities that could be scaled like the tech segmentation inside and communication concept, are now run above market. And these enable us to empower the market to be really spot on with the engagement with the consumer."

Joël: "And to be even closer to our consumers, each market can localize and fine tune the value proposition. So the cost per point the reward catalog are different per market. If you go and visit the reward shop in Korea, for example, and then you go to the French one, you will see that the catalog is adapted to the culture of the country. The marketing activation is also mainly local, each market can define how to activate the first party data collected through PREMIO."

(9:23) Okay, so it's all about engaging members in a personalized manner?

Joël: "Exactly using the data to engage with our consumers to spread the right message at the right time to the right people, which is the you know the basics of CRM."

(9:37) So Dani, it seems like a good place to bring you in here to talk more about the rewards catalogs and that personalization from a Loylogic perspective. So how does Loylogic work with PREMIO to source relevant rewards that work both internationally and locally?

Dani: "Yes, thanks for the question. We are often asked whether we can show THE Loylogic catalog. The answer always is that this just doesn't exist, because our job is to create an engaging rewards experience for the communities of our clients and all of our reward shops are curated for our clients. And in fact, we involve our clients in co-creating and providing a rewards briefing which includes potential categories or must have rewards, a wishlist of certain brands, do's and don'ts, in line with the brand and the program DNA.

"In the case of NDG, we collaborated closely with the global business unit and the pilot market, which was Spain back then in 2017/18. And we defined the categories which includes NDG rewards like vouchers that bring members back to the NDG web shop for their next coffee purchase. We defined music technology as a must have category. This includes earbuds and loudspeakers, electronical gadgets etc. We defined kitchen as a must have category because coffee is often produced and consumed in the kitchen, so we offer kitchen appliances and coffee mugs and these kind of things, as well as experiences which is a mix of international and local gift cards. Within these categories, we look for the right rewards that fit the community profile and the program economics.

"Now, you can imagine that the accrued points value in a coffee pod program is much lower compared to a frequent flyer program, and hence the price points of offered rewards need to be within members' reach. It's important that committed members are able to reward themselves within 30 to 90 days after registration, after starting engaging with the brand. And this requires reward offers at a few euro value or dollar value in this specific case. And on the other hand, we we need to ensure that the offers fit the brand DNA and positioning, which might be a stretch in some cases.

"And maybe another important topic is that, PREMIO is a global concept, but member behavior and needs vary slightly among European countries, and are quite different in markets in Latin America and Asia. And this requires a well-balanced approach to rewards that follows global brand principles, as Joël mentioned, but takes local needs into account. And this is important not only to gain the loyalty of the members in these markets, but also to maintain the commitment of all NDG markets. Within NDG we apply the Pareto rule wherever possible, whereby 80% of the catalogue is, let's say, globally defined, and the markets have a 20% of room to maneuver local needs into the equation. Hence PREMIO is therefore a uniform global concept which is nevertheless localized. I think that's a key success factor."

(12:55) Do seasonal promotions play a part in the rewards appeal too?

Dani: "Absolutely, I mean, redemption is a good thing right, as it is the ultimate proof of member engagement. And of course, to encourage such engagement over many years, it is crucial to run marketing campaigns, whether through the introduction of new rewards categories or reward items, seasonal campaigns such as Valentine's Day, or Black Friday, or run prize draws remember can win the  latest iPhones or an annual supply of NDG coffee capsules. So, we closely collaborate with the markets to provide an exciting marketing calendar in line with the local Nescafé Dolce Gusto marketing plan, you know, throughout the year."

(13:38) Okay, it's clear listening to you that data and analytics are important to the success of PREMIO and you seem to have a really clear picture of what's going on with the program across the numerous markets. So one question I would like to ask is, what criteria do you use when selecting which markets to roll PREMIO out to? Or indeed, stop? Joël, I'll let you answer that one.

Joël: "So we do indeed define two main sets of criteria to set up PREMIO but also to stop PREMIO. When setting up PREMIO in the market we take a fact-based approach by running a business case considering the consumer base by size, the cost to set up and operate the program and the rewards price range.

"Once we're live, we monitor on a monthly basis, the success of PREMIO, looking at the consumer base evolution, acquisition and churn rates. We also look at consumer reviews or we run surveys. When KPIs are not met, all mitigation plans are exhausted to sustain a positive return on investment, then we make the decision to stop PREMIO in the market. This happened. Thankfully, not so often. But we are able to monitor it in an accurate way and we can decide to stop it if necessary."

(14:58) What role does Loylogic play in supporting the data gathering and measurement?

Dani: "Loylogic's scope is related to the rewards experience. And we do complement the picture with redemption related data primarily? Such data contains typical ecommerce metrics such as how many members come to our reward store? How many use their points by placing orders? What's the average order value? What are the top performing rewards and so on? Markets can access reporting dashboards individually 24/7. And the data is also uploaded on a monthly basis in the NDG BI, which allows every stakeholder to have a complete picture of the metrics related to premium."

(15:40) Looking to the future, how do you see PREMIO developing further, given you've got all this data available to you? Yves-Louis, let's start with you.

Yves-Louis: "So we're working on three main streams and I will cover the first two. Number one, we want to complete the footprint, we still have a couple of big markets to launch as well as tackling the non DTC market. So this is really the number one challenge.

"The number two challenge or looking forward is to be able to target the low value user segment. Back to the famous equation of how to have something appealing, but ROI positive. So we're working on extending the reward catalog with smaller gifts like a retail coupon, or raffle ticket donation. The aim is also to bring more gamification into the program for the specific segment by allowing consumers to select instant win versus point collection."

Joël: "The last stream is more longer term, which is to search for partnerships with the help of Loylogic to work with other brands. This is also an option for us together where we are stronger. So this is something also that we're looking at more long term."

(17:00) So Dani, what are the key takeaways you can share from the success of PREMIO that other loyalty program managers should consider when looking at a global rewards program?

Dani: "I have four things in mind, which I would like to share.

"First of all, PREMIO is a true omni-channel concept. And this is very essential for consumer goods brands who generate 80% or more of its business via indirect retail and wholesale channels, which is probably the case in most instances. So direct access to retail shoppers is where the incremental value lies, and what really empowers the brand in a competitive environment.

"Secondly, scalability is a must for multinational and global brands. The scalable architecture as also mentioned, by Yves-Louis, via cloud solutions, and involving global partners, are the key elements here. Just to give you one interesting piece of information...in the case of PREMIO, the go to market is less than three months after a market has signed or approved its business case the green light is given to the involved parties. Less than three months, which is only possible due to, you know, a scalable ecosystem.

"Third, PREMIO is a truly global concept, which can be introduced to every NDG market. And there is still some white spots out there. But not only introducing this to these markets, but also with a very consistent user experience across the globe. The programs, of course, have local a local flavor, but it's Nescafé Dolce Gusto PREMIO across the globe.

"And finally, although being a global concept, it is crucial to ensure a certain degree of local flexibility, for example, with regards to offered rewards. A global rollout must always be supported by the markets, because they also finance these initiatives."

In the latest episode of the Loylogic Podcast, we discuss the story of PREMIO, Nescafé Dolce Gusto’s world-leading multi-market international loyalty program.

Along with Yves-Louis Pigueller, Nescafé Dolce Gusto’s Global Data and Digital Ecosystems Lead, Joël Muller, digital marketing advisor for Nescafé Dolce Gusto and Dani Schmidt, Loylogic’s Head of Growth, we hear how this world-class loyalty program, designed to build engagement and boost consumption of  products, has developed from initial idea to the global success it is today.

Topics discussed include:

- The challenges PREMIO was designed to overcome
- How PREMIO enables the brand to directly connect with consumers through personalized communication
- How the program delivers an appealing value proposition in a consistent yet locally relevant way across multiple geographies
- The data and measurement behind the program
- The reward shops driving engagement 
- Future plans for PREMIO and much, much more.

A must listen for any internatonal brand looking to scale-up a loyalty program globally, or create a new international engagement stratgey, listen here, or read the transcript below.

(1:20) A good place to start is with the story of Nescafé Dolce Gusto and PREMIO. So Yves-Louis, what's the background that led to the creation of the program?

Yves-Louis: "Nescafé Dolce Gusto is a pod coffee system, offering consumers the ability to prepare at home, all the beverages that are made in a regular coffee shop. The range includes espresso, americano, but also the latte macchiato, the cappuccino and chocolate and teas. You can even find, since a couple of years, all of Starbuck's iconic recipes in the portfolio.

"Nescafé Dolce Gusto is available now in 70 markets, mostly in retail channels for the machine, but also for the coffee pods. We also use our own DTC to sell pods and machines. The overall yearly turnover has exceeded more than 1 billion USD in the past year."

Joël: "We like to call ourselves billionaires!"

Yves-Louis: "We're already there, Joël!

"Nescafé Dolce Gusto is operated by each of our markets and the central function provides support for anything which is a common solution, process or capability. This is the case for the Nescafé Dolce Gusto digital ecosystem, which is made up of a direct to consumer, CRM, but also PREMIO, our loyalty scheme, all of which is operated above market."

(3:17) Joël, I'll bring you in here. What challenges has PREMIO been designed to solve?

Joël: "Well, like any brand sold in retail, our challenge is to have a direct engagement with our consumers. This direct engagement provides the ability to collect precious insights on our consumers, and also the ability to engage with them through our own channel in a relevant matter.

"One of the other big challenge we have is the pressure from compatible capsule solutions, and inflation on top, which has increased the need to maintain brand value perception to engage with consumers. So PREMIO, our loyalty scheme, has been designed to answer those challenges."

(4:07) PREMIO has been in play now for a number of years. So what have been the main stages of development since its launch? How has it adapted to meet those challenges and overcome the barriers to success?

Yves-Louis: "It has been a long journey, not an easy ride every day. To design, to build and also to roll out PREMIO across the world did not happen overnight. We invested upfront a firm enough time and effort to define the concept, but also to build a sustainable business case. Loyalty is not really a frequent practice in our industry, so it took time to get everyone on board and to be convinced about the concept. Then, in order to validate all of the business assumptions and to harness the concept, we worked with a pilot market over a period of two years.

"Following these two years, where we had good results, and for the past four years, we've focused on two folds. Number one was to roll out PREMIO to our top DTC markets. And now today we're covering more than 80% of our total revenue. The other fold is about fine tuning the value exchange. What is very important to find is the right balance between an appealing proposition for a consumer, but also for us to remain ROI positive. And this is where we are now."

(5:26) Dani, what role does Loylogic play in supporting this development?

Dani: "Well, as mentioned by Yves-Louis, a major focus in recent years has been on opening up new markets on various continents. And what I mean by launch is, of course, beyond the technical implementation. It's about acquiring members and driving engagement from the program registration, and the very first can onwards. This requires a lot of effort and provides a lot of learning opportunities for all involved parties, including us. Hence, our role is to support NDG in line with its strategy and focus, and while there will be additional market launches, the next one is just around the corner in May, the engagement and value for the brand will mostly come from existing markets and its millions of members. Hence our job is to evolve and support the mentioned initiatives from both the conceptual and executional perspective."

(6:20) Joël, bringing you in again here. What are the core pillars of success for the PREMIO program?

Joël: "The first pillar is the simplicity of the user experience. It is super user-friendly. So concretely, as a consumer, you just have to flash the code which is printed inside every box of Nescafé Dolce Gusto beverage, and each scan will increment your point balance. So you can redeem your points in a gift catalog. And with our latest coffee machine generation, NEO, earning points is even easier. Once you connect your machine to your Wi Fi points are automatically granted for every cup brewed. So no more QR codes to scan so it's even more user friendly.

"The second pillar for the success is the reward catalog itself. So not only we can select for each market, the relevant rewards for all type of points, but consumers can also select many types of appealing rewards like virtual gift cards, physical gifts, vouchers for our own web shop, and so on."

Yves-Louis: "I will add two further pillars. The third pillars is definitely the solution. So we went for a cloud solution that enables two benefits: the first one is easier to roll out than the other solutions that are hosted on premise, but also to get, with a quicker time to market, all the latest innovation from the cloud solution. And to conclude, the latest pillar is in the communication, which is key. One of the main success factors is the ability to be able to advertise on the back in order to reach our acquisition target."

(8:06) Taking that point to the next stage. You were quoted in a recent press release that Nescafé Dolce Gusto was able to establish a strong personalized intimacy with its customers through PREMIO. So can you elaborate on that further?

Yves-Louis: "Indeed, PREMIO is a goldmine of data points. Thanks to these small QR codes, we're able to track the consumption behavior at the consumer level. And with reach of this data, we can push to our consumers the right message at the right time. So any activities that could be scaled like the tech segmentation inside and communication concept, are now run above market. And these enable us to empower the market to be really spot on with the engagement with the consumer."

Joël: "And to be even closer to our consumers, each market can localize and fine tune the value proposition. So the cost per point the reward catalog are different per market. If you go and visit the reward shop in Korea, for example, and then you go to the French one, you will see that the catalog is adapted to the culture of the country. The marketing activation is also mainly local, each market can define how to activate the first party data collected through PREMIO."

(9:23) Okay, so it's all about engaging members in a personalized manner?

Joël: "Exactly using the data to engage with our consumers to spread the right message at the right time to the right people, which is the you know the basics of CRM."

(9:37) So Dani, it seems like a good place to bring you in here to talk more about the rewards catalogs and that personalization from a Loylogic perspective. So how does Loylogic work with PREMIO to source relevant rewards that work both internationally and locally?

Dani: "Yes, thanks for the question. We are often asked whether we can show THE Loylogic catalog. The answer always is that this just doesn't exist, because our job is to create an engaging rewards experience for the communities of our clients and all of our reward shops are curated for our clients. And in fact, we involve our clients in co-creating and providing a rewards briefing which includes potential categories or must have rewards, a wishlist of certain brands, do's and don'ts, in line with the brand and the program DNA.

"In the case of NDG, we collaborated closely with the global business unit and the pilot market, which was Spain back then in 2017/18. And we defined the categories which includes NDG rewards like vouchers that bring members back to the NDG web shop for their next coffee purchase. We defined music technology as a must have category. This includes earbuds and loudspeakers, electronical gadgets etc. We defined kitchen as a must have category because coffee is often produced and consumed in the kitchen, so we offer kitchen appliances and coffee mugs and these kind of things, as well as experiences which is a mix of international and local gift cards. Within these categories, we look for the right rewards that fit the community profile and the program economics.

"Now, you can imagine that the accrued points value in a coffee pod program is much lower compared to a frequent flyer program, and hence the price points of offered rewards need to be within members' reach. It's important that committed members are able to reward themselves within 30 to 90 days after registration, after starting engaging with the brand. And this requires reward offers at a few euro value or dollar value in this specific case. And on the other hand, we we need to ensure that the offers fit the brand DNA and positioning, which might be a stretch in some cases.

"And maybe another important topic is that, PREMIO is a global concept, but member behavior and needs vary slightly among European countries, and are quite different in markets in Latin America and Asia. And this requires a well-balanced approach to rewards that follows global brand principles, as Joël mentioned, but takes local needs into account. And this is important not only to gain the loyalty of the members in these markets, but also to maintain the commitment of all NDG markets. Within NDG we apply the Pareto rule wherever possible, whereby 80% of the catalogue is, let's say, globally defined, and the markets have a 20% of room to maneuver local needs into the equation. Hence PREMIO is therefore a uniform global concept which is nevertheless localized. I think that's a key success factor."

(12:55) Do seasonal promotions play a part in the rewards appeal too?

Dani: "Absolutely, I mean, redemption is a good thing right, as it is the ultimate proof of member engagement. And of course, to encourage such engagement over many years, it is crucial to run marketing campaigns, whether through the introduction of new rewards categories or reward items, seasonal campaigns such as Valentine's Day, or Black Friday, or run prize draws remember can win the  latest iPhones or an annual supply of NDG coffee capsules. So, we closely collaborate with the markets to provide an exciting marketing calendar in line with the local Nescafé Dolce Gusto marketing plan, you know, throughout the year."

(13:38) Okay, it's clear listening to you that data and analytics are important to the success of PREMIO and you seem to have a really clear picture of what's going on with the program across the numerous markets. So one question I would like to ask is, what criteria do you use when selecting which markets to roll PREMIO out to? Or indeed, stop? Joël, I'll let you answer that one.

Joël: "So we do indeed define two main sets of criteria to set up PREMIO but also to stop PREMIO. When setting up PREMIO in the market we take a fact-based approach by running a business case considering the consumer base by size, the cost to set up and operate the program and the rewards price range.

"Once we're live, we monitor on a monthly basis, the success of PREMIO, looking at the consumer base evolution, acquisition and churn rates. We also look at consumer reviews or we run surveys. When KPIs are not met, all mitigation plans are exhausted to sustain a positive return on investment, then we make the decision to stop PREMIO in the market. This happened. Thankfully, not so often. But we are able to monitor it in an accurate way and we can decide to stop it if necessary."

(14:58) What role does Loylogic play in supporting the data gathering and measurement?

Dani: "Loylogic's scope is related to the rewards experience. And we do complement the picture with redemption related data primarily? Such data contains typical ecommerce metrics such as how many members come to our reward store? How many use their points by placing orders? What's the average order value? What are the top performing rewards and so on? Markets can access reporting dashboards individually 24/7. And the data is also uploaded on a monthly basis in the NDG BI, which allows every stakeholder to have a complete picture of the metrics related to premium."

(15:40) Looking to the future, how do you see PREMIO developing further, given you've got all this data available to you? Yves-Louis, let's start with you.

Yves-Louis: "So we're working on three main streams and I will cover the first two. Number one, we want to complete the footprint, we still have a couple of big markets to launch as well as tackling the non DTC market. So this is really the number one challenge.

"The number two challenge or looking forward is to be able to target the low value user segment. Back to the famous equation of how to have something appealing, but ROI positive. So we're working on extending the reward catalog with smaller gifts like a retail coupon, or raffle ticket donation. The aim is also to bring more gamification into the program for the specific segment by allowing consumers to select instant win versus point collection."

Joël: "The last stream is more longer term, which is to search for partnerships with the help of Loylogic to work with other brands. This is also an option for us together where we are stronger. So this is something also that we're looking at more long term."

(17:00) So Dani, what are the key takeaways you can share from the success of PREMIO that other loyalty program managers should consider when looking at a global rewards program?

Dani: "I have four things in mind, which I would like to share.

"First of all, PREMIO is a true omni-channel concept. And this is very essential for consumer goods brands who generate 80% or more of its business via indirect retail and wholesale channels, which is probably the case in most instances. So direct access to retail shoppers is where the incremental value lies, and what really empowers the brand in a competitive environment.

"Secondly, scalability is a must for multinational and global brands. The scalable architecture as also mentioned, by Yves-Louis, via cloud solutions, and involving global partners, are the key elements here. Just to give you one interesting piece of information...in the case of PREMIO, the go to market is less than three months after a market has signed or approved its business case the green light is given to the involved parties. Less than three months, which is only possible due to, you know, a scalable ecosystem.

"Third, PREMIO is a truly global concept, which can be introduced to every NDG market. And there is still some white spots out there. But not only introducing this to these markets, but also with a very consistent user experience across the globe. The programs, of course, have local a local flavor, but it's Nescafé Dolce Gusto PREMIO across the globe.

"And finally, although being a global concept, it is crucial to ensure a certain degree of local flexibility, for example, with regards to offered rewards. A global rollout must always be supported by the markets, because they also finance these initiatives."

In this episode of the Loylogic Podcast, we welcome Vicky Elliot, an independent consultant specializing in travel and hospitality loyalty, to talk about the trends, challenges and strategies for success that all hotel loyalty program leaders need to know.

Together, we discuss:

The evolution of loyalty programs in the hotel industry:

- How loyalty programs have evolved
- The catalysts behind developments
- How hotels are measuring success from their loyalty programs

The challenges and barriers to success:

- Challenges hotels face today in recognizing and rewarding members of their loyalty programs?
- The discussion around sustainability across hotel and the wider travel sector
- Solutions that exist to overcome the challenges and roadblocks

The future of loyalty in the hospitality industry:

- The new trends that Vicky sees being tried and tested in the hospitality loyalty space
- How loyalty programs can leverage data analytics and customer insights to offer more personalized experiences and rewards
- How program leaders should go about selecting which one to partner with?
- Advice to a hotel company either wanting to launch a loyalty program or review their existing loyalty proposition

A must listen for anybody involved with travel and hospitality loyalty, listen here, or read the transcript below.

(1:30) You've been a leader in loyalty marketing and CRM in the hospitality sector for many years now. So how has the hotel loyalty program evolved during this time?

"Yes, probably more years than I care to remember! The hotel loyalty space, if I'm not mistaken, is about 30 years old now. I think Marriott or Holiday Inn were the forerunners of hospitality loyalty and it was very much the collect points for free nights type of program. And then obviously, a lot of the bigger chains jumped on board in the following years and hotel programs became very much a conduit into the airline programs, which were already more established and already much bigger. Through partnerships they fed into the airline travel programs. That then led on to partnerships with financial institutions, especially the likes of American Express.

"Today, the hotel programs are very much essential programs in their own right. Marriott now has nearly 200 million members, over 30 brands, nearly 9,000 hotels worldwide. Hilton is not far behind with 173 million members. And then now you've got alliances such as the Global Hotel Alliance, which is bringing together some of those smaller to medium sized hotel chains. I think they have now 40 brands and over 800 Hotels within their alliance and all joined through a loyalty program. So, co-brand credit cards, partner networks, sponsorship of major events, celebrity endorsement...these aren't just linked to the big retail brands anymore, you see a lot of loyalty programs out there sponsoring, whether it's global football tournaments, tennis, cricket, motor racing, etc.

"Loyalty programs within the hotel industry and moving more away from the points for free nights model, to really becoming a self service experience for the member throughout their hotel stay, whether that's giving them access to things like online checking, keyless door entry, preferred room choice, and even room settings before they arrive, as well as more the transactional benefits. Still collecting points but being able to redeem them for a plethora of other rewards, whether it's in hotel or through partnerships that they have."

(3:56) What has been the catalyst for this change? Why are these big hotel chains looking at the wider experience rather than just points for nights?

"I think a lot has been brought about through industry consolidation. Really the only competitive advantage now is the experience that you can give to your members and to your guests. It's very easy for competitor hotel chains to copy awarding points or a particular in hotels say benefit. But what resonates with the customer, what resonates with the guests and therefore your key differentiator is how you make them feel when they're staying with you. So really through the customer demand and customer expectation and moving away from that transactional to the emotional loyalty. Guests expect to be known. They expected to be recognized. They think they've told you their preferences once, so they don't want to have to repeat themselves. Loyalty is about bringing in this much more one-on-one emotional loyalty that has been the catalyst."

(5:14) That's a nice little segue into the next question, which is how are hotels measuring success from a loyalty program? How do they know that they're delivering the best experience?

"I think obviously they still have the usual loyalty measures of healthy program redemption rates, breakage, number of active members. In the hotel industry, we've obviously focused a lot on the impact on business. So, retention rates, customer lifetime value, and then looking at the average spend of a member versus a non-member during their stay throughout the year. And looking at that recency, frequency, monetary value. We're now also pulling in customer satisfaction scores, customer effort scores, net promoter scores, and how your relationship with that customer influences other people to come and stay at your property as well."

(6:06) There's a lot to think about for these hotel chains now, in terms of their loyalty program. So therefore, there must be lots of challenges and barriers to success. From your perspective, what challenges are hotels facing today in recognizing and rewarding members of their programs?

"I think there are two big challenges. I think one is making sure that colleagues and employees in the hotel chains on the ground are familiar with, educated with, and involved with the hotel loyalty program, so that they don't see it as just something they've got to do, but understand the reasoning, why they have the program, and what those benefits are and what the members' expectations are, and being able to deliver that consistently at a hotel level. There's quite a lot of staff turnover, whether it's front desk, in restaurants, etc. So, it's really that employee engagement, I think that's going to become increasingly important. And looking at employee loyalty is almost as important as looking at the customer loyalty as well.

"And then secondly, data. There's a lot of siloed, disconnected systems within the hotel industry, whether it's from the reservation platforms to their point-of-sale terminals and restaurants, Spa and fitness, to the property management systems, table reservation systems, their CRM, their revenue management... There are so many different locations where data is stored, not necessarily in a consistent manner. They've all evolved over time, but the data hasn't really been brought together. So, I think a major challenge is being able to pull that data together in a manner that's GDPR compliant, that captures member consent and preferences, but then is also being processed in a way that empowers and enables hotels to be able to reward and recognize their guests on an ongoing basis.

"So, I think those two areas are the main challenges for hotel chains today, whether they're small, individual properties, or the I imagine those challenges are even bigger for some of the mega chains out there."

(8:24) So how do we overcome those challenges? What solutions are out there to help loyalty programs?

"I think there's a lot more now in the employee loyalty space, whether that's connecting with learning management systems. And often this is something overlooked from a loyalty program perspective, there's a lot to focus on delivering service in the hotels, but maybe not so much on educating around the loyalty program, etc. I know the big chains definitely have that, but some of those smaller chains, not necessarily so. Then, hotels need to have a reward mechanism that incentivizes colleagues to engage with the hotel loyalty programs as well.

"From a data perspective, there is a lot of middleware out there. There are quite a few companies that specialize now in taking your data and delivering it to your front of house employees. So, they're able to take action on it as well. So, it's out there. It's just being able to choose which one's the right fit for you and fits the gaps within your customer journey that are currently maybe pain points are somewhat disconnected."

(9:34) On that, what questions should a loyalty program leader manager be asking to ensure they get the right software?

"I think they start with their customer journey. At the end of the day, technology is an enabler, it shouldn't be the solution. So, looking at your customer journey from the time that they even start to think about booking a holiday, when they haven't necessarily chosen your chain, all the way through to once they've left and the reminiscing and that whole customer cycle. It's looking at how you interact, where you interact, what platforms you've got, what data you have. And then again, going back to that customer effort measurement, what effort is it for a customer to engage with you across all of those different touch points within the customer journey? And then from that, you're able to identify where your gaps are, where your pain points are for your customers. And from there, you can look at what technology solutions will help you bring that together, whether that's complementing what you already have within your tech stack, or whether it's replacing what you have out there."

(10:38) Before we move on to discuss the future of loyalty, going off on a bit of a tangent here, but I would quickly like to talk about sustainability, which is a topic that I know is close to your heart, and is a topic that that's impacting the wider travel sector at the moment. Is sustainability becoming an important element of hotel loyalty programs? And if so, how are hotels incorporating these aspects to engage customers?

"Yes, it is becoming an increasingly important element into drivers of consideration for a traveler when they're booking their hotel stays, their airline, whether it's with a travel agent, or directly, it's becoming much more of a consideration as to which hotel brand they're going to choose. How is that being incorporated into loyalty programs? To be honest, the answer is not very well.

"The hotel industry overall, is taking amazing steps in addressing sustainability measures, protecting natural environment, promoting societal wellbeing, whether that's through eco-friendly products, waste minimization solutions, energy saving technologies, environmentally-friendly guest services, bike rental, those little notes that you get on your beds to remind you not to use the towels, or change the towels every day, locally sourced food products, even being able to track the food through the process within the hotel to minimize waste there. And then also supporting local communities through food banks or charitable initiatives. And then on the social responsibility side through the hiring and ensuring equality within the hotel teams.

"The World Travel and Tourism Council has come up with 12 basic criteria for the hotel industry based on three core pillars of efficiency, planet, and people. Hotels are starting to share those on social channels. They're starting, they're obtaining certification from distribution channels, but it hasn't really filtered down as much into loyalty programs yet. You see some brands incorporating the ability to donate points to charitable organizations, or to participate in experiences, it could be things from tree planting, or whatever. But there's nothing that really matches what they're doing at a higher level at a more substantial level. And this could ultimately be rewarding guests for eco-friendly choices during their stay.

"I think you know, green loyalty programs do attract the environmentally conscious traveler who seek to have the hotel experiences align with their values that they have. But the ability to do this hasn't really evolved as much. But these initiatives and once a hotel company understands how they can track trace and reward what a guest will do on property, then they could definitely foster that emotional connection with guests and encourage them to return and recommend the hotel to others as well."

(13:47) That sounds like an important part of a future loyalty strategy for hotels there, which moves us very nicely on to the future of loyalty in the hospitality industry. With that in mind, what are some of the new trends you see being tried and tested in the space?

"There's a lot around AI at the moment. Whether that's from chat bots helping you book your hotel stay online, you maybe get stuck with something and the Chatbot pops in and says how can I help you, then connects you to a real live person if the if the bot can't answer, to answering simple questions, being able to connect through chats to order your room service or a cocktail on the beach, there's a lot of AI driving efficiencies and improving the guest experience on property or when they're booking. I think these will only continue to improve.

"From a loyalty program perspective, there's huge potential in card linking products when you're talking about having your loyalty program not only during your hotel stay but meaning something to you or being incorporated into your life when you're back at home, whether that's being able to redeem points for merchandise that you use every day for gifting, being able to collect points whilst you're shopping or in your day to day activities. So being able to connect that value proposition to outside of the of your hotel stay."

(15:17) Does that mean hotels need to work with loyalty platforms that have a really wide rewards marketplace and can drive to connect brands to communities? Is that where the future is do you think?

"Definitely, that's a component of it? Absolutely. So Being able to reward members outside of their own ecosystem, and employees as well, I think such platforms or play will be very important to employee loyalty and driving that employee space who don't necessarily want to or have the means to go and dine or stay at the hotel properties, but want to be able to choose some sort of reward that's relevant to them. So yes, definitely.

"I also think that just understanding how and why a customer wants to engage with you, or engage with other travel partners, and who those travel partners are through the enhanced data analytics and customer insights that will help drive those personalized experiences, that emotional connection. You want members to think, okay, these people really get me they really know me, they're going to make my travel experience seamless, so I can get make the most out of my time, whilst I'm in my destination."

(16:26) We've touched on this already, but there's a huge choice of platform providers and technology out there vying for business. Is there anything else you would like to add on that topic in terms of selecting which one to partner with?

"As I said before, I think it's very much linked to the customer journey and where your gaps are. But then also, the hospitality industry is quite unique in the way its tech stacks are structured, and how everybody interacts very differently with the technology. So having a partner that potentially has that experience already with the hospitality industry, or at least within the travel industry and understands what you're trying to achieve, and is aligned with you and understand your vision, then I think that's important, too."

(17:14) Bringing all of the different strands we've talked about together, what would your advice be to a hotel company who either wants to launch a loyalty program or who wants to review their existing proposition?

"I think there's a lot of hotel companies, not only hotel companies, but a lot of businesses that go out there today saying, "I need to get my I need to understand my customers better I need to get customer data, I need to have a loyalty program to do that". Okay, there's a couple of objectives in there, but it's maybe not the best way to start. I think understanding what type of behavior you're looking to drive. What loyalty actually means to you as a business, you know, is it repeat stays, is it increased wallet value? Is it multiple stays across multiple destinations? Is it advocacy? It could be a combination of all of these things, but very clearly setting out your objectives that are very much aligned with your vision of your company and what your company stands for and what its purpose is, remains vital. Start from the top work your way down.

"And as I said before, the technology part is really an enabler to all of that, rather than the solution. So, work on your strategy, work on your objectives. And from there, look at what your customers want from you what they're expecting from you speak to your customers, understand what they value, what drives consideration when they're going to book with you, how they like to be treated on property, and start there, rather than starting with a solution of I need a loyalty program and I need to tech solution to do that.

"I think spending more time on that whole discovery and design phase is really important, rather than jumping straight to delivery."

In this episode of the Loylogic Podcast, we welcome Vicky Elliot, an independent consultant specializing in travel and hospitality loyalty, to talk about the trends, challenges and strategies for success that all hotel loyalty program leaders need to know.

Together, we discuss:

The evolution of loyalty programs in the hotel industry:

- How loyalty programs have evolved
- The catalysts behind developments
- How hotels are measuring success from their loyalty programs

The challenges and barriers to success:

- Challenges hotels face today in recognizing and rewarding members of their loyalty programs?
- The discussion around sustainability across hotel and the wider travel sector
- Solutions that exist to overcome the challenges and roadblocks

The future of loyalty in the hospitality industry:

- The new trends that Vicky sees being tried and tested in the hospitality loyalty space
- How loyalty programs can leverage data analytics and customer insights to offer more personalized experiences and rewards
- How program leaders should go about selecting which one to partner with?
- Advice to a hotel company either wanting to launch a loyalty program or review their existing loyalty proposition

A must listen for anybody involved with travel and hospitality loyalty, listen here, or read the transcript below.

(1:30) You've been a leader in loyalty marketing and CRM in the hospitality sector for many years now. So how has the hotel loyalty program evolved during this time?

"Yes, probably more years than I care to remember! The hotel loyalty space, if I'm not mistaken, is about 30 years old now. I think Marriott or Holiday Inn were the forerunners of hospitality loyalty and it was very much the collect points for free nights type of program. And then obviously, a lot of the bigger chains jumped on board in the following years and hotel programs became very much a conduit into the airline programs, which were already more established and already much bigger. Through partnerships they fed into the airline travel programs. That then led on to partnerships with financial institutions, especially the likes of American Express.

"Today, the hotel programs are very much essential programs in their own right. Marriott now has nearly 200 million members, over 30 brands, nearly 9,000 hotels worldwide. Hilton is not far behind with 173 million members. And then now you've got alliances such as the Global Hotel Alliance, which is bringing together some of those smaller to medium sized hotel chains. I think they have now 40 brands and over 800 Hotels within their alliance and all joined through a loyalty program. So, co-brand credit cards, partner networks, sponsorship of major events, celebrity endorsement...these aren't just linked to the big retail brands anymore, you see a lot of loyalty programs out there sponsoring, whether it's global football tournaments, tennis, cricket, motor racing, etc.

"Loyalty programs within the hotel industry and moving more away from the points for free nights model, to really becoming a self service experience for the member throughout their hotel stay, whether that's giving them access to things like online checking, keyless door entry, preferred room choice, and even room settings before they arrive, as well as more the transactional benefits. Still collecting points but being able to redeem them for a plethora of other rewards, whether it's in hotel or through partnerships that they have."

(3:56) What has been the catalyst for this change? Why are these big hotel chains looking at the wider experience rather than just points for nights?

"I think a lot has been brought about through industry consolidation. Really the only competitive advantage now is the experience that you can give to your members and to your guests. It's very easy for competitor hotel chains to copy awarding points or a particular in hotels say benefit. But what resonates with the customer, what resonates with the guests and therefore your key differentiator is how you make them feel when they're staying with you. So really through the customer demand and customer expectation and moving away from that transactional to the emotional loyalty. Guests expect to be known. They expected to be recognized. They think they've told you their preferences once, so they don't want to have to repeat themselves. Loyalty is about bringing in this much more one-on-one emotional loyalty that has been the catalyst."

(5:14) That's a nice little segue into the next question, which is how are hotels measuring success from a loyalty program? How do they know that they're delivering the best experience?

"I think obviously they still have the usual loyalty measures of healthy program redemption rates, breakage, number of active members. In the hotel industry, we've obviously focused a lot on the impact on business. So, retention rates, customer lifetime value, and then looking at the average spend of a member versus a non-member during their stay throughout the year. And looking at that recency, frequency, monetary value. We're now also pulling in customer satisfaction scores, customer effort scores, net promoter scores, and how your relationship with that customer influences other people to come and stay at your property as well."

(6:06) There's a lot to think about for these hotel chains now, in terms of their loyalty program. So therefore, there must be lots of challenges and barriers to success. From your perspective, what challenges are hotels facing today in recognizing and rewarding members of their programs?

"I think there are two big challenges. I think one is making sure that colleagues and employees in the hotel chains on the ground are familiar with, educated with, and involved with the hotel loyalty program, so that they don't see it as just something they've got to do, but understand the reasoning, why they have the program, and what those benefits are and what the members' expectations are, and being able to deliver that consistently at a hotel level. There's quite a lot of staff turnover, whether it's front desk, in restaurants, etc. So, it's really that employee engagement, I think that's going to become increasingly important. And looking at employee loyalty is almost as important as looking at the customer loyalty as well.

"And then secondly, data. There's a lot of siloed, disconnected systems within the hotel industry, whether it's from the reservation platforms to their point-of-sale terminals and restaurants, Spa and fitness, to the property management systems, table reservation systems, their CRM, their revenue management... There are so many different locations where data is stored, not necessarily in a consistent manner. They've all evolved over time, but the data hasn't really been brought together. So, I think a major challenge is being able to pull that data together in a manner that's GDPR compliant, that captures member consent and preferences, but then is also being processed in a way that empowers and enables hotels to be able to reward and recognize their guests on an ongoing basis.

"So, I think those two areas are the main challenges for hotel chains today, whether they're small, individual properties, or the I imagine those challenges are even bigger for some of the mega chains out there."

(8:24) So how do we overcome those challenges? What solutions are out there to help loyalty programs?

"I think there's a lot more now in the employee loyalty space, whether that's connecting with learning management systems. And often this is something overlooked from a loyalty program perspective, there's a lot to focus on delivering service in the hotels, but maybe not so much on educating around the loyalty program, etc. I know the big chains definitely have that, but some of those smaller chains, not necessarily so. Then, hotels need to have a reward mechanism that incentivizes colleagues to engage with the hotel loyalty programs as well.

"From a data perspective, there is a lot of middleware out there. There are quite a few companies that specialize now in taking your data and delivering it to your front of house employees. So, they're able to take action on it as well. So, it's out there. It's just being able to choose which one's the right fit for you and fits the gaps within your customer journey that are currently maybe pain points are somewhat disconnected."

(9:34) On that, what questions should a loyalty program leader manager be asking to ensure they get the right software?

"I think they start with their customer journey. At the end of the day, technology is an enabler, it shouldn't be the solution. So, looking at your customer journey from the time that they even start to think about booking a holiday, when they haven't necessarily chosen your chain, all the way through to once they've left and the reminiscing and that whole customer cycle. It's looking at how you interact, where you interact, what platforms you've got, what data you have. And then again, going back to that customer effort measurement, what effort is it for a customer to engage with you across all of those different touch points within the customer journey? And then from that, you're able to identify where your gaps are, where your pain points are for your customers. And from there, you can look at what technology solutions will help you bring that together, whether that's complementing what you already have within your tech stack, or whether it's replacing what you have out there."

(10:38) Before we move on to discuss the future of loyalty, going off on a bit of a tangent here, but I would quickly like to talk about sustainability, which is a topic that I know is close to your heart, and is a topic that that's impacting the wider travel sector at the moment. Is sustainability becoming an important element of hotel loyalty programs? And if so, how are hotels incorporating these aspects to engage customers?

"Yes, it is becoming an increasingly important element into drivers of consideration for a traveler when they're booking their hotel stays, their airline, whether it's with a travel agent, or directly, it's becoming much more of a consideration as to which hotel brand they're going to choose. How is that being incorporated into loyalty programs? To be honest, the answer is not very well.

"The hotel industry overall, is taking amazing steps in addressing sustainability measures, protecting natural environment, promoting societal wellbeing, whether that's through eco-friendly products, waste minimization solutions, energy saving technologies, environmentally-friendly guest services, bike rental, those little notes that you get on your beds to remind you not to use the towels, or change the towels every day, locally sourced food products, even being able to track the food through the process within the hotel to minimize waste there. And then also supporting local communities through food banks or charitable initiatives. And then on the social responsibility side through the hiring and ensuring equality within the hotel teams.

"The World Travel and Tourism Council has come up with 12 basic criteria for the hotel industry based on three core pillars of efficiency, planet, and people. Hotels are starting to share those on social channels. They're starting, they're obtaining certification from distribution channels, but it hasn't really filtered down as much into loyalty programs yet. You see some brands incorporating the ability to donate points to charitable organizations, or to participate in experiences, it could be things from tree planting, or whatever. But there's nothing that really matches what they're doing at a higher level at a more substantial level. And this could ultimately be rewarding guests for eco-friendly choices during their stay.

"I think you know, green loyalty programs do attract the environmentally conscious traveler who seek to have the hotel experiences align with their values that they have. But the ability to do this hasn't really evolved as much. But these initiatives and once a hotel company understands how they can track trace and reward what a guest will do on property, then they could definitely foster that emotional connection with guests and encourage them to return and recommend the hotel to others as well."

(13:47) That sounds like an important part of a future loyalty strategy for hotels there, which moves us very nicely on to the future of loyalty in the hospitality industry. With that in mind, what are some of the new trends you see being tried and tested in the space?

"There's a lot around AI at the moment. Whether that's from chat bots helping you book your hotel stay online, you maybe get stuck with something and the Chatbot pops in and says how can I help you, then connects you to a real live person if the if the bot can't answer, to answering simple questions, being able to connect through chats to order your room service or a cocktail on the beach, there's a lot of AI driving efficiencies and improving the guest experience on property or when they're booking. I think these will only continue to improve.

"From a loyalty program perspective, there's huge potential in card linking products when you're talking about having your loyalty program not only during your hotel stay but meaning something to you or being incorporated into your life when you're back at home, whether that's being able to redeem points for merchandise that you use every day for gifting, being able to collect points whilst you're shopping or in your day to day activities. So being able to connect that value proposition to outside of the of your hotel stay."

(15:17) Does that mean hotels need to work with loyalty platforms that have a really wide rewards marketplace and can drive to connect brands to communities? Is that where the future is do you think?

"Definitely, that's a component of it? Absolutely. So Being able to reward members outside of their own ecosystem, and employees as well, I think such platforms or play will be very important to employee loyalty and driving that employee space who don't necessarily want to or have the means to go and dine or stay at the hotel properties, but want to be able to choose some sort of reward that's relevant to them. So yes, definitely.

"I also think that just understanding how and why a customer wants to engage with you, or engage with other travel partners, and who those travel partners are through the enhanced data analytics and customer insights that will help drive those personalized experiences, that emotional connection. You want members to think, okay, these people really get me they really know me, they're going to make my travel experience seamless, so I can get make the most out of my time, whilst I'm in my destination."

(16:26) We've touched on this already, but there's a huge choice of platform providers and technology out there vying for business. Is there anything else you would like to add on that topic in terms of selecting which one to partner with?

"As I said before, I think it's very much linked to the customer journey and where your gaps are. But then also, the hospitality industry is quite unique in the way its tech stacks are structured, and how everybody interacts very differently with the technology. So having a partner that potentially has that experience already with the hospitality industry, or at least within the travel industry and understands what you're trying to achieve, and is aligned with you and understand your vision, then I think that's important, too."

(17:14) Bringing all of the different strands we've talked about together, what would your advice be to a hotel company who either wants to launch a loyalty program or who wants to review their existing proposition?

"I think there's a lot of hotel companies, not only hotel companies, but a lot of businesses that go out there today saying, "I need to get my I need to understand my customers better I need to get customer data, I need to have a loyalty program to do that". Okay, there's a couple of objectives in there, but it's maybe not the best way to start. I think understanding what type of behavior you're looking to drive. What loyalty actually means to you as a business, you know, is it repeat stays, is it increased wallet value? Is it multiple stays across multiple destinations? Is it advocacy? It could be a combination of all of these things, but very clearly setting out your objectives that are very much aligned with your vision of your company and what your company stands for and what its purpose is, remains vital. Start from the top work your way down.

"And as I said before, the technology part is really an enabler to all of that, rather than the solution. So, work on your strategy, work on your objectives. And from there, look at what your customers want from you what they're expecting from you speak to your customers, understand what they value, what drives consideration when they're going to book with you, how they like to be treated on property, and start there, rather than starting with a solution of I need a loyalty program and I need to tech solution to do that.

"I think spending more time on that whole discovery and design phase is really important, rather than jumping straight to delivery."

The latest episode of the Loylogic Group Podcast brings together two experts to delve into the evolving landscape of airline and hotel loyalty programs.

We find out how African Bank’s Audacious Rewards program is incentivizing positive financial behavior for all customers.

In the latest episode of the Loylogic Podcast, we’re joined by Martin Gauss, CEO of airBaltic, a true pioneer in the airline industry's adoption of Web3 technologies, and Rob Clements, Lead Consultant at Loylogic and Web3 loyalty strategy expert.

What’s fueling the future of large scale fuel rewards programs?

For this episode of the Loylogic Podcast, Olivier Martinet, CEO of Posidonia Consulting and ex Vice President of marketing at BP, joins us to discuss fuel loyalty programs and what’s driving any rethinking of customer retention, revenue generation and incentivized engagement strategies.

In this discussion, Olivier emphasizes the importance of tailoring fuel rewards propositions to fit each company's strategy and customer engagement capabilities. Key talking points include:

- Instead of searching for a universal best-in-class program, he suggests evaluating programs based on four lenses: ease to participate, relevance, personalization, and profitability.

- The level of focus on these lenses varies based on the company size and scope, with global organizations showing a greater inclination towards balancing customer advantage and brand consistency.

- How the increasing digitalization and shift towards electric vehicles in the fuel industry are driving organizations to rethink their loyalty strategies, recognizing that a loyalty scheme is not just a marketing tool but also a privileged data provider for long-term strategic adaptation.

- Why, as the industry moves towards becoming energy providers, the evolving landscape of mobility hubs and electric vehicles will impact loyalty offers, requiring companies to adjust to longer customer dwell times and the integration of home charging behavior.

- Why major fuel companies are indeed repositioning themselves as energy providers, and collaborations with other energy companies and investments in alternative energy sources are already taking place, signifying a shift towards a future of potential joint ventures and partnerships.

- Why loyalty program owners should keep earn simple but creative with the burn side, with the differentiator coming in terms of personalization, and how customer data is handled.

To hear Olivier’s thoughts on these topics and much more, listen using the link below, or read on for the full transcript.

(1:27) Olivier, in your opinion, what are currently the best in class fuel rewards propositions around the world? And what is setting them apart?

Olivier Martinet: "That's a good question. And maybe I won't answer that directly, because at the end of the day, there's one thing I really don't believe in is that there's a best in class program. Basically, all programs, or success of a program, is very much dependant on the fit between the program as it is with the company, the company strategy, but also the readiness of a company to be using it. To some extent, the best in class aspect is having the right program for the company, for the company's targets and what that company is able to do with engaging customers. Okay, so it's probably not directly answering your question, but I guess it's a key feature of the thinking and how I've been approaching loyalty schemes for about 30 years."

(2:28) So your approach there is very much steering away from a one-size-fits-all strategy and instead looking at a case-by-case basis?

Olivier: "Yes, absolutely. The KPIs I'm looking into, to decide what is where we should go. The first one is around ease to participate. And when I'm saying this, it's ease to participate on both sides, from the consumer angle, but also from a retailer or partner point of view.

"The second one, the second lens is on the relevance. How relevant is a program as a consumer on the receiving end, but also how relevant is this program to my strategy to be engaging customers going forward?

"The third lens is personalization. And when I'm saying personalization, what is the right level of personalization? And are we talking to groups? Are we talking to a segment of one? And this is very highly dependant on the capabilities you have as a company, in terms of what you are going to be doing with the data? How are you going to be engaging the customers? How far have you gone on the digitalization journey? And how smart are you with analyzing the data of your customer base.

"The last dimension I'm looking into is the profitability. When saying this I'm more thinking of financial sustainability of the scheme, because one thing is, you are not as a company entering into loyalty for the next two weeks, this is for the long run, so you bloody need to make sure that you can sustain this financially in the long run, and not going to be forced to deceive your customers, you know, 5/6/7 years down the road by decreasing the advantage you've been giving them.

"These are four lenses, I'm always looking into to try to find the right balance between customer advantage and what the company or my clients can do with that scheme and how far we can push the personalization journey."

(4:27) How common is it that you come across an organization, a brand company, whatever you want to call it, that shares that vision that that is able to look at its loyalty and rewards through those same lenses?

Olivier: "To some extent, it depends on the company you're talking to. If you're talking about a company who is in one market, covering one, it's very infrequent that you would be looking into these four lenses because basically very often, you find those really focusing on how relevant the offer can be for customers and how much digitalization you can put in your system. But, if you start getting into some other companies who are managing schemes across the globe, 20 different countries, or more four or five different continents, that's where often you can find some of this approach. This was where you need to balance how much you're giving to customers, to your targets, in terms of personalization, but also managing some kind of consistency in the approach for your brand."

(5:43) My logical next question there is, you've got these four lenses, and what challenges are rewards loyalty program owners facing? What's driving any rethinks of the strategy? And how are people going to regard and look at their loyalty programs?

Olivier: "Very often, what is forcing the rethinking is the digitalization of it, coming in with a mobile application and then kind of suddenly saying, here is the 'ta-da' moment for customers. You start realizing that to be getting there, you need to be upgrading your IT, you need to be making sure you're going to be dealing with your consumer data. What are you going to be doing it? And what is the analytical solution you're going to be applying to it? And then, what are the use cases you're going to be applying to it?

"Very often, what I see is that companies would go through part of his process, and we'll start getting into, "Okay, my use case for this, obviously, is I need to talk to my customers, I'm going to be communicating to my customers, because that's a marketing tool, I need to do this". Very often, what I see missing is that comms or marketing, even on a segment of one, is only one part of a value, which a loyalty scheme can generate. The number of use cases which can come from the data arising from your privileged customer base is much wider. And it can go into various strategic things like category management, if you're a retailer, what are your pricing policies, where are you going to be investing, what is the range of your assortment you're going to be offering to customers in what sites etc etc., which are much, I would say, wider use cases, than only looking at the marketing side.

"Obviously the marketing side, to some extent, is the bread and butter, because that is what makes sure your customer base keeps coming back, keeps generating the income, but also keeps generating the data you're after. A loyalty scheme is not only a marketing tool, it's also a privileged data provider for companies to be adapting their strategy in the long term."

(8:31) So it's fair to say that it is more than marketing?

Olivier: Yeah, absolutely. As anyone who has known me for some time will know, I always say that your loyalty scheme shouldn't be left only to loyalty managers. It should be sitting on a boardroom table. It's where we honestly should be sitting, not so much the engagement or marketing part, but for all of the rest, which is getting into the long term benefits of launching and participating into a loyalty scheme."

(9:06) One question I've got to ask you, given we're talking about fuel, is where does the shift to electric vehicles come into play?

Olivier: "I guess it's an indirect impact. The shift to EVs is a strategic shift for fuel retail, for networks, and we see, not all, but most of the companies working on shifting on moving away from being a fuel or let's say a fuel provider, to becoming an energy provider. So that's a fundamental strategic shift, which is happening to most of the fuel retailers. To some extent, that's the driver. That means, though, that there is going to be some adaptation required to the loyalty, so it's more of a consequence of the strategic shift, which needs to happen and obviously will need to be impacting via schemes at some point in future."

(10:06) Okay, so in London, as in many other cities around the world, we're seeing the creation of mobility hubs that are about more than fuel. It's about enjoying time out of good cup of coffee and maybe do some shopping. So how is that impacting fuel loyalty?

Olivier: "It will impact the overall offer to the consumer, so it will need to impact loyalty. Basically, there's a fundamental shift here, which is to say, in the past, you had customers coming to fill up with a get me in, get me out as quickly as possible, and by the way, as cheaply as possible, attitude. And if on my way, in and out, you can sell some other stuff, you know, being impulse items, coffee, fine.

"There are two ways which I would say the EV will impact loyalty. The first one is, it will force customers to stay longer on the forecourt, because there's a charging time, which means it's less of loyalty. You then get into how, I can make sure as a customer when I'm getting to a site, I will be able to charge, I will be able to get some coffee or make sure that the 10/15/20 minutes I'm going to be there are also going to be very valuable. That's one thing.

"The second thing is, how does this relate to me charging my EV when I'm home, because at the end of the day, for an EV to be financially attractive to customers, one of the big underlying thing is that a big share of the charging should happen at your own house. And to some extent, that's where the impact of loyalty schemes is going. How do you deal with customers staying longer on the forecourt? Then, what is the kind of behavior you want to reward? And the second thing is, how do you relate that on-site interaction with what is happening when customers are filling up at home?”

(12:09) Do you therefore see fuel companies becoming energy companies?

Olivier: "So that's what they are claiming. Look into what BP or Shell are claiming, Total is doing the same thing. They are very much claiming to be a future energy company, energy provider for mobility.

(12:29) Is there a case there that we'll see more collaboration between fuel companies and other energy providers?

Olivier: "You can see already things happening. You can see already partnerships happening between electric companies, oil companies, energy companies. You can see also that BP and Shell and Total are investing highly in alternative energy, be it solar, wind, etc, etc. And to some extent that's something which is already happening. Whether then you are going to see some of the big companies joining up in future in the long term, probably yes. Is it happening? Is it going to happen in the short term? Honestly, I have no clue. I would suspect not. Because you still have the weight of the oil production and distribution, which is still driving significant value for shareholders. So it's not in the short term. But in the long term. You know, probably yes. That's me guessing, you know, it's probably more for an evening, you know, a beer conversation!"

(13:41) If only we knew Olivier will be richer than we are now! Does this changing landscape of loyalty, and you've touched on it a little bit earlier, does it require more personalization of rewards now, as well as greater choice of rewards?

Olivier: "There's a long term trend anyway, which is for hyper personalization or on getting to segment of one. And obviously, you know, digitalization is forcing this into a conversation. So, yes, you're aware, but at the same time, there is also a very clear thing to say, don't make it too complicated for customers. So, probably, if you're on your earn side, you know, keep it as simple as possible, make it very understandable for customers. You don't need to start creating tiers to achieve something, which only complicates the conversation.

"Probably focus more on the burn part, on giving a wide choice of options for customers. And that's where, to some extent, the attractiveness of a scheme is happening. How big is the choice? To some extent, give the customer the choice of how they want to burn and don't force them to do it in a limited way.

"Talking about the key features of a scheme, that's probably where I would focus. On top of burning, how much more are you offering to customers? If you're part of a loyalty scheme, your customer journey on site is going to be much more simplified, you have privileged access to a cashier, quick in and out. Starbucks is one of these examples. Money can't buy experiences, etc, etc. Earn and burn being the traditional thing, but how much more can you personalize to the customer's aspirational lifestyle, in terms of getting rewarded or getting some kind of benefits or recognition of participating into a scheme?”

(15:57) Does that then also bring into play the possibility for programs to look at profit margins use innovative ways to burn points through raffles, the play model, etc?

Olivier: "To some extent, the worst thing for a loyalty scheme is to have customers sitting on a big amount of points, or value or currency, whatever it is, basically, and not being very clear about what we're going to be doing with it. That's, to some extent, the worst of what you can do. And therefore, you know, there is always a balance to be done in terms of, yes, obviously, I need as a brand to have part of my customers come back to me to get rewarded, which needs options for the customers in terms of freedom of burning, or using the currency. And that's where you will have some customers say, you know, absolutely, to have a partnership with a supermarket. Others will say yeah, you know, I love gamification, while some of us say, I want to pick from my computer the reward I've been always dreaming and want this to be delivered to my home. You have all of these options, which needs to be offered to the consumers."

(17:37) So coming back to the whole development of thinking around electric vehicles, are there any regions or brands that you think could go first in this transition, or any leading the way?

Olivier: "It's the usual suspects, obviously, you're going to have Europe, UK, parts of the US, because to some extent, legislation is forcing the OEMs to electrify cars. Basically, if you're talking about, by 2035, to only sell electric cars, for example, which is, you know, part of what we've seen in UK or in Europe, this means that adaptation will need to happen quickly. I would say, look into wherever legislation is pushing the most. And then you will very quickly find where this EV shift will impact the market."

(18:34) So wrapping things up, what are the key takeaways for from this conversation for anybody involved in fuel loyalty, looking to adapt to current trends? And what recommendations can you give to those looking to set up new loyalty rewards engagement programs in this changing landscape?

Olivier: "Three things. The first one is make it simple for your customer base to participate, you're only one out of X number of schemes in the market. So make it simple for them, because we shouldn't be spending the next 25 hours reading into what can I get out of it, understanding it.

"The second thing is make it attractive to customers. And when I'm saying attractive, it's probably not so much on your own. It's more of a Burnside make it relevant to him. But these are hygiene factors.”

"The differentiator will come in terms of personalization, and how you're dealing with consumer data, what you're going to be doing with consumer data, that's probably wherever focus should be. This means quite a dramatic shift in terms of teams capability in terms of data analytics. How do you make decisions? That's where the value is going to be going forward."

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In the world of ever-evolving technologies and digital ecosystems, Web3 has the potential to revolutionize the way we interact and engage online. At the heart of this transformation lies the concept of community building, which has been amplified and invigorated by the integration of digital assets. These digital assets have given rise to new possibilities, particularly in the realm of loyalty programs, where brands and organizations can enhance customer engagement, foster long-term relationships, and create thriving communities like never before.

For the fourth episode of Loylogic’s podcast, we’re joined by David Slavick, Co-Founder and Partner of Ascendant Loyalty, to discuss innovation in iGaming and Casino loyalty.

In this latest episode of the Loylogic podcast, Evert De Boer, CEO and co-founder of Fidivio, and Managing Partner at On Point Loyalty, joins Gabi Kool, CEO of Loylogic, to discuss how the full potential of airline loyalty can be realized.

In this entertaining and insightful conversation, Evert and Gabi discuss how loyalty programs, once the best kept secret of the airline industry, have stepped into centre stage of global airline economics. They delve into past stories about the development of airline loyalty, talk about present perceptions and how loyalty programs have become lucrative assets…and detail how the untapped potential of these programs can be unlocked.

Finally, Evert and Gabi look to the future and what they think the future holds for frequent flyers and airline loyalty.

Questions answered in this not-to-be-missed podcast include:

Chapter 1: Past stories: two decades of airline loyalty development (1:44 to 7:44)

- How was airline loyalty perceived two decades ago and how has this developed over the years?

Chapter 2: Present perception: lucrative assets, but still more potential? (7:45 to 20:06)

- Thinking about where airline loyalty is at today, it’s clear that loyalty programs are some of the most lucrative assets on airlines’ balance sheets and their sheer scalability, controllability and profitability make them stand-out in an operating environment that is perpetually challenging. Does this mean that programs are no longer flying under the radar like they once were?

- Program valuation is clearly extremely important when it comes to collateralizing airline loyalty programs and enabling attractive financing structures – how can programs ensure they have an accurate valuation?

- How can programs be used as part of capital allocation strategies, along the lines of a recent example such as the Apollo – Air France / KLM transaction related to Flying Blue?

- Where does profit and loss come into play? How can programs deliver higher operating margins?

- Are there any lessons that we can learn from high-achievers within airline loyalty?

Chapter 3: Future thinking: what next for frequent flyer programs and airline loyalty? (20:07 to 29:56)

- Looking to the future, what’s next for airline loyalty? Are we on the cusp of a new era in airline loyalty as organisations look to unlock the full potential? Are we going to see more adoptions of popular airline loyalty currencies by other airlines, like the recent examples of Finnair and Qatar adopting AVIOS?

- What opportunities are there for airlines to develop structures that will deliver ongoing growth?

- How do you see rewards developing over time?

- What headwinds will programs face and how can program managers overcome them?

The podcast transcript

(1:44): Evert and Gabi, you've worked with each other for longer than you probably care to remember, and have no doubt seen many changes in the airline loyalty world over the years. How was airline loyalty perceived two decades ago and how has this developed over the years?

Evert: "You're right. It is quite some time ago that I first met Gabi. In fact, he was my first boss who hired me in my first role at KLM Royal Dutch Airlines in Amsterdam, in 2000. I think on the one side, lots of things have changed. On the other side, some things are still the same. I do think that the program structures and the supporting organizational designs have changed a lot. And I think the programs are essentially more effectively run with stronger designs. And that's all for the better.

"When I joined KLM, back then, the department we worked for was called loyalty marketing. And I think, although in itself, it's a pretty good name, loyalty programs or loyalty strategy goes way beyond just the marketing component of it. It's something that we've witnessed over the last, let's say 10 years, with elements of economics and finance, and more behavioral economics and the whole psychological aspect of it coming into play.

"Back in 2001 or 2002, we were working on a potential merger between KLM and Northwest, who had launched the first transatlantic joint venture. As part of that project, it was considered to essential to combine the programs of KLM and Northwest. In the end, it didn't happen for a lot of reasons. But if we fast forward almost 25 years and see what's happening in the industry, now, with consolidation and sort of consolidation of loyalty currencies, it's interesting to see that the industry is still facing similar challenges, but at the same time, it's coming up with solutions for them."

Gabi: "Of course I have very fond memories of those 20 years ago when we were still young and innocent and full of ambition to make an impact on the world, which has been fun! I also recall from that time, you had to, as a loyalty marketer, really try to pull out all the stops to get it on the Board's agenda. Nowadays, of course, the asset value is so clear to the airline boards that the dynamic has completely changed.

"I remember that that we had one of the pioneers in the industry, Randy Petersen, who a lot of people will know well from Inside Flyer and the awards that he runs every year. I remember that we brought him over to talk to the KLM board and share, from an external point of view, the 10 recommendations that the airline should consider while thinking about loyalty strategies and its frequent flyer program. One of them was actually separating the state from the church argument that he used at the time, which basically meant considering running the loyalty program as a standalone business, spun out of the airline and treated as its own independent entity in the in the airline group. That was, in those days, a very early and challenging recommendation to make. Fast forward 20 years and you will see that, of course, a lot of different models have evolved in that space."

Evert: "If I can just pick up on Gabi's use of the term loyalty marketeer. I agree that it's a good term, but at the same time I sometimes warn my clients and colleagues, don't position yourself as a loyalty marketeer because it goes way beyond just the marketing aspect of it. In reality, it's a very interesting crossroads of all sorts of disciplines, including data analytics, operations, research, breakage, and liability management, financial optimization. I feel that we're kind of shortchanging ourselves if we call ourselves loyalty marketers, because it goes way beyond just the marketing aspect of it."

Gabi: "That's a very fair point. I think those kind of terms like member equity, the collective sum of the expected future profits of these kinds of customers. If you think about it in that way, then you also start thinking very differently in the boardroom about how do you grow that kind of significant assets of that consumer base across all your kind of touch points and businesses that you run as an airline can improve?

(7:45): What you're saying there leads us nicely into the discussion around the present perceptions and the fact that if we think about where airline loyalty is at today, it's clear that loyalty programs are some of the most lucrative assets on airline balance sheets, and their sheer scalability, controllability and profitability make them stand out in an operating environment that is perpetually challenging. Does this mean that programs are no longer flying under the radar like they once were? And how have perceptions changed?

Evert: "It's a fair statement, although I would put some nuances on it. Again, if we were to go back in time, 20 or 25 years, and I'm speaking not just about KLM but aviation or airlines in general, if you were to go to members of the board, or even the CFO or CEO of a large and medium sized airline and ask them, 'What is the value of the loyalty program? How much profit is it making?', I think they would struggle to give you a meaningful number. And the same goes for many of the shareholders and investors and analysts looking at airlines. Today, I think the picture has completely changed.

“To some extent, that is thanks to what happened during COVID-19. With all the collateralization and increased level of reporting done by airlines. So yes, that has completely changed. However, I would say that being aware of it, and doing the right thing are two separate things. If we were to ask that same question to the board or the CEO and the CFO today, I think a lot of them would have an increased knowledge and appreciation of the potential profitability of the program. But that's not to say that they have a full understanding of the drivers of profitability and the levers that they have at their disposal. Awareness, yes, but actually turning that into meaningful actions and, you know, implementing the correct strategy and organizational structure, I still think we have some ways to go."

Gabi: "Yeah, I would fully echo that. I think while airline CEOs or the boardroom know the value, of course of those FFP departments, I still see very often that they are somewhat hampered in the being a true kind of marketing company as well, to really kind of create the full value of what these FFP departments can unlock for an airline.

"Governance is key, because there are still many airlines where it's extremely hard for the people running FFP departments to be true partners to their non-air partners in the schemes. A lot of partners would sometimes struggle with limited exposure to the database, or the marketing that they can send out via the programs. There's always this kind of trade-off between how much do we communicate to a member? How do we communicate about airline related matters and offers? And how do you basically enable a structure whereby the FFP department can be a marketing bureau for the partners and the benefit of the members? That comes with elements like setting up the right opt-in and opt-out type structures for members. Rather than having one opt out for any communication that goes out for both the airline and the frequent flyer program, and for the members, you need to put a different kind of infrastructure in place, that so if somebody decides that they do not want to get more offers or content from that particular program, that they are not lost to the larger airline group. And so there are certain elements that that often hamper the true potential of the commercial elements of what such an airline loyalty business really can be."

Evert: "Just to add to that, I think you would be surprised about the number of airlines that we encounter, where revenue management still considers reward travel as non-revenue. So they put it in the same bucket together with travel agents or other incentive categories, and essentially don't attach any monetary value to miles being redeemed, which, in our view, doesn't make any sense. But that's just one sort of very tactical example. I think there's lots of headroom to grow and fully appreciate the value and then institutionalize that appreciation in the actual algorithms and financial reporting, and not completely disregard it."

(12:35) Related to that is program valuation, which is clearly extremely important when it comes to collateralizing airline loyalty programs, and enabling attractive financing structures. How can programs ensure they have an accurate valuation?

Evert: "I agree with what you said, and valuations are important. And clearly they play an important role in any potential collateralization. However, I think they are one piece of the puzzle. I think the bigger puzzle is around understanding what is the value expressed as a P&L and then have control over it? How do we influence that P&L? Then I can take the P&L and apply it in my capital allocation optimization strategy. Getting the valuation right is important, but probably even more important is understanding, okay, what's the opportunity? What levers can I pull or push to influence the performance of that segment? What are the underlying trade-offs?

"Collateralizing is basically using the program as collateral to raise financing. That's one thing that you can do, but there's other avenues as well. But if you don't have the full overview of the landscape, you'll never be in a position to judge the competing alternatives. So we say first, establish a proper view of how is the business or the segment or the unit performing today, and how could it perform in the future? And what are the underlying trade-offs that you are faced with?"

(14:04) How can programs be used as part of capital allocation strategies, along the lines of a recent example of the Apollo Air France KLM transaction related to Flying Blue?

Evert: "I think, basically, if you have a well run program, it's an asset within your toolbox that you can use to raise financing. The Air-France KLM example is indeed a very recent one, where basically they got an external investor to buy bonds on their separated loyalty business, and that allows them to treat it as equity under French IFRS rules. Well, clearly, I am no expert on French IFRS rules but from what they have disclosed, that seems like a good solution for their problem.

"I think if we go back in time, Avianca first used this tactic whereby they used the loyalty program to raise financing instead of the airline. And by doing so they were able to exploit much favorable terms of credit. In other words, the coupon or the interest they have to pay on the on the loan was much less than if they had used the airline. The model is out there. It's tried and tested.

"I guess the bigger picture here is that airlines continuously need to raise finance. And because of the different characteristics that a loyalty business represents, if there is an efficient degree of separation, you can exploit some of those characteristics to your benefit, and basically run a more effective capital strategy."

(15:55) Gabi, if I could bring you in here, where does profit and loss come into play? And how can programs deliver higher operating margins?

Gabi: "If you've got to break down a P&L in a simple way, you would sell miles at a certain price to non-air partners at a certain rate per point. On the other hand, you've got a cost per point when the actual redemptions are taking place. So if you can, in a very simplistic way, think about how you can increase that spread by also, for example, lowering the cost per point on the redemption side, then by definition, you will increase your operating margins.

"There's an interesting trend that we foresee around quick micro redemption options. For example, if you think about using your miles or your points for sweepstakes or raffles at a much lower cost per point, but still do it in a way that members enjoy and find fun, then you can drive a certain portion of the miles redemption into that redemption bucket, that could have an impact on the overall weighted cost per point, i.e. a lower weighted cost per point, which of course would improve your operating margins, and also technically allow you to reclassify your outstanding points liability against that lower weighted cost per point across all redemption categories.

"There are all kinds of levers to play with. But what is often forgotten somehow is the impact that redemption cost can have in this whole mix, because that's still where 70% of all the costs are sitting in these kinds of programs. When we look at the P&L side, that would be an area of focus for me."

(17:41) Are there any lessons we can learn from the high achievers within airline loyalty?

Evert: "Ultimately, what drives success? If we have to boil it down, it's utility in the currency, meaning it's easy to earn, there are no complex terms or conditions. It's intuitive. It makes sense, members get it and will go out of their way to get their hands on the points or miles or whatever.

"I think a program can achieve that when the program can move with speed and precision. And what I mean by speed and precision is that you run a loyalty business that puts out an attractive currency, effective partnerships, it can move rapidly, it's not bogged down by IT issues. Precision is important because it implies having control over the performance of the business if I pull this lever, this is what will happen to my yields. If I pull that lever, this is what will happen to my cost per point to my breakage. If we look at programs, or loyalty companies that we think are very successful, I think these are the common characteristics."

Gabi: "I think to build on Evert there, we are talking about currencies here, airline miles are currencies. Every currency lives or dies with trust in that particular currency. The predictability and not a lot of unexpected devaluations all the time of that currency and the fact that members and partners can rely on the airline program as a reliable partner who will do anything to try to protect, within the economic kind of environment, the value of the currency, that is also a very important element in my view."

(20:07) If we look to the future, what's next for airline loyalty? Are we on the cusp of a new era in loyalty as organizations look to unlock the full potential, are we going to see more adoptions and kind of popular airline loyalty currencies been picked up by by other airlines such as the recent examples of Finnair and Qatar adopting Avios?

Evert: "As you rightly point out, Finnair and Qatar Airways are adopting or have adopted Avios as their currency whilst retaining their own program. I think this is a great example of showcasing or demonstrating, again, the utility in the currency. I would speculate that these airlines considered the various alternatives and ultimately made a decision to join a very strong currency that offers a lot of utility. So I think that makes total sense.

"Coming back to my earlier point, building on the increased awareness across all the different stakeholders and constituents in the system, I think airlines will continue to come up with better strategies and stronger content for their programs. I think IAG is an interesting one. They talk a lot about IAG loyalty, they've set it up as a separate segment. And they're really trying to educate the market and the analysts about how this is a very exciting business that we have here. It wouldn't surprise me if, at their upcoming capital markets day, they will talk a little bit more again about their loyalty business. And I think others are sitting up and considering, 'Hey, you know, what should we be doing? Should we be looking at a P&L? What is our P&L? How do we optimize it? And then if you have the P&L, how do we then communicate that to the market?' I think there's lots of interesting things that will happen in years to come."

(21:57): Gabi, what opportunities are there for airlines to develop structures that will deliver ongoing growth?

Gabi: "I expect the largest growth is in the space of the frequent flyer programs being present in the daily online shopping lives of their members. If you look at the P&L of frequent flyer programs, co-branded credit cards have counted for ages as the most important accrual partner in the program. I do think there's a similarly large opportunity existing in the space of affiliate marketing connected to the online spend of the members, but not in a way that it has been done for the past two decades.

"Affiliate marketing, as a customer journey, has always been extremely clunky, I would say, for users to go to an airline loyalty website, click on a link, go from there to kind of a shopping portal or a website and then basically wait six weeks before their points or miles were credited. And of course, nobody shops that way. I'm predicting that if you look at a program Flying Blue, and we are involved as Pointspay as the Loylogic Group to help them with their new venture of Flying Blue plus, which is entering into the affiliate payments space, by having their own payment button implemented on leading websites in France and the Netherlands in this particular case. I think there's an enormous amount of accrual Income to be generated there for the airline. At the same time a lot of value can be created for those online merchants by connecting them to this affluent consumer base."

(23:34) Gabi, sticking with you, it would be wrong to not discuss rewards in more detail here. So how would you see rewards developing over time?

Gabi: "I think it has been a quiet, kind of stable base for a lot of programs, but there's an opportunity to reimagine how these rewards shops should look and the content that they should offer.

"Coming out of COVID-19, a lot of load factors are higher, airlines have rationalized their capacity, and as a result, reward seats are harder to get than prior to COVID. And you see some kind of pushback in the media, either in Australia or in in the US last week with Delta, you see kind of a lot of stress in the system on the flight-related reward. So, I think non-air rewards have to play a more significant role.

"Now, the question is, how do you structure that in a way that the cost per point, if this means cash going outside the ecosystem of the airline groups into third party type rewards offerings, in such a way that if that cash out happens that you benefit from that as airline loyalty program with a lower weighted cost per point? I think the rewards require a lot more imagination, having different brand partnerships in place to have unique content in the reward shop, which might not be easily found elsewhere, like early access to new releases or unique offers, but also presented in a much more memorable user experience than what it has been for the last few decades.

"If you look at loyalty programs in the fast moving consumer goods industry, they are very often run by very brand focused marketeers, I would say, and you will see that rewards shops are truly an extension of the actual brand positioning of that particular brand. I think it might be interesting for frequent flyer programs to also really think through what should such a brand extension mean, in light of my brand, what I stand for. We've also chasing a new dynamic around sustainability, so what kind of brand extension would you like that reward shop to be? So I do foresee that it's time to reimagine that part.

"Another element that could be interesting to think about is cash as a redemption offer, which of course, has always been popular in any kind of loyalty offering. Traditionally, airlines have been quite reserved in offering that, but we do think that there's probably a space for having virtual rewards cards as an alternative to gift cards that can be then embedded in Apple Pay or Google Pay or Samsung Pay wallet. But again, at the lower kind of cost repoint compared to the regular rewards, the flight rewards. And this probably would not be something that I would let loose on the entire FFP database. I more see this as an extra benefit for elite members who will redeem their miles anyway. And then you might want to position that more virtual cash element only for that segment. So these are just some of the hypotheses were having what we might see in that space."

(26:49) To wrap up the discussion, what key takeaways can you give anybody looking to maximize the potential of their airline loyalty program?

Evert: "I think I'll repeat myself when I say that, in order to truly benefit from the potential value that a loyalty program can bring, it's critical that you understand how it's performing and what are the levers that you have at your disposal to influence that performance? I think that's critical.

"I do want to mention two headwinds that I think are important to talk about. The first one is kind of building on what Gabi said, increased pressure in the system on award availability. I think that's true. And I think, you know, the most successful programs will develop this skill to optimize or revenue manage access and pricing to rewards. In other words, you need to have a strategy that determines who gets access to what flight rewards at what price, and basically make sure that that's done in a in a smart way. So your best members get the best value. And yes, there is a role to be played for non-air because it can bring down cost per point, as well as act as a release mechanism for built up pressure.

"The other thing that I think it's important to mention as well, is that I think we're going to see increased regulation and legislation around loyalty programs, specifically in Europe. I think frequent flyer programs, that name itself, is enough to attract a lot of attention in the very near future. And I suspect that more and more regulators and legislators will turn their attention to it. I think it's inevitable, and it's up to the industry to come up with an appropriate response that makes sense for all involved stakeholders."

Gabi: "I think another potential headwind to be mindful of, is the continued pressure on interchange remains a risk for the frequent flyer business model. So again, diversification, or by focusing on tapping into, for example, online commerce might be an appropriate strategy.

"To wrap up this call, I would urge everybody to reimagine what the future could look like, taking all of these macro factors into play, but also making sure that the FFP department is truly positioned and enabled to function as a real marketing company for its partners within the airline ecosystem. I think that's a key takeaway for from my side, talking to a lot of FFP managers lately.”

Bank loyalty programs are crucial business tools that can drive customer engagement and revenue, and also enhance customer lifetime value. Yet, there remains masses of untapped potential for banks to exploit, especially around the use of data and personalization.

For this episode of the Loylogic Podcast, we are joined by Paul Wallis, Director of Growth at Epsilon, to explore the benefits that loyalty and rewards programs – when done well – can deliver for banks and how program leaders can overcome the challenges of delivering effective whole bank loyalty programs.

Key topics discussed include:

1. Bank loyalty programs today (2:05 to 8:10)

• Why bank loyalty is still in its infancy, the need for much greater personalization in loyalty and rewards, especially given the huge volume of data banks posses.
• Global trends in banking and why this is driving the ever-greater need for effective loyalty programs.
• What the best bank loyalty programs have in common.

2. Attracting and retaining customers with loyalty programs (8:11 to 15:42)

• How banks – or any financial institution for that matter – can ensure they’re developing the right loyalty program strategy for their business to meet customer demand for innovative loyalty schemes.
• Overcoming the main operational challenges brands face while executing their loyalty programmes.
• The big talking point…data…and why effective use of the information that banks hold on their customers is the best way forward for any loyalty platform to power engagement.
• How does this effective use of data play into the cost centre vs revenue generation debate?

3. Bank loyalty programs in UAE & Saudi Arabia (15:43 to 19:48)

• How global trends in bank loyalty are playing out across UAE and the Kingdom of Saudi Arabia
• The region-specific factors loyalty program managers need to consider while implementing loyalty programs in the region.
• The regulations, issues and requirements loyalty program managers need to consider when implementing loyalty programs in this region.

Listen now...or read below

The podcast can be enjoyed here, or by heading to the Loylogic Podcast channels on Spotify, Apple Podcasts and wherever else you listen to your favourite shows. A transcription of this latest epiosde can also be found below.

(2:05): How are banks across the world currently using loyalty programs as a strategic tool to drive success?

From what I see, I think bank loyalty is in its relative infancy. And I see that across the world, not just in the Middle East. When I see the amount of data a bank has about me, it knows my spending habits, it knows an awful lot more than most people do, probably than my family, I still see that I'm not receiving personalized offers, and rewards live statically on web pages. I don't see that engagement yet.

Typically, I'm not changing my bank every week. I've got this automatic loyalty there. And I think there's a real opportunity for banks to tap into that loyalty and be able to cross-sell and upsell me lots of different things. I never understand why I've got my current account in one place, I've got a car loan somewhere else, a mortgage with somebody else. I think, if banks get it right, there's a real opportunity.

I feel that some banks are doing a particularly good job, but then there are others that really need to play catch up. When I've spoken to people, they've got their own challenges internally, but I do think if you can break those internal challenges, there's a really good opportunity for the banking world.

(4:04): I guess what you're saying there is all the more important given that the banking landscape has changed dramatically since COVID. What are the global trends that are really driving the need for loyalty?

Obviously COVID drove the change towards digital banking. And then of course, because everything's going digital, fintechs are seeing opportunities to offer more user-friendly banking. Then we've got the open banking adoption coming in. So, you're seeing a lot more use of data, data and AI, to reduce fraud and improve customer experience. You've got new asset classes coming into the business as trends to explore and the blockchain and crypto central banks are exploring digital currency to make transacting more efficient, as well.

I think all of these trends are really dramatically changing the banking from a physical, quite slow process with expensive charges, to ones where banks are really going to need to be sharp in terms of what they offer to their customers to retain their business.

(5:25): That makes sense, and therefore, are we seeing more banks turning to loyalty programs? And if so, what benefits are they hoping to extract from them?

For me, whenever I've done banking loyalty programs in the past, or some sort of reward platform, the key drivers have been banks always wanting more transactions, and obviously being able to gain from cross border FX when people are traveling. But really, when I talk to banks now around loyalty, they're looking for better retention, and they're looking for more engagement with their customers.

Key to that is the ability to cross-sell other banking products, it's not just about running a current account anymore, really, the bank should be able to own the household finance. We see the super apps coming along as well to also disrupt that business, simple buy now, pay later, modules that plug into shopping platforms are all taking away from these banks. I think, if banks can control it from the data that they have, again, I think that's one of the reasons they can turn to loyalty programs. I for one don't need to sign up as my bank has already got me as a customer. It'd be very easy to switch me on to my bank to be loyal if there was another incentive there.

(6:47) So we're talking very much about kind of whole of bank loyalty here? And are there any examples of banks who are doing this well?

Looking around, I think I've seen a few examples of where loyalty is used quite well in the banking industry. One of them is Citibank, and the other one is JP Morgan. They kind of have a fairly common practice, but it seems to be working well for those guys. Their rewards enable points earning across a range of banking services, which can be turned into cash or redeemed at participating merchants. It's quite simple and straightforward, but of course, you're earning points whenever you do something at the bank, which can be exchanged into real money. So, I think as a start point, what those guys are doing is really good.

I think Citibank, when I last checked, they've got 23 million members on their rewards platform across the world. Of course, it's in multiple locations and of course, it's a large base of people. But 23 million people enjoying the platform is not to be sniffed at. And then moving from there, I think you can bring a lot more of the new technologies in to drive loyalty even further, but I like what they're doing as a start point, they're doing some good stuff.

(8:11): That leads us nicely on to the kind of next chapter it really of today's discussion. And I'll start by kind of sharing that the findings of a KPMG study that reported that 61% of customers found it extremely important or very important for their bank to focus on coming up with more innovative ways of rewarding loyal customers. Given this, how can banks or any financial institution or brand for that matter, ensure they're developing the right loyalty program strategy for their business?

Again, it comes down to the fact that they're blessed with data if they want to make their rewards for their loyal customers truly rewarding. They know for me, if they look at my profile, I like cars, I like golf. If they just offered me those things, I would do as much as I could, in order to make my lifestyle more fun, more enjoyable.

I was talking to a couple of the card issuers and they're going down the experiential route, in terms of what they want to offer for their customers and, and there's a whole big piece around money can't buy rewards. Some of the banks and financial institutions sponsor big events, so they can get you into places. I think Marriott do it quite well with their Bonvoy reward platform. You can go to see Manchester United play or the Formula One.

I think banks need to really focus on doing things that are ultra personal to the individual, but also bring in some of the experiential stuff. They've got these massive sponsorship deals around the world and so can leverage their relationships to provide some of their customers with true money can't buy experiences. I think that's where that's where they should be going, and they can really win from that type of customer engagement.

(10:04) I think you could probably argue that people would pay you to go and watch Man United at the moment! Moving swiftly on, what are the main operational challenges that the brands face while executing their loyalty programs?

For me, the competitive landscape of loyalty now is crazy. Everywhere you go, there's a loyalty platform or some scheme in place, whether it be at brand level, bank level, or shopping mall level, and people get confused. They've got points going all over the place, they've got app fatigue, as well. With all of this confusion in the actual sort of loyalty marketplace, engagement becomes difficult. And then, of course, all of these other challenges around the data management, the tech integration, the education of the team, building personalization, communication, running costs of the business, potential fraud, fraudulent activities, they exist on platforms. There are heaps of operational challenges, and loyalty shouldn't be taken on lightly, because you're trying to build that relationship with a customer over the long term.

So, whenever you enter into the space, you've got to do it right. Otherwise, it can take years to recover from these things. It's a big thing to embark on, if you're going to do it properly. And often, people miss out those things, going for the simplest way, if somebody downloads, I'll give them a simple reward per transaction and things like that. Loyalty needs to be really well thought through and driven, with the right strategy built at the front end of what people want to achieve, what KPIs they need to measure against, in order to build the platform.

(12:14): I want to pick up on one of one of the areas that you've mentioned there, which is data. Data management is a hot topic, so how can any loyalty program manager ensure that the data has been managed in the right way?

As we move forwards in the world, I think as we see cookie deprecation, and all of these things, and the influx of Web3, and things like that, data is going to become more in the control of the individual, as opposed to just being used across the board by anyone and everyone. Data control, coming back into the hands of the individual, will be a good thing.

And then I think it will be down to the brands to ensure that they're able to build a trusting relationship with their clients, that clients will hand over their data to them, because they know the brand or institution that they're dealing with is actually giving them value back. Where I work now in Epsilon, we truly believe in value-led loyalty as a way forward. And of course, that includes Data Trust, as well as one of those things.

(13:30): Taking that to the next stage, the ability to deliver those personalized golden moments through rewards, helps to build that trust and show that it's an intelligent use of data?

Exactly, yes. If you personalize properly, you'll be receiving things that are relevant to you, and not just receiving emails and pressing delete. Brands spend a lot of money sending out hundreds or thousands of emails and to have 2% open rates. It doesn't it doesn't make any sense, right? It's just a waste of everybody's time. So as soon as this can happen, I believe that better for everybody.

(14:09): The next question on data is how does the effective use of data play into the whole cost center versus revenue generation debate?

If you get your data strategy right, and I'd always encourage people before they embark on loyalty to ensure that they've first got the data part right, their data pools under control, if you wish, because so many times people will start trying to build programs using fragmented data, and it creates all sorts of headaches. So, even before you start to do your loyalty strategy, it's always good to get your house of data in order if you wish.

But, of course, there's an upfront cost associated with building your data strategy. But once you've got it, there's plenty of ways in which you can start building in monetization off the back of the of the data, and that's both from an internal efficiency perspective, based on the insights that you have known how to adapt the program, knowing what type of rewards to do, and then being able to use that data to the benefit of the customers. And then, you've got a pool for the cross-sell and upsell of the business, which then is a contributing factor to the ROI of your loyalty program.

Loyalty is not built overnight. So those ROI calculations need to stretch over, you know, a good three years, but good loyalty programs will run into multiple years of engagement, if done well and data is used correctly, of course.

(15:43): So, Paul, you have extensive experience of delivering successful loyalty programs in markets such as the UAE and Saudi Arabia and I want to focus on that region for a few minutes. How are global trends in bank loyalty playing out across the region? And is there a move towards loyalty program adoption?

There is. Publicis acquired the Epsilon platform in 2019, came to the UAE, really, in 2020, and since we've seen a huge increase in enquiries for loyalty programs in the financial sector. Typically, before, it was very heavily driven on retail. But now we're seeing a move away with banks from a traditional 'just give him rewards' to actual loyalty. That goes across most of the region, and especially in the Kingdom, where there's a lot of growth accelerating. UAE has been fairly stable for a long time. But that being said, there's a lot of digital banks that have come in as well. So yeah, there's lots of new and exciting opportunities across the region.

(17:00): What are the local trends and opportunities?

On the large scale, we're seeing huge trends in digital transformation. This has taken a massive hold in most of the regions, and certainly from the consultative side of the business. They're driving forwards a lot. And people want to transform with super apps, they want to bring in fintechs to their business. They want to do so many things, Web3, there's so many new digital initiatives. On a country level, they're embracing digital transformation as well. And to that extent, you know, personalization is becoming very important.

It's really interesting to look at the mix of people in a region like Dubai, or the change in population demographics. In Saudi, 65% of the population that are Gen Z. So, you've got a very young audience, digital savvy, and they want things like gamification and Web3. In the region, everybody loves exclusive rewards, the VIP treatment and all of those things, but then we have to bear in mind that we need to keep it aligned with Sharia compliance, and Islamic finance and things like that. We have all these different cultural pockets that we need to be respectful of, but the trends are there, the mobile wallet integrations, AI and chatbots etc. It's really exciting. And you know, of course, we've got an audience that's wanting to embrace the technology changes.

(18:48): Excellent. So where do you see the future of bank loyalty across the region?

I think we'll see some of the best loyalty programs come out. There are some pretty unique things in regions here, where you see families that own multiple businesses, so shopping malls, car dealers, banks, everything, real estate, all falls under one umbrella, you know, whilst their individual brands and P&L is on their own. Ultimately, they report up into big family conglomerates. They're in a unique position to create apps that go across or touch all different parts of people's lives. So, from there, they're able to build ultimate loyalty. And if they do it well. they'll keep customers within their ecosystem. If I was one of those companies, I'd really be embracing what I could do with loyalty.

(19:49): To conclude our discussion, what key takeaways can you share that would provide bank loyalty program managers the best insights from what we've discussed today?

From my perspective, there's a shortlist. I like to think of it as bullet points. So, the first thing when you come to the region, and you get involved in loyalty, cultural sensitivity, important understanding of all the local regulations, because they differ by country, although you might be doing Middle East wide programs.

Localization is the key, being able to localize like in the television industry. I refer to that because I used to work in it. But when I see the international platforms that come here, versus the local platforms that have set up, the local platforms are doing and performing better, because it's localized content. And people like to work in places they're familiar with. Then there's the personalization, ensuring everybody has a unique tailored experience. Data security, payment, diversity, collaboration with partners. You're not just in one ecosystem, you're able to use your points as a currency in in many partners. Exceptional customer service and feedback is critical. And of course, keeping an eye on the competition.

For me, in summary, when I talk about loyalty, especially under the Epsilon umbrella, our remit is that we always want to capture a share of a customer's heart, a share of mind, and of course, a share of wallet. And we think if we can capture those three things, we can build the best loyalty programs.

In today's challenging economic environment, loyalty programs have become a crucial tool for businesses to engage customers, drive revenue and enhance customer lifetime value (CLV). However, loyalty program owners often face a significant challenge in managing program costs, particularly the cost of rewards which is typically their largest expense and heavily scrutinized.

In this episode of the Loylogic Podcast, we're joined by Rob Clements, Lead Consultant at Loylogic, to discuss how loyalty program owners can use rewards as an opportunity, not a risk. Chapters and key topics include:

1. Managing risk and profitability(01:41 to 04:43)

- The guiding principles that should we be using to establish a budget for rewards and how to strike a balance between incentivizing customers and maintaining a solid bottom line.

- As loyalty programs evolve and costs fluctuate, we look at how program owners can stay one step ahead and effectively anticipate these changes and safeguard against unexpected financial challenges.

2. Rewards, redemption and resource management(04:43 to 11:54)

- Redemption rates of loyalty points or miles can have a significant impact on a program's finances. How can program owners forecast these rates accurately and control them strategically? Can you share some insights on maintaining the equilibrium between customer satisfaction and business viability?"

- The liability associated with loyalty points and miles and how program owners can effectively manage this while ensuring that the program remains appealing to the customers.

- How various types of rewards might offer different levels of cost-effectiveness and strategies for allocating resources optimally across diverse reward types.

3. Metrics and program management(11:54 to 14:12)

- The key metrics or KPIs that program owners should focus on to effectively evaluate the financial performance of their loyalty program

- How these metrics should be interpreted to make informed decisions about the program's future direction.

Listen now...or read below

The podcast can be enjoyed here, or by heading to the Loylogic Podcast channels on Spotify, Apple Podcasts and wherever else you listen to your favourite shows. A transcription of this latest epiosde can also be found below.

(1:41): When thinking about the financial blueprints of a loyalty program, what guiding principles should we be using to establish a budget for awards? And how do you strike a balance between incentivizing customers and maintaining a solid bottom line?

That is a really cutting question that I think touches right at the core of loyalty program management. When setting a budget for awards, you need to try shifting your perspective and view it more as an investment rather than merely an expense.

Looking at the top loyalty programs, they're allocating a substantial part of their revenue, sometimes up to 15%, for rewards. And it might seem a bit high. But if you can share the value of those investments to your business, it can be actually quite a logical decision.

If we look at some of the more lagging programs, often they're struggling to allocate their budgets. And that often means they're not really seeing the right results and sometimes deliver a really poor rewards experience. So although that approach may save some money in the short term, it really does risk losing customers and losing that engagement. So, ultimately, the aim is to strike a perfect balance between incentivizing your customers and making a robust bottom line.

(2:43): In order to achieve that perfect balance, there's always going to be an issue where costs fluctuate, especially as programs evolve. So how can program owners stay one step ahead and effectively anticipate these changes? We'd all love to have a crystal ball, ultimately, at the end of the day, but what strategies have you seen that help to safeguard against unexpected financial challenges?

You've touched on an essential aspect of how you manage a program and that's around the adaptability. So often, as programs evolve and grow, costs inevitably fluctuate. But the key really is managing these changes. And that really lies in understanding how that program is performing, understanding the financial forecasts, and any of those scenarios that you need to plan for. So often, it's the crucial part of the financial planning.

Looking at leading programs, again, I think you can see that they're the ones conducting rigorous financial forecasting and scenario analysis, they're really able to anticipate those costs. And it's really some of the average and lagging programs that fail to have a more structured approach to that, which really means that they're unable to project their costs out into year two, year three and beyond.

That lack of financial stability really limits their adaptability for the program and means that they're not really looking at it as an investment, but very much as a cost. They're not able to say, well, if I put this amount of funding behind it, we can expect this sort of return.

(4:08): How far ahead can programs predict? How far ahead should they be looking?

I think there are a few different horizons that you may want to look at, depending on exactly the maturity of your program. I think a good a good idea would be looking at the profitability maybe of your customers over a two year timeframe. But possibly, you know, you may want to take a wider lens, if you know that there are more technical costs that need to be incorporated. So possibly a five year view may be better.

(4:41): The redemption rates of loyalty points or miles can clearly have a significant impact on a program's finances. So as a program owner, how would you recommend they forecast these rates accurately and control them strategically?

Redemption rates can be a bit of a challenging aspect within the program. Often, program managers and program directors really want to see their customers redeeming, but maybe other parts of the business see that purely as a cost. So there are certainly financial implications there. But without redemption costs, you're not really going to be seeing that customer satisfaction, you're not really going to see them engaging in the program.

Ultimately, I think that if you can prove the link between redemptions and the future value of those customers, and how that levels up to your overall program, then businesses are really viewing those redemptions as a good sign of a healthy program. And not just a cost.

(5:37): You mentioned leading programs there. What are the leading programs doing to maintain the equilibrium between satisfaction and business viability?

I think it starts with the data, I think you have an accurate understanding of how your customers are behaving, and understanding of how you can forecast those redemption trends, and certain predictive tools that are really able to guide your strategy. But, of course, you need to make sure you're engaging those members, and using your personalization capabilities, using your media in ways that really engage your customers.

Of course, you can't do that in isolation. I think you need to keep a really close eye on your program, and understand any of those changes. So, if your customers are maybe finding certain redemption options more attractive, or maybe they're, you know, moving into new markets, different redemption ranges become important.

(6:36): I apologize in advance for this. But I've got to bring up the elephant in the room, which is the liability associated with loyalty points in miles. Now, how can a program owner effectively manage this while ensuring the program remains appealing to customers, which ultimately is kind of what they live and die on?

Yeah, it's really good you brought this up. I think, frankly, it's one of the aspects that businesses overlook, and they don't really understand it until it becomes a problem. The opportunity for programs is to be more proactive. Probably behavior is more reactive at the moment, I think. The leading programs really understand that it's something that needs to be managed actively. And it's not something that is going to work out well for the for the business if it's not really proactively managed.

Some of these leading programs are using actuarial models, and employing robust forecasting techniques, that really gives them the ability to understand their liability today, and also what they expect it to be in the future. Often those liabilities can be understated, sometimes they can be overstated. And both of those can represent real challenges for businesses.

(7:45): Is this where smart cost per point management comes into play?

I think that's a really important weapon in the arsenal of programs. Understanding that by taking an active view on what the average cost per point is, they can look to lower it over time, which ultimately drops more profit to the bottom line.

(8:04): What advice would you give to a program director when it comes to optimizing costs without negatively affecting the customer proposition? What are the trade-offs to consider? How do they strike the right balance?

It's absolutely striking the right balance, it's making sure that you're delivering value for customers. And that balance with a cost really makes it more of an art for program managers. They need to understand that it's something that you can't really compromise for customers. It's really important to get that balance, right, in terms of the cost invested. And I think, if you're looking at some of the weaker programs out there, they're more likely to overlook the importance of cost optimization. They've probably had a budget that's been in place for years on end. And a manager just signs that off, and does that every year.

What we tend to see is those programs missing the opportunity, because they're not really looking at what would their program would be like if they increased their budget. And not really understanding what the profit opportunity would be for making some of the cost savings as well.

(9:19): To make those necessary changes, do you need a mindset shift?

Yeah, it's about providing the best value for your customers, but also about recognizing that reward budget is an opportunity for investment. It's an opportunity to drive deeper loyalty for your customers and an opportunity to drive greater profit for your program, but also maybe optimize certain elements in the program that you haven't looked at for, you know, maybe up to the last five years.

(9:52): Within the constraints of a budget, various types of rewards might offer different levels of cost effectiveness. How should program managers assess and compare these?

Reward cost effectiveness is an essential factor. I think it's about providing value for your customers. Without overstepping that budget, I think customers really want more and more over time and I think programs have felt the pressure of needing to cut back. And really the only strategy that has been working for those programs is A/B testing for the rewards, getting that customer feedback, and seeing where there's an opportunity to leverage data to optimize rewards, which ultimately leads to the larger bang for buck.

(10:39): We talk a lot about golden reward moments and diverse reward types. So how does that come into play here? How are the leading programs that you talk about devising strategies to maximize the potential of both global and local reward types?

It starts with understanding what rewards your customers are going to be most interested in. Programs are able to access better data now than they were before. Understanding what those members want is not quite the challenge it used to be. The challenge now is how do they get it to those members at a price that the program's happy with, and the price that maybe the wider businesses is happy with, as well.

I think you need to look rewards sourcing operations, you also need to look at the types of product ranges that maybe have margins that are more attractive for your business, and bringing that all together, to really ensure that on one side, you're driving that customer satisfaction. But on the other side, you're also ensuring the long term sustainability of your program.

(11:49): In your opinion, given everything that you've said, what are the key metrics or KPIs that program owners should focus on to effectively evaluate the financial performance of their program?

It's a really good question. I'm not sure there's ever one magic metric out there. I think certainly, depending on the industry you're in, and maybe depending on the education and loyalty that you've had, you may gravitate towards one more than the other. But I think you can probably handpick a few that are the ones that are going to drive you in the right direction. And one that's very common is understanding the revenue per member. It's vital to understand the customer lifetime value (CLV) of a member, understanding how profitable those customers are going to be across a period of time. And, of course, understanding that your program is an asset. Understanding the level of profitability of that program, the total level is really something that you can use to strategically guide the business.

(12:54): To wrap up this episode, could you summarize our discussion or provide listeners with a few key takeaways?

At the heart of a successful program is considering the reward budget as a deliberate investment designed to nurture customer relationships, but at the same time aligning that with business strategy, making sure that you're staying nimble and adjusting to any trends. So if there are any changes in the environment, you're able to safeguard your loyalty program, and ensure you're meeting those new and emerging trends.

As well as that, optimizing your award budget, not necessarily thinking that the amount that you had last year is going to be suitable for this year, is key. Really being proactive and understanding that for each dollar that's invested, what the return is, so you're really maximizing that opportunity. Above all that, it means looking at your global loyalty program as a strategic asset, and not merely as a as a cost center.