#96: IAG Loyalty Shares New Trends including eStore, new Banking Propositions and Employee Loyalty

PAULA: Welcome to Let’s Talk Loyalty, an industry podcast for Loyalty Marketing Professionals.

PAULA: I’m your host, Paula Thomas, and if you work in Loyalty Marketing, join me every week to learn the latest ideas from Loyalty Specialists around the world.

PAULA: This episode is brought to you by Collinson.

PAULA: The pandemic has introduced major disruption to our lives and spending habits, and these shifts are having a distinct impact on customers’ loyalty to your brand.

PAULA: As experts in customer engagement and loyalty, Collinson can help you to harness your data for deeper customer understanding and adapt your customer strategy to successfully navigate uncertainty so that your loyalty program will continue to drive engagement and deliver new revenue streams.

PAULA: Make every interaction count.

PAULA: Visit collinsongroup.com to learn more.

PAULA: Hello and welcome to episode 96 of Let’s Talk Loyalty.

PAULA: And my guest today is a man I would describe as a true believer in the power of loyalty programs to drive commercial results.

PAULA: Adam Daniels is the Chief Executive Officer at IAG Loyalty Limited, a company that operates loyalty programs for the five airlines in the International Airlines Group.

PAULA: In today’s episode, we talk about the origins and history of IAG Loyalty and some exciting growth areas of the business that have really grown impressively despite the pandemic.

PAULA: We also talk through some innovative partnerships they’ve done in recent months in financial services.

PAULA: Way beyond the typical credit card propositions, we are all so familiar with.

PAULA: So Adam, welcome to Let’s Talk Loyalty.

ADAM: Paula, thank you very much for having me.

PAULA: It’s great to talk to you.

PAULA: And I know we share a common former company, in fact, as I was just looking through your background, 26 years with British Airways, Adam, my goodness.

ADAM: Don’t tell anybody.

PAULA: Oh, I know, I know, I shouldn’t say a thing.

PAULA: Listen, I love the work you’re doing with IAG Loyalty.

PAULA: So really keen to understand all of the history of the company and all of the stuff you’re doing now, particularly in the pandemic world we’re all dealing with.

PAULA: But before we get into your story, tell me what is your favorite loyalty statistic?

ADAM: Yes, I’ve been thinking about that question and what I should use.

ADAM: And I’ve gone with a stat which shows the power of loyalty and the scale of our business that many of your listeners might not know.

PAULA: Sure.

ADAM: So in any given year, our members spend about 40 billion pounds a year.

ADAM: So that’s about $55 billion in pursuit of earning Avios.

PAULA: Oh my goodness.

ADAM: That’s from flying, that’s from credit cards, bank accounts, hotels, car hire, but it’s a huge number.

PAULA: It is a huge number, Adam.

PAULA: Wow.

PAULA: Well, it certainly has the wow factor.

PAULA: And as you said, we have plenty of listeners who may not even know the Avios brand, for example, may not know the IAG Loyalty brand as yet, but you have an extraordinary history that goes back many years.

PAULA: I think in fact, my research says nearly 30 years.

PAULA: So I’d love if you would tell us all about the company and the businesses you operate.

ADAM: Yes, absolutely.

ADAM: I think that many people don’t know we have a pretty rich heritage in loyalty.

ADAM: Air Miles was formed in 1988 by Sir Keith Mills, which some of your listeners may know founded Nectar, the business that’s now owned by Sainsbury’s.

ADAM: And that at the time was pretty groundbreaking in the loyalty space, certainly in travel.

ADAM: And then just to confuse matters, in 2000 BA Miles was launched, which was a separate currency.

PAULA: Oh, I didn’t know about that one.

ADAM: Yeah, it’s a separate currency, but with a specific focus on the airline itself.

ADAM: So not general customer base, but specifically frequent flyers.

ADAM: And so we had two currencies running in parallel, if you like, until Avios started in 2012 with the formation of the Avios travel group.

ADAM: And then most recently, we changed our name again, just to confuse everybody one more time.

PAULA: Yes.

ADAM: And we’re now called IAG Loyalty.

ADAM: And that’s because we’re more than just a currency.

ADAM: We’re looking at being a loyalty provider across the airlines and beyond.

PAULA: Okay.

PAULA: And it’s five airlines.

PAULA: I know that you operate loyalty programs for Adam.

PAULA: So British Airways, obviously the original with Iberia.

PAULA: And then my own favorite, of course, is Air Club.

PAULA: So five airlines and how many kind of members are we talking about across that group?

ADAM: Yes.

ADAM: Well, there are about approximately 35 million members across the group.

ADAM: Yeah.

ADAM: And that’s obviously British Airways, as you say, is the biggest of the airlines.

ADAM: But there’s still a lot of members in Air Club.

ADAM: There’s a lot of members in the Vueling Club as well.

ADAM: So a lot of different members.

ADAM: And quite a few of our members are actually in the States.

ADAM: So we have strong membership in the UK, Spain, Ireland and the USA.

PAULA: That’s amazing.

PAULA: Yes.

PAULA: And I remember vividly, actually, just when you used the name Air Miles, because I did a fair bit of work out of Gatwick with BA Holidays.

PAULA: And I do remember Air Miles was actually headquartered together with BA Holidays, again, back in the late 90s, dare I say it.

PAULA: So there’s immense power and value in that name.

PAULA: So in terms of just that major rebrand to the Avios currency, because I know that’s something that you’ve made huge progress with.

PAULA: But as we all know, changing a brand that’s been around for 20 years does take a lot of time.

PAULA: So tell us a bit about that.

PAULA: Was that due to the, I suppose, combination of those five airlines coming together under one group?

ADAM: Yes, that was part of it.

ADAM: And also a currency that brought the two parts of the business together was also important.

ADAM: And, you know, we know, we’re honest enough to know that some people still call it BA Miles.

ADAM: There are some people that still call it, you know, Vueling Puntos.

ADAM: So we understand that.

ADAM: But it’s about bringing the businesses together, bring the currency together.

ADAM: And actually now, it’s got pretty good recognition across our different customers and across our different airlines.

PAULA: Absolutely.

PAULA: Yeah.

PAULA: And I do love it, actually, because, you know, short, snappy names like that, that actually become memorable, I do think are very powerful.

PAULA: So again, I know how difficult it is to come up with something to replace a legacy brand, but great work.

PAULA: And I know you’re still operating, for example, the British Airways Executive Club, pardon me, as well as Iberia Club Plus and all of those loyalty programs.

ADAM: Yes, absolutely.

ADAM: Doing something specific for those customers, but also trying to get an infrastructure in place where we can move and put things in place for customers in the different programs going forward.

PAULA: Indeed.

PAULA: And I was looking at some of your stats as well, Adam.

PAULA: 279 destinations pre-pandemic and carrying approximately 118 million passengers a year.

PAULA: And as you said, spending over 40 billion pounds then to earn Avios.

PAULA: So just an extraordinary business.

ADAM: It’s a huge business.

ADAM: And I’ve got to be honest, I thought I knew a lot about it when I came and joined this business a few years back and I joined as CEO just over a year ago, interesting timing.

ADAM: But it is a huge business.

ADAM: And as I say, the power of loyalty that potentially people don’t understand or who are not used to it, not close to it, just how important that is and what it could do for your business.

ADAM: It can really help drive the bottom line and can really get customers more sticky, if you like, with the brands that you’re associated with.

ADAM: So it’s been a really interesting year for me as CEO with everything that’s going on with the pandemic.

ADAM: But what it’s also shown me in that time is that customers have remained very loyal to us and the currency has shone through in those last 12 months.

PAULA: Yeah.

PAULA: And in terms of your background, Adam, what I really did like is your previous role and the most recent role you had before you left British Airways was Chief Commercial Officer.

PAULA: And one of the things we often talk about on this show is, you know, loyalty programs are often kind of hidden under, you know, the marketing team and they don’t get the visibility.

PAULA: And to your point, they don’t always get to shine through.

PAULA: So, I think it takes somebody that has your commercial credentials, I think, to kind of, you know, take something like IAG Loyalty and really demonstrate the power.

ADAM: Well, you know, I think that when I was the CCO of BA, probably the loyalty lever was the most powerful lever I had in terms of driving revenue.

ADAM: Everybody can use price changes.

ADAM: But in reality, the best lever was the loyalty business, because lots of customers, you know, wanted to, you know, when they wanted to fly, were able to fly, you know, using that loyalty lever was very, very effective.

ADAM: And I know that’s the case in lots of other businesses, but and often forgotten.

PAULA: Indeed.

PAULA: Yeah.

PAULA: And my own favorite career highlight, I will definitely say, was also using loyalty way before I was in the business, but when we were looking within Emirates to change channels for bookings.

PAULA: So, again, you will be very familiar with the travel agency community.

PAULA: And we literally had the loyalty program SkyWords, where we could literally say, OK, let’s incentivize our loyal customers to book directly with emirates.com.

PAULA: So yes, I think for me, that’s when I kind of went, wow, this is the most powerful tool in my marketing toolkit.

ADAM: And we spend an awful lot of money as airlines trying to obtain new customers.

ADAM: You know, we should also spend a lot of our time with our existing customers looking to get more of their business.

ADAM: And we sometimes forget that.

PAULA: We sure do.

PAULA: Absolutely.

PAULA: Yeah.

PAULA: And that’s another favorite term of mine, actually, Adam, share of wallet.

PAULA: So I know there’s lots of loyalty professionals really looking at that now, because at the end of the day, you know, if people are only giving you half their business, then there’s still work to be done.

PAULA: So exactly right.

PAULA: Definitely work.

PAULA: So that’s fantastic.

PAULA: And you mentioned the timing of the pandemic coming in at a particularly, let’s call it interesting time in the loyalty and airline business, particularly, I’d love to hear how you guys have been responding to the pandemic.

PAULA: And given that the vast majority of your members were being triggered, as we said, mainly by their flights and their their willingness to travel, which hasn’t been the case to the same extent for the last 12 months.

PAULA: So I’d love to hear what’s been going on for that time.

ADAM: Yes, I think the you know, the pandemic has obviously caused, you know, a major change for all of us.

ADAM: And you know, more no more so than the airline space, and really our response was doing some of the things you would expect from us, you know, taking care of our customers, extending vouchers, working with confidence, flexibility, that’s the right thing to do.

ADAM: And frankly, it’s what customers would expect from us.

PAULA: Yeah.

ADAM: I think we’ve also tried to maintain the interest and that’s, I think, been quite effective in terms of promoting products and brands that customers could spend on or are interested in.

ADAM: And that’s where our online shopping portal, our eStore has come in very effectively.

ADAM: So our eStore in the last 12 months has had its best 12 months it’s ever had in its history.

ADAM: Because customers coming in and saying, well, if I can’t earn miles through some of the ways I would normally do, I’ll earn it this way.

ADAM: And so yes, our eStore has been remarkably successful in the last 12 months.

ADAM: And we’ve also tried to focus on things that came up through the pandemic that customers wanted to do.

ADAM: And we got a lot of feedback.

ADAM: And I know this has been a subject on some of your previous podcasts about wanting to do something with a currency.

ADAM: And so we decided to do a promotion both in Spain, Ireland, but particularly in the UK around donating points for the NHS and to allow our NHS teams to be able to go on a break.

ADAM: So we teamed up with the NHS in the UK and we weren’t sure, if I’m honest, whether that would work or not.

ADAM: Would our customers want to do that?

ADAM: Would they want to use their points in this way?

ADAM: But in the answer was a resounding yes.

ADAM: We had just under 100 million points donated by over 9,000 members.

ADAM: And we’ve managed to award trips across to Europe to over 5,000 NHS workers.

ADAM: So that’s great.

ADAM: We’re something we’re proud of.

ADAM: But it also shows that customers wanted to interact with us and wanted to use the currency for things other than for them, which I think is great and something we need to think about going forward.

PAULA: Yeah, and it comes, I suppose, very much within the topic again, we talk about a lot on this show and it’s the balance between transactional loyalty, and I do want to explore the e-store a bit more with you, and then the emotional loyalty, which is coming through then very much.

PAULA: So like 5,000 NHS workers going on holidays, literally, you know, as guests of Avios or IAG Loyalty, I think that’s a lovely message.

PAULA: And I had seen the call to donate, because I’m not obviously in the UK or anywhere I can easily earn Avios, I didn’t have the opportunity to earn or donate, but I hadn’t realised that it had produced such extraordinary results.

ADAM: Yeah, and I think we were surprised, if I’m honest, we had some outline of what we thought the numbers would look like.

ADAM: But, you know, we got, I get a lot of emails, I don’t, as a CEO, I get a lot of emails, some of them positive, some of them less so, but I got a lot of emails back from customers saying this is exactly what we want you to do, it’s exactly the sort of thing that we want you to engage in.

ADAM: And I’ve also had some great emails from NHS staff themselves saying brilliant, I wasn’t able to go away to go home, now I can.

ADAM: So that’s been a real success.

ADAM: And you know, we’re thinking about that as we go forward.

ADAM: But as you say, emotional loyalty is very powerful, if you get it right.

PAULA: It sure is.

PAULA: So was that a short term tactical one, Adam, that you’re considering for the future?

PAULA: Is that how it was designed?

ADAM: Yeah, so it was designed specifically with this situation in mind.

ADAM: And we managed to get it live pretty quickly, to be honest.

ADAM: We are thinking about how we explore that space going forward, because it doesn’t exist for us today.

ADAM: It isn’t an option for customers today to donate in that way.

ADAM: So we are looking at what we might do going forward.

ADAM: So that’s an active conversation at the moment.

PAULA: Lovely, lovely.

PAULA: But it definitely sounds like you just kind of nailed the zeitgeist, because, you know, customers or members don’t obviously email unless there’s something either very good or very bad with their loyalty program.

PAULA: So the fact that they’re reaching out and it also, I think, is much greater than, you know, the CSR programs that we’ve all done in the past, which are well-intentioned, but sometimes in the form of, you know, it’s a check or whatever.

PAULA: We’re sending people to travel, which is the beauty, obviously, of the airline business.

PAULA: I just think it’s a gorgeous one.

PAULA: So I’m sure your social media team will have a field day with all the content coming in from that one.

PAULA: So just take me back a bit then to the eStore as well.

PAULA: I know when we talked the last time, you literally described it as an undiscovered gem.

PAULA: So how long has it been around, actually, is the first question I wanted to ask you.

PAULA: And then just, again, for maybe people who are not familiar with an eStore and maybe the revenue model around that and why it can be so powerful for a loyalty program.

PAULA: Because again, thinking about this audience, there’s lots of people with lots of loyalty points and earn and burn propositions, but mightn’t have gone down the eStore route.

PAULA: So just would love if you wouldn’t mind explaining that piece for me.

ADAM: Yeah, sure.

ADAM: You know, we’ve had the online shopping portal, the eStore for some time, for the last few years, two or three years that we’ve had it.

ADAM: And we have it specific to the individual airline, because that’s quite important.

ADAM: So you don’t go on to one, you go on to the British Airways eStore or the Vueling eStore or the Aer Lingus eStore.

ADAM: And we try and tailor some of the content to that.

ADAM: So you might have something that’s a bit more relevant, let’s say to the Spanish market in the Iberia eStore.

ADAM: But it’s the ability to shop, do your everyday online shopping, but yet earn currency on the back of it.

ADAM: And we do that in associating with Collinson.

ADAM: Collinson provides a lot of the retailers that we use.

ADAM: And we talk to them and we talk to the retailers.

ADAM: We do a lot of the tech, as it were, at the front end.

ADAM: And now what we found is that once customers really see it and understand it, they stay with it and they really use it very effectively.

ADAM: So you can go and buy an iPad through that site with Apple or through another retailer.

ADAM: You can go and book tickets.

ADAM: You can also use some of the high street stores that you would understand in the UK and in Spain, whether that’s El Cod Ingles or John Lewis in the UK.

ADAM: And we do see lots of people use that.

ADAM: And increasingly, once they understand it, once they can see it, we see them stay with the channel as they go forward.

ADAM: Using promotions, I think is very useful.

ADAM: We do that a lot.

ADAM: Black Friday, for instance, is a big part of our e-store network.

ADAM: But certainly as a product, if you think about loyalty as a whole, it is something that we invested in, we thought we could work, and we’re very pleased with the results we’ve had thus far.

PAULA: Yeah.

PAULA: Super exciting because, yeah, I think always one of the pieces of feedback that we hear from members of loyalty programs is they want to earn more quickly.

PAULA: So it obviously proves the power of models like coalition programs and all of those.

PAULA: So to be able to translate or offer all of the online shopping opportunities to earn Avios, as you said, with airline specific stores, that sounds like just a very, I won’t say a quick win because nothing’s a quick win, but sounds like something that was almost waiting to be discovered.

ADAM: Yeah.

ADAM: You know, we have quite a bit of feedback from customers saying, you know, I did know about this, now I love it.

ADAM: So we have a piece of work still to do, I think, about making sure that visibility is there for everyone.

ADAM: But, you know, we have seen a lot, we talked about the pandemic, probably the biggest surprise for me, yes, iPads and Apple products have flown off the shelves, but the, we were able to see some of the transactional history.

ADAM: So we see, for instance, fitness gear has gone through the roof in the last 12 months.

ADAM: So you get some interesting data from it as well.

PAULA: Yes, absolutely.

PAULA: And again, listeners on the show will know that we had Rakuten rewards in the US again as a similar model.

PAULA: So again, I think the world is just waking up to it.

PAULA: I’m not even aware in this part of the world where I am, where we really have something as compelling as an e-store where I can get maybe, you know, Avios or whatever.

PAULA: So I must go and explore that some more.

PAULA: The other thing I wanted to ask you about, Adam, was the whole idea of employee loyalty, because I know that’s something that you’re very positive and interested in developing.

PAULA: So I’d love to talk through what you’re doing in that space.

ADAM: So we’ve thought about that and we’ve seen our customers respond, you know, asking us, can we gain access to the currency?

ADAM: Can we earn in different ways?

ADAM: And we think employee loyalty is something that could work, whether that’s, you know, if somebody’s done something great in a company, they can be awarded with Avios because we know people like to get that, or whether it’s through a certain type of activity.

ADAM: We launched internally something called Get Active With Avios, which gave people Avios if they did a certain amount of exercise, and we did it for a couple of weeks, not expecting, if I’m honest, too many people to do it, and we had a huge number of people take it up.

ADAM: In fact, so much so that my CFO, who was looking at the numbers, got slightly worried and said that we had to stop it on time and not extend it.

ADAM: But it gives you a sense that if you get it right and you can reward people, there is something there.

ADAM: So we’re going to explore that.

ADAM: We’ve done also some work with a couple of other companies looking at that and also looking at how we could use our technology to help in certain different ways with Avios and the currency.

ADAM: So we think that’s got potential and something we’re exploring at the moment.

PAULA: I know it was only done on a short term basis, but I think first of all, the simplicity of Get Active With Avios, I think that cuts through immediately.

PAULA: I can totally imagine human resources directors all over the world going, yay, that’s what we need.

PAULA: Just on an operational perspective, is it something that could be connected in with employee profiles or devices or how did it work on a day to day basis?

ADAM: I think for the trial, what we did was we made it, we did integrate it at a top level, but we didn’t do too much work to make sure that we thought there was something there for us, but certainly something we’re thinking about whether we can integrate it in some of the bigger platforms in this space.

ADAM: That’s something that I know we’re thinking about as part of our loyalty products and services arm.

ADAM: We’re looking to expand out of just focusing around Freak and Fly programs to think about providing loyalty products and services to the wider market, and that’s the first step in that space.

PAULA: Yes, and I did congratulate you, I think, last time we spoke, Adam, as well on just getting some of the basics in place because I think previously, again, Avios was so busy building that the website wasn’t in place and whatever, and the core proposition for partners that I was working on, in fact, for Air Club, wasn’t easy to articulate, and I think there’s a lot coming through now.

ADAM: I agree, and I think that is something that we’re working on still, we’re not there completely, but I don’t think it’s any coincidence that in the last year when we’ve got some of that technology in place, we’ve launched probably four of the biggest partners that we’ve ever launched in our history.

ADAM: New partners in the middle of a pandemic.

ADAM: I think it shows again the power of loyalty if you get it right, but also if you get the technical infrastructure in place, it does enable you to do some of the changes that we’re talking about, whether it be the launch of Santander in Spain, we have a big link there, Barclays in the UK, and of course the announcement also we made the last month or two that we were linking up with Nectar and with Sainsbury’s, and those are big changes for us, the like of which we haven’t done for many years.

ADAM: But again, the technical infrastructure was there to enable us to do it, and also there was the belief in the currency going forward.

PAULA: Yeah, and again, just because the audience is global here, Adam, I will just explain a little more that obviously Santander and Barclays are big banking partners, Nectar and Sainsbury’s.

PAULA: So that’s Grocery and Coalition.

PAULA: So again, the most active sectors of any loyalty industry.

PAULA: And you guys are plugging in, I think you said, nearly one a month at this stage.

ADAM: Yeah, well, that’s what we’re hoping to do.

ADAM: And you’re right to pick me up on the global nature of your podcast.

ADAM: But I do think that, you know, in both Santander and Barclays examples, we’ve gone not with just, not with a credit card or not just with a credit card in one instance, we’ve also done it with a bank account.

ADAM: And I think that’s something that potentially in the loyalty space, we haven’t done as well as we could have could have done.

ADAM: We always talk about credit cards.

ADAM: Don’t get me wrong, credit cards are very important.

ADAM: They are the main part of a lot of what we do.

ADAM: Bank accounts should be another area that we look at.

ADAM: And I think certainly the early evidence from the work we’ve been doing with Santander and Barclay says that there’s an appetite for that as well.

ADAM: So something that we thought could work.

ADAM: And thus far, early results suggest we’re right.

PAULA: And that resonates for me as a consumer, Adam, as well, because I think I have regularly had underlying frustration with various banks that I’ve been with, and yet I’m inherently lazy or just not sufficiently incentivized to go and look elsewhere.

PAULA: And yes, there are plenty of credit cards that are vying for my business, but I don’t really care about that because, you know, I’ve kind of done the research, but I think that’s a really big insight there in terms of like the whole banking relationship.

PAULA: And then obviously the incentive because the lifetime value of a customer for their full relationship, I think that’s a really, really big idea.

ADAM: And I think what certainly surprised the banks we’ll be dealing with in the early data that we’re getting back is that people are prepared to move.

ADAM: One of the big issues with bank accounts, certainly from the evidence we see in Europe, is people are very reluctant to move bank accounts.

ADAM: But if the loyalty is in place going forward, that might change their perspective.

ADAM: And certainly that’s the early read that we have from the data so far.

PAULA: Well, it sounds like we’ll have to stay in touch, Adam, and you’ll have to come back on the show definitely again to update me on all of this exciting work you’re doing.

PAULA: That’s all of the questions I had from my side.

PAULA: Did you want to add anything else before we wrap up?

ADAM: No, I don’t think so.

ADAM: It’s been great talking to you.

ADAM: Thanks very much for having me.

PAULA: Not at all.

PAULA: And I will just say thank you to our friends in Collinson who put us in touch.

PAULA: So Adam Daniels, Chief Executive Officer at IAG Loyalty, thank you so much from Let’s Talk Loyalty.

PAULA: This show is sponsored by The Wise Marketeer, the world’s most popular source of loyalty marketing news, insights and research.

PAULA: The Wise Marketeer also offers loyalty marketing training through its Loyalty Academy, which has already certified over 170 executives in 20 countries as certified loyalty marketing professionals.

PAULA: For more information, check out thewisemarketeer.com and loyaltyacademy.org.

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