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While customer reward programs have been around for decades in the West, they are still a relatively new phenomenon in the Middle East. Leading the way in the region’s loyalty game is the Air Miles scheme, which, since its UAE launch in 2001, has gained in excess of a million members from over 450,000 households.
“In our game you need a bank, a supermarket and a petrol station,” says Dave Battiston as he plots the Saudi Arabian launch of the scheme.
“We can then bring all these companies together and offer them a really compelling proposition — we’re at the stage where we’ve got letters of intent signed by the big parties, so we are just getting over a couple of hurdles now,” he adds confidently.
Five years ago, before Air Miles touched down in the desert, the company’s global executives were pondering the decision of where next to expand, Asia or the Gulf. “We were looking at the Middle East and Japan but decided the Middle East had the legs because HSBC (bank) and Spinneys (supermarket) had already said they wanted to be a part it. It’s a great time to be here and the retailers are doing really well,” says Battiston.
Currently enjoying a presence in Qatar, the UAE and Bahrain, the company will rollout operations in Lebanon and Jordan by the end of the year, expecting to add 100,000 members in the first year from new markets. Despite having operations in Canada — where 70% of householders are Air Miles members — as well as the UK, Spain and the Netherlands, the Middle East remains one of the most important areas in the company’s global strategy.
As Air Miles founder, Sir Keith Mills said this summer: “With a predicted 250% rise in retail gross leasable area by 2010, the Middle East is a shopper’s dream. This is exactly where Air Miles, as a coalition loyalty program offering aspirational rewards can help members make the most of their daily spend.”
So far in the region, the program has partnerships with over 160 varying businesses including Hertz car hire, IT retailer Compume, Hilton hotels, Al-Futtaim travel and HSBC bank. The basic business model of the scheme is that Air Miles runs a database of customers and a call centre operation.
In return it takes a small percentage of money spent by its members on its partners’ businesses, while offering rewards to members from electronics and jewellery to skydiving or Formula One driving experiences.
BLUE CARD BANDWAGON According to Battiston, it is not just the customers that can benefit, with coalition members also enjoying the perks of being on the Air Miles bandwagon. “HSBC bank has had a 29% increase in credit card spend because of us and also a 50% growth in card acquisition year on year since 2001. When we first came into the market they were the fourth credit card bank and now they are first having overtaken Citibank,” he says.
“Also, Damas — the biggest Jewellers out here — has boosted its sales by 20%,” he adds. Sceptics may claim that such results can’t be solely down to a loyalty program, but Battiston insists that, thanks to direct marketing, he can prove that they are. “The results are totally measurable. In direct marketing you can measure how many more customers are coming to you by doing double Air Miles campaigns and seeing how many people are shopping with you during that promotion,” he says.
LIFELONG SALESMAN Originally from New Zealand, Battiston first started out in the loyalty industry in London working for the Nectar loyalty management group. A salesman at heart, he admits it is a challenge working across so many sectors. “I’ve been in the game for a while now and I’ve grown to love it,” he says. “I deal with other CEOs and question them right down to the final degree. How many times do you turn over your bananas in Spinneys? What are your key strategies for driving profit with your credit cards? What’s a good customer? What’s a bad customer? We learn everything, so it’s a challenge but it’s fun because you cross so many paths.”
A common misconception about Air Miles is that it is in the same ballpark as frequent flyer programs such as the Skywards service offered by Emirates airline. Admitting he’s “a good Skywards member”, Battiston maintains that the two types of loyalty program are completely different.
“We have the mass market appeal (where as) the frequent flyer is a select audience, so we don’t compete with Skywards”. So, with air travel making up only 10% of Air Miles rewards, where does the company’s name come from? “A lot of people ask me why it’s called Air Miles. It’s because of the aspirational value of air travel, as we offer aspirational rewards,” he says. “Perhaps in the UK, air travel is so cheap. You can fly to Spain for around £20 (US $37), but here air travel is still a big deal because the pricing is so high.”
The real threat to the business, according to Battiston, is companies that try to run their own in-house loyalty schemes. “It doesn’t really make sense for companies to do it because you’ve got to have the database, the rewards and the knowledge. The key is that you’re only going to be looking after your own customer base where as we have one million people walking round with that blue card in their pockets.”
EXPANDING EXPENSE With the company standing on the verge of entering Jordan and the biggest regional marketplace, Saudi Arabia, Battiston admits that setting up in new markets is an arduous process, which costs the company millions of dollars in the first few years.
“It cost us US $6 million (AED 22 million) to set up our database here which was a huge loss in 2001, so it usually takes us four years just to break even because we have to invest a lot in the country.” As a hands-on executive, Battiston spends the majority of his time outside the office getting to know the demands of his customers and clients. Liasing closely with the Air Miles head office in London, he also acts as sounding board for the various members of his ever-expanding coalition.
“We find out what people are doing in other countries and bounce them off our market leaders here,” he explains.
“To HSBC we might say ‘this is what American Express is doing in the UK, that could really work well for you’ and they love that — we’re always trying to be and stay one step ahead and that’s the only way you’re going to create value,” he adds.
If Battiston continues to build on the success of the last five years by breaking the Saudi market while keeping the coalition members happy, the popularity of his blue plastic currency looks set to soar up, up and away.
ROCKETING REWARD: ANYTHING IS POSSIBLE While the best thing most recipients of customer loyalty rewards can expect is a new plasma TV or a free trip abroad, in September this year, a London man saved up enough frequent flyer miles to launch himself into outer space.
Electrician Alan Watts flew between the UK and US on Virgin Atlantic flights 40 times in the past six years, earning him enough miles to take the trip into space with Virgin’s space wing. The two and a half hour trip, which will be taken sometime after the program’s 2008 launch, is worth two million frequent flyer miles, with tickets valued at a whopping US $200,000 (AED 734,400).
