When rewarding loyalty, the sky's the limit

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Co-branded cards and air miles coalition programmes have proven to be smart marketing tools for providers in terms of bringing in more revenue. Such programmes are often seen as a lure for consumers, encouraging them to spend much more than they would if there were no loyalty schemes.

In the Middle East, loyalty programmes are becoming increasingly popular because of the demographic make-up of the region's population, which includes a large number of expatriates with travelling compulsions. In fact, travelling and shopping are two of the top most priorities for people living in the region - especially those in the UAE.
Stakeholders in the payments industry have come up with an increasing number of loyalty programmes in recent years, targeting the travelling and shopping requirements of the region's population. Their ambitions have been further fuelled by the replacement of cash with plastic cards.

Card payments in the GCC region have jumped 30 per cent in the last year alone. According to VisaVisa statistics, 1.53 million credit cards and another 2.72 million debit cards had been issued by the third quarter of 2007.

The travel and retail business has seen a similar trend. Spend in the UAE's travel market was expected to have crossed US$7.1 billion by the end of 2007, aided by 1,760 weekly flights departing from the UAE - half of which originated in Dubai. In addition, outbound traffic from the country is expected to increase at a rate of 12 per cent per annum until 2009, meaning more opportunity for loyalty programmes to target travellers.

A report by the Abu-Dhabi-based Arab Monetary Fund sums up the overall sentiment of UAE residents when it comes to shopping and leisure.

According to the report, UAE residents spend just under US$20,000 annually on consumer goods and services, representing the highest average of all Arab nations. In 2006, the UAE's private consumption covering spending by individuals and families on goods and services totalled US$84 billion. By 2009, retail spending alone in the UAE will reach almost AED37.44 billion per year, according to DMG World Media.

It is little wonder that airlines and credit card issuers are rushing to address the travel needs of UAE residents, while at the same time inventing tactics to boost consumerism.

Co-branding has been a particularly successful tactic. Back in 2000 in the UAE, CitibankCitibank and Skywards were the pioneers of this type of programme. Today, the idea is catching up with a number of smart bankers, while key players like Air Miles have also entered the scene.

The cards buffet
When it comes to co-branded credit cards and loyalty programmes especially those that reward air miles and other travel benefits consumers have a wide variety of options to choose from.

CitibankCitibank has tied up with Skywards to offer customers one Skywards mile for every US$1 that is spent on their credit or debit cards. With the Ultima card, which targets the higher end of the market, customers can earn two Skywards miles for every US$1 spent. Skywards miles can also be earned using a CitibankCitibank e-card.

Skywards has tie-ups with other banks in the UAE as well, such as EmiratesEmirates Bank and Emirates Islamic BankEmirates Islamic Bank. Holders of any EmiratesEmirates Bank Group credit card can earn three of the bank's own meMiles for every AED10 they spend on purchases worldwide. These can later be converted to Skywards miles at the rate of 0.8 Skywards miles for every meMile earned.

Emirates Islamic bankEmirates Islamic bank recently launched its first Islamic co-branded credit card with Emirates AirlineEmirates Airline and VisaVisa. This card has one of the most rewarding conversion rates in the market, with cardholders earning one Skywards mile for every AED1 spent on the card. The miles are also redeemable against a number of offers, including reward tickets from EmiratesEmirates and other partner airlines, hotel discounts, car rental deals, complimentary golf rounds and free E-Gate cards.

Apart from the UAE, Skywards has spread its wings into other GCC countries as well. Bahrain-based Ahli United Bank (AUB)Ahli United Bank (AUB) has partnered with Skywards to provide AUBAUB credit cardholders in Bahrain with the option to convert points they earn through the bank's Oyster Rewards programme. Cardholders can convert each Pearl point they have into one Skywards mile. The miles can then be redeemed for free flights, upgrades and other leisure and lifestyle rewards with

Skywards' worldwide partners
Skywards and Kuwait's Al Ahli BankAl Ahli Bank have also introduced a co-branded credit card that promises Kuwait residents three Skywards miles for every KWD1 spent on the card.

Brian Labelle, senior vice president at Skywards, says that globally, airline co-branded credit cards are amongst the most successful partnerships between frequent flyer programmes and banks. With different emerging market segments and varied target audiences, it is an opportunity for both organisations to expand the range of products and services offered to their members while expanding their membership bases. At the same time, this sort of partnership adds tremendous value to the mutual customers of the partners, he adds.

In March 2006, National Bank of Dubai (NBD) launched a credit card with DnataDnata, the Dubai-based travel provider. Apart from a range of competitive credit card benefits that include high credit limits, acceptance at millions of MasterCard merchants worldwide and 24-hour customer assistance, the NBD-Dnata MasterCard credit card allows its members to earn reward points redeemable for airline tickets, exotic holiday packages and various other services.

Abu-Dhabi-based EtihadEtihad airline is also heavily into rewarding loyalty travellers. The use of the HSBCHSBC Etihad Guest card entitles customers to earn Etihad Guest miles for every US$1 spent (the earning of miles varies with the type of card). While all frequent flyer programmes typically have a threshold for redemption, the Etihad Guest programme is unique in that cardholders can choose to redeem their miles with as little as one mile using the one-mile redemption feature and settle the difference in cash using the miles-plus-cash feature of the Guest programme.

Additionally, HSBCHSBC has tied up with Air Miles, the only regional coalition loyalty programme. HSBCHSBC credit cards offer Air Miles to all cardholders on card spend. Cardholders can also collect Air Miles from over 1,500 participating outlets in the UAE. Air Miles can be redeemed for a wide choice of rewards that include airline tickets, cruises, hotel accommodations, restaurant meals, perfumes, movie tickets, magazine subscriptions, tickets to theme parks and more.

American Express, too, has tied up with EtihadEtihad to link their respective loyalty programmes and offer a host of lifestyle rewards for affluent customers across the world.

Win-win situation
In terms of who benefits, partners agree that co-branding and loyalty programmes are beneficial to all parties concerned.

Labelle explains: "For any venture to be successful, it has to be a win-win-win situation for the customer, the airline and the retail partner. The customer must be the very basis of all planning and strategy, while price, product, quality and service are the crux around which most policies are drafted and implemented. The benefits are thus customer-centric, but there are rewards for both banks and Skywards. Typically, with joint marketing efforts, we will expect to see an increase in the membership base, increase in activity and increased visibility."

This statement proves to be accurate if we look at the rise in membership that all concerned partners are enjoying. Launched only in November 2006, the HSBCHSBC Etihad Guest card already has 25,000 members. Skywards has drawn 3.5 million members from all over the world in the last seven years, while Air Miles, since its launch in 2001, has more than two million members from the UAE, Qatar and Bahrain.

"Research has shown us that our cardholders have a global lifestyle and constantly want to get more out of life. Travel rewards and benefits are an integral part of what they see as a true value-add from a credit card," says Sangeeta Pendurkar, regional chief marketing officer at HSBCHSBC. "Any reward programme or airline tie-up is designed to address this customer need, thereby resulting in increased customer satisfaction."

Faisal Aqil, general manager of retail at Emirates Islamic BankEmirates Islamic Bank, describes the bank's strategic partnership with Skywards as a commitment towards putting customers' needs above all else. "Travel is an integral part of the lives of many of our customers. Through this partnership, we have been able to add huge value to their travel and offer them many more benefits that complement their lifestyle," he says.

Aside from customer satisfaction, loyalty, retention and added value, revenue is a big driver for loyalty programme providers. Within the airline industry, the perception is that such programmes generate 15-20 per cent of revenue, which is no small amount.

"Of course there is a revenue aspect in every partnership. We are a profit centre and thus have to sustain ourselves in terms of commercial returns, growth and operations," Labelle admits.

Needless to say, having more members ensures more revenue. Through Air Miles, HSBCHSBC has witnessed a 30 per cent increase in card use every year and a 50 per cent increase in card acquisition. Similarly, other Air Miles partners like Lamcy Plaza and Damas have seen footfall increases of 31 per cent and 20 per cent respectively.

Dave Battiston, CEO of Middle East rewards management at Air Miles, notes that it is a natural tendency for retailers to introduce innovative tactics not only to retain existing customers, but also to attract new customers, as ultimately an increase in the level of loyalty will ensure more revenue, positive bottom lines and increased profitability.

"Air Miles gets discounts from suppliers and a small variable percentage from retailers, while companies make money in redemptions Air Miles pays for," explains Battiston. "Because the whole programme generates more customers, even after providing discounts, it works out to be cost effective for business establishments."

Premal Patel, senior marketing director at American Express Middle East & North Africa, agrees, adding: "We have seen card members enrolled in membership reward programmes generate around four times more spend a compelling proposition for merchants that wish to attract an affluent audience."

For American Express, more than 60 per cent of point redemption takes place in the travel and hospitality sector. The company has recently experienced a 10-15 per cent increase in retail redemptions as well.

All indications are that loyalty programmes around cards are set to grow and explode over time. For consumers, the deals that they get through these programmes could be double-edged swords that eventually lead them to spend more than they earn. But for those who are prudent enough to get the most they can out of these programmes without overspending, it is time to start taking advantage of the many products available.

Travel & shopping a top priority
The preference of Middle East consumers is highly skewed in favour of travel and shopping, the latest MasterCard Consumer Lifestyle survey found out.

While most consumers surveyed in the UAE have lined up travel plans in the months to come, 78 per cent want to travel for personal reasons, five per cent for business reasons and another eight per cent for both. Ninety-nine per cent of those surveyed are planning to spend in the range of 11-50 per cent for personal purposes while travelling. Spending on business travel is poised to further increase, with 95 per cent of consumers willing to spend more.

In the survey, 59 per cent of UAE consumers mentioned shopping as their main activity while travelling. The majority of UAE travellers own some sort of payment card, whether it is a credit card (71 per cent), debit card (78 per cent) or pre-paid card (48 per cent).

Air Miles
Air Miles is the world's leading coalition programme and the only regional coalition loyalty programme in the Middle East region. The Middle East chapter of Air Miles, known and managed by Rewards Management Middle East, covers the UAE, Qatar and Bahrain. It is owned 40 per cent by HSBCHSBC and another 60 per cent by the Loyalty Management Group of the UK, which has been running successfully in the UK, Canada, the Netherlands and Spain for the past 20 years.

Air Miles can be redeemed for a wide range of rewards including airline tickets, cruises, hotel accommodations, restaurant meals, perfumes, movie tickets, magazine subscriptions, tickets to theme parks and more. Unlike other loyalty programmes, Air Miles are easy to collect, as cardholders earn them on card spend as well as on spend in retail outlets.

Since its launch in 2001, the programme, which is free to join, has grown exponentially, with nearly two million members enrolled from over 700,000 households in the UAE, Qatar and Bahrain. Now, over 80 per cent of all Air Miles members have either redeemed their Air Miles or have enough Air Miles to do so, making Air Miles the largest and most active retail database in the region. In this region, some of Air Miles' major partners are Spinneys, Damas, Sun & Sands, Bin Sina Pharmacy, Royal & Sun Alliance and Lamcy Plaza.

According to Air Miles' CEO, Dave Battiston, it is hard to quantify a specific figure for the value of each Air Mile. Looking at typical shopping vouchers, the conversion starts at a minimum of 6,500 Air Miles for an AED100 voucher at one merchant, but it could convert from 24,000 air miles to an AED100 voucher for another merchant. "There are over 1,000 rewards that our members can redeem for. Services vary significantly from reward to reward. This could be affected by availability, discounts offered by the supplier (which are passed directly to our members) and achievability," he explained.

Skywards
Now celebrating seven successful years, the Skywards frequent flyer program of Emirates AirlineEmirates Airline is widely known to deliver benefits to its members that go beyond the mere travel experience. More than 3.5 million frequent travellers across the globe have joined Skywards since its launch in 2000.

Members earn Skywards miles on every flight with EmiratesEmirates and its partner airlines. Skywards flight rewards start at 10,000 miles and all flight rewards are for return tickets. Members can also earn miles by staying at Skywards' partner hotels, using the services of other partners for car hire and leisure activities and when using co-branded credit cards in association with banks. Rewards for a passenger's loyalty and business include free flights and upgrades to hundreds of destinations, as well as free leisure activities and quality goods.

At present, Skywards offers three types of membership: blue, silver and gold. Skywards blue cardholders earn one Skyward mile for every mile flown, while silver cardholders receive 1.25 Skywards miles for every mile flown and gold cardholders earn 1.50 Skywards miles. Also, flying in business or first class ensures 50 per cent and 100 per cent more Skywards miles respectively. Available also are family bonus miles, where 20 per cent of the miles flown as a family add to the family head's account.