Loyalty Truth

In the beginning, there was Air Miles. Actually, according to history, it was three men in a room that started Air Miles.

According to Air Miles corporate history, Keith Mills wasn’t one of those three guys, but somehow later it was Sir Keith Mills that sowed the seeds of the Air Miles brand and business model across continental Europe. Eventually, Sir Keith helped to found Nectar, the successful coalition loyalty program based in the UK.

There is a passage in Exodus when God tells Abraham that “I will make your descendants as numerous as the stars in the sky and I will give your descendants all this land I promised them, and it will be their inheritance forever.”  I am tempted to make a tongue-in-cheek analogy between Abraham and Sir Keith, though the family tree is becoming quite muddled at this point in time and the coming battle between Air Miles and Groupe Aeroplan will ensure that no-one’s inheritances comes easily.

Aeroplan, the spin-off of Air Canada’s frequent flyer program, has not been satisfied to improve its core business, but has set about acquiring loyalty schemes around the world, the most notable of which, until yesterday, being Nectar. Air Miles, to its credit, has apparently been eyeing expansion opportunities and recently announced that it has made a 29% investment in Dotz, the evolving coalition program in Brazil.

Yesterday, Aeroplan announced its planned acquisition of Carlson Marketing. It is not completely clear what the US$188 Million price tag purchased, but presumably Aeroplan has just strengthened it capabilities in offering a complete processing and operational solution for the large companies it is seeking as potential clients. It has also significantly added to its strategic planning abilities assuming that Peppers & Rogers is included in the deal.

The announcement will get the attention of the Air Miles folks in Toronto and its subsidiaries LoyaltyOne & Colloquy will increasingly feel competition in a sandbox that was nearly their own to play in until now. Half the residents of St. Louis will stay awake at night as well as Maritz, MasterCard and others seeking the crown of “leading loyalty solutions providers”  find themselves up against stiff competition and deep pockets.

What is means for the rest of the industry will be sorted out over the coming months. One message that is clear is that there is money to be made in Loyalty Marketing, especially if you are the owner of a currency that becomes valued by consumers and is traded widely.

There is also that the likelihood that consolidation will breed greater need for independent viewpoint, analysis and recommendation. Corporate executives making decisions with long term financial implications would be well served to evaluate the source of their advice.

Aeroplan and Air Miles trace their roots back to the same family tree in many ways. Let’s see what kind of family feud will brew now that Aeroplan has upped the ante of the game.