Why Rupert Duchesne has no problem being a nerd

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Rupert Duchesne is living with the enemy. The CEO and president of Groupe Aeroplan spends his days persuading marketers that only an organization like his can offer precious data on individual shoppers' patterns of consumption, and then goes home to be confronted by his two teenage children blithely shrugging about how much personal information they've been giving away on Facebook.

"My kids spend their whole lives on Facebook," he sighed during a recent interview. "As a consumer you need to be very conscious of who you're giving permission to use your data, and if you give them permission, you should expect something in return."

This message is falling on deaf ears at home, he admits. "With that age group - how much do you listen to your parents?" Mr. Duchesne asks rhetorically.

And yet he's not giving up the fight.

This week, he delivered a speech at an airline industry conference in Montreal in which he claimed the loyalty industry is on the brink of a transformational moment led by a rare species he calls "the datarati." The word, he noted, was coined by Hal Varian, Google's chief economist, who last year predicted that one of the sexiest jobs over the next 10 years will be statistician.

That sort of thing is music to the ears of Mr. Duchesne, whose industry labours in the shadows of some of its flashier and more glamorous cousins in the persuasion trade. "A consumer is going to get more out of accumulating points than they are watching a TV commercial," he says. "If a company gives $5-million worth of points, or spends $5-million on a TV ad, the customer actually gets something from the points."

He says this as if he has perhaps a small chip on his shoulder, for even as TV ads get all the attention, it is geeks like him and his sexy statisticians who do all the heavy lifting of turning affinities and affiliations and inclinations into actual sales. "I'd prefer to be the nerd than the [popular]boy," he says, in a tone of voice he probably wishes were more convincing.

Some nerds, of course, have been getting a lot of attention lately, namely Mark Zuckerberg and his colleagues at Facebook. But Mr. Duchesne believes there's a growing wariness about the lack of privacy forced upon users of social media sites, which may cause problems.

"As consumers, certainly in the post-25 age group, understand the degree of exposure that social networks essentially force on them, the quality of that data will decline because I think they'll be less willing to have those entities make the kind of use they have done historically on the data."

Just as importantly, though, Mr. Duchesne argues that social media sites don't have the sort of hard data that loyalty marketing companies do. "[Facebook]is much less about their actual purchasing behaviour than it is about their interests and affiliations."

Mr. Duchesne believes loyalty marketing companies such as Aeroplan, in which consumers collect points on purchases that can be redeemed for flights or other rewards, are at a key moment in their history. "I think the realization [among marketers]that the real value is locked up in the data, as opposed to it just being another form of marketing expenditure aimed at the customer, I think that really has only started to embed probably as recently as the last 18 months."

He argues that the financial difficulties of the past two years has played a key role in strengthening Aeroplan's market position. "The recession has put a very acute focus on bang-for-the-buck in terms of marketing expenditure," he notes.

"You can measure the [return on investment]of a loyalty program. You know exactly who has bought what, how many points you gave them, what share shift you achieved by giving them bonus points or channelling them through a particular channel - whether that be online, or bricks and mortar or whatever - in a way you cannot do with other forms of marketing. Marketers always complain that marketing is the first area to get beaten on by the [chief financial officer] and the reason for that is, historically it's been much harder than most other areas of the business to give concrete ROI numbers. If you have this calibre of data, you can argue with the money guys on a basis that they'll understand," he says.

"If you're trying to defend your marketing budget, this is a very defensible area, and as you defend something you naturally understand more and more about its value. I would actually argue the recession has been fairly important in waking people up to the explicit value of [loyalty programs]"

Aeroplan is also getting smarter about using the data it accumulates. Mr. Duchesne notes that, nowadays, a traveller who gives their Aeroplan numbers after booking a flight might get an e-mail with offers tailored to their destination. "If you're going to Mexico City, you might get an e-mail offer on hotel rates, suggestions on what restaurants you might want to attend. It helps you plan your trip while you're there."

"It helps build what is basically an air ticket - which is very transactional - into more of an experience, and from a marketer's point of view, the more a customer feels you've looked after them, understand what they're interested in, and are not just selling them something, the more likely they are to be loyal to your brand."

Last year, Aeroplan rolled out a program in the U.K. under its Nectar card banner, called "coupon-at-till," which is mining data in powerful new ways. When a customer shops at a Sainsbury's grocery store and swipes his Nectar card, an instantaneous check of his purchase history is activated. If the data show, for example, that he has purchased a family-sized bottle of Coca-Cola each week for the past six weeks, but failed to do so this time around, it might serve up a 10-cent-off coupon for his next purchase.

While Canadian grocers have long given computer-generated coupons at the cash register pegged to a purchase - say, a discount offer on Coke for someone who's just bought Pepsi - there was previously no way for them to know who marketers were targeting with that discount. That sort of mass couponing approach, says Mr. Duchesne, "a) costs an awful lot of money on a per-coupon basis; b) you have no idea if the person has a propensity to buy Coke; and c) they may be buying Coke anyway, so all you've given them is a discount."

"This has taken that to a whole new level. We've issued 45 million coupons in the last six months on the basis of who you are, as opposed to just what was in your shopping basket [that day]"

Mr. Duchesne says the response rates for the coupon-at-till program "have been fantastic." Still, he declines to cite specific numbers.

Hey, he knows you don't give your information away to just anyone. That stuff is valuable.