The Loyalty Newscast

This episode of The Loyalty Newscast, hosted by Ian Pringle, explores the rapidly shifting landscape of the global loyalty industry, focusing on devalued status programs and market consolidation. The program begins with an analysis of British Airways’ recent changes to its loyalty tiers, which has created a significant opportunity for competitors to attract displaced high-value customers through status matches.

The broadcast also covers major corporate movements, specifically Capillary Technologies’ $20 million acquisition of SessionM from Mastercard. Key industry experts, including Mark Ross-Smith, JP van der Lips, and Tom Shapiro, provide insights into:

• The mechanics and strategic value of status matching as a customer acquisition tool.

• The necessity of scale and AI integration in the current loyalty technology market.

• A historical perspective on loyalty acquisitions, illustrating how the industry often comes “full circle” with brands like Aeroplan and Nectar.

• The “small fish, big pond” challenges of tech valuations within large corporate structures.

Ian Pringle (Host): When one airline changes its program this dramatically, competitors quickly respond, as Phil Gunter explains.

Phil Gunter: Well, BA certainly made a bit of a shake up when they announced changes changes a year ago. The long and short of the changes is there’s a lot of people that have had status, many for for a long time, that are going to lose it. It’s making a lot of people that are quite comfortable to have a really good look at their their airline loyalty and say is this the right flight for me? Some of them will be forced to make choices, as in they’re going to lose their status, but even even people that aren’t necessarily going to lose their status right now, are are have got a great opportunity to look at whether their status their their loyalty is in the right place.

Ian Pringle (Host): So did BA get it wrong?

Phil Gunter: Oh, it would be easy—it’s easy to say yes, right, but we don’t know what they were trying to achieve. But it’s almost certain that they did not anticipate the the level and ferocity of the the reaction they got when they made the the next changes a year ago. I’ve seen this many, many times. I’ve seen it so many times where airlines, they get the calculator out and they do all this analysis based on the science of this stuff… and they’ve looked at what would happen if we do this and this and this based on logical, rational reactions. And they’ve not considered the art, which is what’s the customer going to do? Are are the customers going to change behaviors? Are they going to literally jump ship? And it probably is going to—it’s even more significant in anything related to status. Because status generally is the closest thing in the whole loyalty industry to loyalty. We call it a loyalty industry, but most loyalty programs don’t deliver loyalty, but status does. And people that have status with an airline, they they have a much, much higher likelihood to say when they need to fly, just get me on that airline or, at a very least, a strong, strong preference for flying with that airline… And a lot of people have just been trained to do that over time because of the status program. And then a lot of them now are being told actually, your loyalty hasn’t—isn’t necessarily welcome going forward. So they’re—they’re given an opportunity to have a really good look at what their airline needs are…

Ian Pringle (Host): And those alternatives are already in the market.

Phil Gunter: Oh, well, you’ve seen a bit of activity last year, right? And and you’re seeing it again this year. That there’s a lot of competitors coming in and offering status matches. Very, very, very logical, because if you have status with someone… the thought of starting at the bottom and earning your status is just a massive barrier. So—so sensible airlines are saying, “Hey, if you switch to us,” they recognize the fact that there’s a lot of people for what the word in the market. And they’re saying, “If you switch to us, we’ll match your status”.

Ian Pringle (Host): So, if the door is open, which customers should walk through it?

Phil Gunter: Well, from from a customer perspective, I’d say like almost everybody. The obvious ones are people that are looking at a downgrade, of course. Before you get downgraded, look at your options and and see what you can get with a status match or something else. But there’s also a stack of people that, like I say, have been comfortable in BA’s program that now may well have a better alternative.

Ian Pringle (Host): So British Airways may have intended to simplify the program, but as these changes take effect at the end of March, the real question is not just what BA customers will do, but how the rest of the market will respond.

Ian Pringle (Host): And now we’re back again with our latest edition of Sponsor Love… Hi today I’m joined by Mark Ross-Smith of Loyalty Status Co. Mark, to get us started today, can you tell us what status match is and what problem it solves?

Mark Ross-Smith: Yeah hi Ian. For brands status match is a simple but powerful tool for loyalty programs to rapidly acquire new high-value customers. Fundamentally, someone has elite status with one loyalty program… they can match that tier into your brand. Status match effectively therefore acts as a way for brands to attract proven high-value customers who already spend a lot with your competitor.

Ian Pringle: And how does it work for customers and clients? What’s the customer journey?

Mark Ross-Smith: Yeah for brands, customers go to the website, they enter some basic details, we validate their status. It’s a three-step process. After we validate that, we send a ping back to the loyalty program to upgrade the person’s status…

Ian Pringle: And how can airlines make it happen? What’s the integration like?

Mark Ross-Smith: Yeah really easy. We can get brands up within weeks on the status match global platforms. We do all the heavy lifting, all the tech, all the a lot of the marketing…

Ian Pringle: And how can people find out more?

Mark Ross-Smith: Yeah for consumers… just go directly to statusmatch.com, enter email address. It’s free and we’ll let you know if something comes up that is of interest to you. For brands, check out https://loyaltystatus.com.

Ian Pringle: Well thanks Mark and we look forward to having you on the podcast again soon.

Ian Pringle (Host): Next we turn to consolidation in the loyalty technology market. Last week, Capillary Technologies announced it would acquire SessionM from Mastercard for around $20 million. Ian Pringle spoke to Jan Piet van der Lips (JP), President for Europe at Capillary, to understand what the acquisition means for the market.

Ian Pringle: JP, congratulations on completing the acquisition of SessionM, that can’t have been an easy task.

JP: Yeah thanks Ian. And I mean the—the work was done by other people mostly, but my work starts now which is what I really enjoy.

Ian Pringle: And to start with, can you briefly explain what Capillary does and why the acquisition made strategic sense?

JP: Yeah, so we are a global loyalty technology company. We have a strategy of organic growth and inorganic growth. And for us the rationale is typically one or more of three reasons: deepening capabilities, strengthening geographic leadership (scale), and expanding vertical expertise.

Ian Pringle: And so why specifically then for did SessionM fit the bill?

JP: So first of all, Mastercard selected Capillary for SessionM. What they liked about us was that we are loyalty first… we have AI integrated across all aspects of the platform and we have a track record of acquisitions and migrations.

Ian Pringle: And so what does this acquisition mean for SessionM’s clients and Capillary’s clients?

JP: No, no. The first priority really is to guarantee continuity. It’s business as usual for the SessionM clients. For our current customers, it means that this acquisition will make us a better business… it’ll give us really good expertise, and we will be able to kind of channel that back into our existing clients.

Ian Pringle: And finally, what comes next?

JP: Yeah well listen, first of all is to look after our customers. Secondly, our focus is on organic growth… But it’s it is highly likely that eventually we will do more acquisitions…

Ian Pringle: Congratulations on the move JP, and we look forward to hearing more about how it goes in a later podcast.

Ian Pringle (Host): And now it’s time to look at the data… This week, we’re looking at loyalty acquisitions. The modern coalition loyalty industry arguably began back in 1988, when entrepreneur Keith Mills launched the Air Miles program in the UK. Within a few years, the business… was acquired by British Airways in 1993. As part of this deal, Mills… expanded the Air Miles concept globally… When Mills returned to the UK, he launched Nectar in 2002. In 2007 Nectar was sold to the Canadian loyalty group, Aimia, for around £368 million. Sainsbury’s bought back Nectar back in 2018 for around £60 million, and in 2019, Air Canada bought Aeroplan back for roughly $450 million. After that, Aimia gradually sold off its remaining loyalty assets… and in 2023, Capillary Technologies acquired Kognitiv, consolidating another part of the global loyalty technology market.

Ian Pringle (Host): The SessionM deal also raises a wider question about how companies in the loyalty technology sector are valued… To explore that, Ian spoke with Tom Shapiro, Executive Vice President at Wellesley Hills Financial.

Ian Pringle: Tom, SessionM was acquired by Mastercard in 2019 for around $250 million and was sold again for roughly $20 million last week. From a merchant banker’s perspective, how unusual is it to see such a big loss in value in such a few years?

Tom Shapiro: Thanks Ian for having me. So, it is not common and it is indicative that there was some significant issues within the transaction. Typically when a company acquires another one… they create value drivers and they should have a value creation plan… SessionM was really put into a difficult position. It is unusual but when you are a small fish being sold to a behemoth like Mastercard, you are at the whims of their budgetary cycles…

Ian Pringle: And as we enter now period of consolidation within the loyalty market… what can we learn from this?

Tom Shapiro: Absolutely. So, from the management teams and the leadership team’s perspective, you don’t want your earn-out… play out three, four, five years later, right? The second thing is you want to make sure that there are no conflicts between your business strategy and the intended strategy of the organization.

Ian Pringle: Well, thank you very much for your perspective Tom, it’s been really interesting…

(Host): And that’s it for this edition of The Loyalty Newscast. On behalf of Ian Pringle and myself, thank you for listening.