Andrew Souvaliotis: A pretty cool guy, with equally cool paisley shirt cuffs.

This past weekend I had the privilege of hearing Andrew Souvaliotis, the Chief Impact Officer (how sweet of a title is that?) of AIR MILES for Social Change, speak in my 486R class. His discussion was basically centered on the very point of our class, which made me extremely excited and eager to share his lessons with all of you.

Firstly, AIR MILES for Social Change is the social venture of Air MILES, meaning it’s affiliated with AIR MILES and contributes to the bottom line; however it is operated as a separate business with a social objective. Their contribution to the parent company in terms of the bottom line is marginal because of AIR MILES’ huge revenues, therefore, this actually leaves them with the perfect business model to “choose impact over profit”, as he put it. In terms of the benefits for Air MILES, they have been immeasurable brand impacts from Andrew’s work.

Andrew started the business from an idea that he literally thought of while sitting in his backyard – this is the idea that 1) climate change is a big deal and 2) Canadians are literally obsessed with points. Customer loyalty programs are huge in Canada, the popularity of which are second only to the UK in the world. Andrew thought to combine the ability of a huge company with national impact with incentives driven to change consumer behaviour, and voila, he soon found Air MILES (Air MILES captures over 70% of the Canadian market), sold his company to them, and began his program to make an impact.

The objective of the program, and how Andrew feels businesses should be driving change, is through changing behaviours of consumers. This all lies in the AIR MILES redemption – i.e. when people collect AIR MILES, they have typically been able to redeem them for not only flights, but also a variety of household and other goods. By changing the types of goods people can redeem points for (e.g. bikes, transit passes) and also which goods are eligible for points or extra points (e.g. organic groceries), Andrew is using Air MILES immense national reach and relationships with retailers like Safeway to influence buyer decisions right at purchase. And it actually works! Because of Canadians’ points craze, they’ll seemingly do anything to get a few extra points.  Obvious criticisms of this came from the fact that this doesn’t do anything about reducing consumption, and, without key metrics, it can’t be ascertained whether the program is also increasing people’s consumption. Therefore, the AIR MILES for social change program is a definite promoter of the switch over the cut marketing perspective.

Our class asked so many questions that I’d love to elaborate on, however, I wanted to summarize some key themes that I got out of Andrew’s talk.

1. Marketing yourself as “green” is redundant

• Talking about yourself as green just puts you in the huge pool of companies who are doing the same thing – it doesn’t differentiate you from those who see it as a trend. You need to prove you’re green with your actions and let others tell your story for you. (They do this, for example, through the Ontario Power Authority’s proclamations that the AMFSC program grew ROI by 7000x)

2. There has been a fundamental shift in marketing forever – consumers will be permanently aware and affected by environmental and other sustainability issues, and therefore, sustainability will just become mainstream business

• This directly ties into our class debate about whether there needs to be a marketing revolution versus marketing evolution. I definitely agree with Andrew!

3. People are more convinced about climate change when they see its impacts in their backyards (e.g. Stanley Park being destroyed by a windstorm is a more powerful communicator than floods in a far off country)

4. Businesses should not focus on changing their supply to be more sustainable (i.e. sustainable by design) but instead, use their inherent influence and heft to drive change on the demand side (i.e. change consumer behaviour). Only then will climate change be combated, because it has to be something the masses choose to do.

• His argument for AMFSC is that it is transitional in this initiative; by beginning with incentives, they are causing people to change their buying habits. While AIR MILES as a business is continuing to do what it does best, it uses its national reach to drive as many changes in purchasing decisions as it can. Therefore, the best way to drive sustainability as a value is through big business. This perspective resonated the most with me as to what business’ role in driving change actually is. In addition to this, by using your strengths (as a business), and then using that to drive sustainability, you’re creating a real competitive advantage, as opposed one centred on just sustainability, but does not complement the existing strengths of your business.

A last point that I found interesting was the actual ability of loyalty/rewards programs to make money. For anyone wondering about this, as I was, here’s how they do it:

1. Loyalty programs are apparently relatively new, and in a market like Canada where we love points, people literally pounce on that.
2. How the redemption structure actually works:

• Besides the people that never redeem (free revenue), and the fact that redemption costs for a bike or flight, for example, are less than the revenues they are paid from someone like Safeway to offer the program, the other source of profitability lies in turnover cycles. Basically, they collect accounts receivables from people like Safeway right away, but time to actual redemption (i.e. accounts payables) is typically 30 months away! That’s the equivalent of getting free interest payments. I just about had the equivalent of an accounting orgasm.

Anyway, I’m eager to hear people’s feedback on this guy and hope to debate the issues he raised possibly in our class.

For Andrew’s bio, see: http://www.loyaltyone.com/whoweare/ourleaders.aspx (and scroll down).

Press release about the AIR MILES for Social Change program: http://www.loyaltyone.com/whoWeAre/NewsReleasesItem.aspx?id=69bf9027-9d65-401a-9eb2-bcfee4ee3187