13: What sits behind the most successful Loyalty Marketing Programs?


Ilya Frolov, General Manager of Infinite Rewards, Investor and Advisor of Oxygen Ventures and Director of Studiomint, understands exactly how companies can leverage data to better understand their customer’s consumer behaviors. Learn how Ilya’s reward program and platform company provides a solution for the acquisition, engagement and retention of customers.

John: So today I’m in Melbourne just by Albert Park, the venue for the Grand Prix, great spot great weather surprisingly. And I’m joined by Ilya Frolov, Ilya is the general manager of Infinite Rewards, which manages reward programs and platforms, including for a bunch of universities but also many corporate clients. The company aims to really provide a solution for acquisition, engagement and retention of customers. And Ilya is a man of many talents. He as well as running Infinite Rewards, is also an investor and advisor for Oxygen Ventures sourcing venture capital for technology start-ups. And he even oversees architectural and interior design firm, Studiomint. It’s fair to say that Ilya has provided strategic consulting direction to executives and management across an array of sectors – technology, finance, telecommunications and of course internet-based companies.

Today we’re going to talk about how all of this came to pass. To really get an understanding of what Ilya does to innovate both around his own customers and what his reward company does to really make data in particular, work for his clients.

We’re also going to learn a little bit about the nuts and bolts that sit behind, I guess ultimately a really great loyalty marketing program and data is the key as I’ve mentioned. So Ilya welcome to Customers Matter.

Ilya: Thanks a lot.

John: As I said in the introduction, you’re a man of many talents; tell us about Infinite Rewards, how it started and how you decided there was a need for a platform like this.

Ilya: Sure. So Infinite Rewards has been around quite a while now. It was actually the brainchild of serial entrepreneur, Larry Kestelman, who founded and sold Dodo a couple of years ago.

John: Dodo the telecommunications company?

Ilya: The telecommunications company yeah. The dodo where ‘the internet flies’, so the big tagline that comes from there. So it arose early during their life lifecycle if Dodo. Being a very competitive market, telecommunications was tough in the early days and really the products that were selling was internet broadband and there was not much differentiation around during the early days. And so what they were trying to do is try to innovate on ways of acquiring customers. So their main focus of course was building the brand. And you would’ve seen it around plenty of commercials around. Their sponsors were a lot of sports activity but they still needed to innovate on and in different ways of acquiring customers. And one of those ways was providing incentives.

They went around and shopped around Australia to see if there was an opportunity to use something off the shelf. Couldn’t find anything and realised that we should just do this ourselves.

John: What was your job back then? Were you involved in the business at this stage? Or does this predate you?

Ilya: This predates me. So a couple years before my arrival and running the firm so it was I didn’t see the idea. But it was it was very much Larry’s brainchild there.

And what was the basic principle, what was he looking for that he couldn’t find and what did he do that was different?

So it was all about finding an incentive, something that provided value at a low cost from a business perspective but that it provided enough value for the customers where you know you’re selling Internet broadband. So giving something else or give something else to the customers that they’ll enjoy or need or want. So by sort of combining that package and packaging it up, which is what he was trying to work out, what is in the market that was out there?

John: So ultimately how did Infinite Rewards differ from other programs that are in the market, what set it apart? I mean obviously there are many loyalty programs, I was at a conference recently and there were literally hundreds of loyalty programs that were cited that had hundreds of thousands and some cases millions of customers in Australia, so there’s a lot of stuff out there. What separates Infinite Rewards both back then and today?

Ilya: Well back then there was pretty much; there was very few competitors out there, almost none in terms of the rewards space. This is early 2000 so everything was still early days in technology there was nothing really around. Really the only ones that were around I believe was the Qantas frequent flyers points program and that was about it. So there was nothing really of tangible value that you could provide something interesting to the clients.

It was born out of that and they basically collated a number of different brands together trying to get some exclusive discounts. Packaging it up into a nice presentable package and providing things like ‘show and save’ in restaurants and dining and those kind of offers and rewards during the early days.

John: So when did you come along and how did you come to get involved in Infinite Rewards itself, what was the process?

Ilya: I joined 2009. It was only a consulting job. But at that time I was at the end of my IT career. If you call it that, and I wanted another challenge. And I met Larry through Dodo at that stage and he said look I have this other business it has a huge potential; there’s a massive technology driver behind that you could really turn this into something. And that’s when I said yeah this is a no brainer. Let’s take advantage of this.

John: So you brought technology know-how to a customer facing loyalty scheme, what happened? How did you come by in that technology know-how? And to what effect?

Ilya: Well I suppose what I try to do is I look at it from, okay let’s have a look at the process current process from onboarding all the way to the experience and trying to understand how can technology improve that process either through efficiency or other means. And so I came through trying to understand okay well, providing a benefit is fairly stock standard you know you get an offer you show that offer, someone goes and redeems that offer, so it’s quite a fairly straightforward process. During that time when I started to join the technology, or the Internet area, definitely started to flourish. It was very much in place. It was the onset of mobile. So it was how do you now take that program to the next level. It wasn’t about you know the old show and save cards that everyone loved and hated at the same time. But it was how do you transform that into you know the next evolution of the program. And that was sort of my mandate and my desire to sort of turn a turn around.

John: So what did you do?

Ilya: Well yeah. So we were probably one of the first to focus on online rewards as well. So it wasn’t just about the show and save it was, how do you encompass the onset of online shopping and how do you leverage that so we started to take that on board. How do you streamline that process? How do you provide offers around the world not just in Australia? So shopping became quite open to global shopping and quite open to everyone now. So how do you take advantage of that? Tried to enhance the customer experience of a rewards program, because it was all about for us it was all about engagement. How do you keep the client engaged? How do you make it interesting? How do you make it relevant?

John: So what has all that meant for the growth of the program from 2009 to today? How big is the program now? How has it grown? How wide and how deep is it?

Ilya: Good question. So I’d love to say it’s grown tenfold and it’s you know it’s going gangbusters. We’ve had our ups and downs. Technology has definitely been the driver to our resilience I could say that. But it’s also been the burden as well because there’s been so many other products and campaigns and companies that have risen during the last 10 years, have become and gone as competitors. So as an example of the daily deals phenomenon that came, it was you know a massive competitor and it hurt our bottom line during a large period of time because effectively we competed on a discount model. However you know we were offering one set of products and exclusive offers and there were offering another set of products, which were discounted heavily but they were short term. Where as ours was longer term discounts and forever, but we had smaller discounts. And because people just wanted the discount they didn’t care how long it took.

So those kind of competitive pressures and forces definitely made us rethink how do we continue evolving?

And I suppose looking back and reflecting our success today, is we are still in place, we’re still growing, we still have a very strong world of corporate clients that are in place and still opening up new opportunities in traditional sectors. And that’s what’s really blown me away. Despite all the pressures that are around you externally you still manage to work through it and to succeed at the end of it.

John: And can you tell me about, just give me a feel for the cross-section of your customers and opportunities for their customers that are given through your program?

Ilya: So more so recently, we’re focusing on three core target audience for us. The transactional corporate client and what I mean by that is where there is a transaction between the brand and the customer. So utility companies are a great example, the Telco, an energy company is a transaction experience. Our other main audience is the education sectors, so universities are big. And the third key area is associations and industry membership areas.

If you break it down the next level of who is really the core and who really uses it for us, it really is for end users or customers that are financially conscious. That understand it. You know the cost of living is increasing, how do you consciously go out there and make sure that you can save intelligently.

And so when we approach our clients, we try to get an understanding of their customers and whether the program does fit for them. Because unfortunately the GPA or the medical association really sort of doesn’t work, you know our program really doesn’t work with them because that’s not really the customer base at the end.

John: But for a student who’s looking to save a buck?

Ilya: Look for a student, where they’re really struggling just to pay rent, it’s a great program.

John: So you found a niche where you can offer genuine value add, discount, surround the customer with relevant offers that actually help them with the cost of living.

Ilya: Correct.

John: That’s the bottom line here?

Ilya: That’s the bottom line yeah.

John: Which is quite a different model to a frequent flyer points model or what have you.

Ilya: Which is an aspirational model.

John: Yes. You mentioned earlier you’d originally had views for people who would shop all over the world. I’m assuming in this model it’s probably more about shopping closer to home for your customers?

Ilya: Correct and we’ve evolved from that as well and realised that it is possible to offer a thousand, ten thousand, twenty thousand different brands and companies with it, it can say but it’s really the essentials is where they’re really wanting to sell. It’s the everyday life that they’re trying to save on money.

So it is the supermarkets, it is the petrols, it is those aspects of life that people really want to save and are now conscious about it because that’s their biggest expense item at the end of the month.

John: Now Ilya there is another dimension, of course, to loyalty programs these days, and I touched on it in the introduction and that’s data. Tell me what the role of data is in a loyalty program these days and why is it so important?

Ilya: So data is king not just in loyalty but everywhere I believe it’s a key part of every business that should be running right now. It’s something that management should be looking at and aspiring to, to build on and evolve and understand and effectively create strategy and insights for their business. So for us in particular we look at collecting as much data for ourselves but also for our clients. And that’s part of the value add that we provide to our clients. So for us data is important because it helps us understand customer behaviour, what their purchasing behaviour is, their activity on our site, their satisfaction level. So that’s really sort of our key data.

John: So if we broke this down really simply, I’m a university, I’m using your loyalty program, I’ve got a bunch of students who have taken up that program. What could I know by virtue of how I might work with you and your loyalty program and the data you capture that I wouldn’t otherwise know? What are the sorts of things I can learn and how might that shape what I do?

Ilya: So I suppose what we provide our university clients, is once again that purchasing behaviour and understanding what kind and what time. So when they’re making certain purchases at certain times of the year, you could try to… I suppose how they interpret that data for their advantage. It could be around certain initiatives that they have. And what I mean by that is particularly around student fees, you know that could be something that would provide some insights to them understanding that you know during this particular time it becomes very difficult for them. So how could they potentially use that information to de-stress or…

John: Take some of the pain away?

Ilya: Take some of the pain away effectively from the student. Also during the lifecycle or the semester of the student, how do you help them out from an accommodation level from the students fees?

John: So really what you’re saying is I could potentially see the spending behaviours over time of the student and understand when they feel like they can spend and when they feel like they can’t?

Ilya: Correct, to some extent. Yes. And you can take that information and start to unpack just as a general cohort not just on an individual student level but just as a cohort of students. You can start comparing year on year, semester on semester, on how the students, you know, effectively spending behaviour but also their financial status. And that could be used as an initiative within the university to provide further assistance.

John: I see, very interesting. Now we talked about at the outset, some of the diverse businesses you’re involved in. Can you tell me about Oxygen Venture and indeed also Studiomint, because they are different but you’ve mentioned technology underpins them?

Ilya: Correct yes. So Oxygen Ventures was born out from the acquisition of Dodo. So when Dodo was sold to M2 in 2012, I spoke to Larry and was having coffee with him and having a chat and I asked him what he’s going to do next. And he was saying I’m not quite sure yet.

John: Because it was a fairly healthy exit?

Ilya: It was a very healthy exit. Yes. And so we were brainstorming and he asked me. He goes look if you had this much money, what would you do. And I said look I’d love to just invest in technology companies, that would be my passion and help other businesses grow and build and support. And then he goes, fantastic great idea let’s do it. And so that’s how Oxygen was born. And basically that was the premise of it. You know it was really using my technology background and passion, Larry’s ability to build brands and build businesses on the large scale and help entrepreneurs and budding founders grow and help their businesses, support them in that way.

John: So the Oxygen ventures fund, how big is it? How many businesses have you invested in? And how’s it rolling?

Ilya: Yeah so it’s been, we’ve been at for six years. We’ve invested in six companies. We’ve done it, initial investments and follow ons, so it’s totaling close to 15 million. Still looking at other opportunities. But as everything we want to make sure that these are successful rather than placing more bets. So we’re focusing on them and helping them grow and helping them succeed.

John: And what’s the spread of the sorts of technology businesses you’ve invested in? What are they doing? And we’re they at in the maturity curve?

Ilya: Still early stage I’d say. Look they’re all within two or three year old companies are still very early, they’re still growing, building new teams, exploring and exploding internationally as well. So, the cross-section of what the companies are, they have an underlying theme and that’s data, which is the thing of today. And databases, how do you build big databases as well. So a couple are in the ad-tech space, couple is a core networking technology and another one is in a profession marketplace as well. So…

John: And have you set yourself across a portfolio, a goal and ROI. And when you hope to see what from the spread of investments or is it really more philanthropic?

Ilya: I think it’s a bit of both. There was a little bit of altruism initially into it but of course Larry is a businessman and the aim is to provide a return on investment. Look for us success is making sure that we have healthy exits. We don’t have a benchmark of what we’re trying to achieve. It was making sure that it failed. And by that if we provide them with enough support, mentorship, guidance and advisory they should be successful. So…

John: You’ve been doing that for six years and then of course there’s the architectural and interior design firm. How does that fit in?

Ilya: Yeah exactly. So that one was a doozy. So I suppose one of my early passions in high school was definitely architecture. That was something that I had an eye for and wanted to be involved in but ended up being a mechanical engineer instead. But it was funny enough that my very good school friend had the same passion and vision and she ended up being an interior designer. We reconnected many years later and there was a project that was outstanding and I said you should do this; it’s going to give you a great opportunity. And out of that was born a company. Not much thought behind it to be honest. But today what I’ve really focused on is trying to look at ways to disrupt that archaic industry because nothing has changed.

John: They often see clients as patrons almost rather than as businesses that need to get a return.

Ilya: Correct.

John: Whether it’s residential or…

Ilya: Commercial, Exactly so, so it is a really interesting business. It’s a non technology business that I’m trying to put technology into it and the way that I’m trying to do that is purely from a process perspective and a customer centric perspective and trying to understand data, trying to understand a customer, trying to understand how to build a business not just on the design aspects.

John: So with Infinite Rewards you’re running as the CEO…

Ilya: Yes.

John: The other companies, the venture capital businesses you’ve invested in and Studiomint, what’s your role in those businesses?

Ilya: So for Oxygen Ventures, the investment director and also I sit on the board of some of the portfolio companies. For Studiomint, also a director and a shareholder of that company. So I’m more of an advisor, high level as well as when I need to I get deep down in the roots of it as well.

John: So this is going to keep you pretty busy, what do you do in your spare time and how much of it do you have?

Ilya: Look I’ve got two kids so they take up the rest of my spare time and I make sure that they get as much attention from me as possible because they are the future.

John: How old are they?

Ilya: They’re six and three. So two boys.

John: Joyful thing.

Ilya: Yes exactly. Everything needs to be a balance. And what I love and what motivates me is the ability to multitask, have a number of things going on at the same time. I have the ability to apply different methodology, different thinking, from one company and industry and sector and problem to another. And you can start sort of working out how can this all work and gel together. And that’s what I love and draw the thread and the dotted lines between certain situations and go okay, there’s an opportunity here, how do we take advantage of it and how do we streamline it.

John: So Ilya you and Larry have remained friends as well as in business together, so how often do you guys catch up these days and what’s the relationship like.

Ilya: Still just as strong as it was. I try to catch up as much and often as possible in our busy days. And he’s on his path, he’s got a lot of other new ventures – the NBL, he’s an avid property developer as well so that keeps him busy. I’ve got my kids they keep me busy. So we definitely try to cross paths and make sure that we have a healthy discussion about the future and what’s going on in businesses and that’s really key and critical success.

John: And just finally, if you were looking at the world today and advising businesses that were either being disrupted or thinking of disrupting, this combination of understanding your customer, technical know-how, and really working out how to innovate with those ingredients. Is that the most important stuff or is it something even bigger than that which is about the passion that driver it all? What would you say is the secret to surviving and thriving in this day and age?

Ilya: It’s definitely, definitely a passion but passion is usually born out of the founder and the CEO and if it is a start-up or if it’s a small enterprise, that definitely is the driver. It’s the vision behind that person that’s driving the company forward. I have this philosophy with all start-ups and founders that I speak to is, make sure you’re not behind the desk. Get out there speak to your customers, speak to your clients, speak to your end users, you have to understand what their opinion is or how they’re using your product. You know what you should change because otherwise you’ll just be wasting a lot of time and that insular approach is usually the failure of a lot of businesses.

For larger enterprises success really for me personally revolves around customer-first approach. That mindset that brand loyalty is starting to become quite frivolous these days. And people remember experiences; they don’t remember brands anymore, because there’s just so many out there. So if you can focus on being customer-centric, customer service orientated company, no matter what you do, whether you’re selling products or services, I think that’s the way that you’ll be able to succeed in today’s day and age.

Innovate. Be agile. Making sure that you’re always at the forefront of technology to understand how you can leverage that and use that to your advantage rather than fear it. Other than that there are so many more things that happen and that are very specific to each industry and each company. But as a broad-brush stroke, that’s sort of my philosophy on business of today.

John: Thanks for sharing that with us Ilya. Thank you very much.

Ilya: Thank you.