NRI Papers
No.107 August 1, 2006
  Secondary Currencies: "Mileage Points"
—What can Japan learn from the US business currency alliances?—
 
Hiromichi YASUOKA, Katsumi TOMITA, Yumiko SATO
      As represented by the mileage programs offered by the airlines and the points programs of mass home electronics retailers, "business currencies" have been launched to provide a means of directly returning some of a company's advertising and sales costs to consumers, thereby retaining the customer base and allowing companies to obtain information about their customers. The appearance of business currencies has changed consumer buying patterns, with many choosing to purchase from retailers offering points.
      Nomura Research Institute (NRI) has estimated the total annual value of business currencies issued in Japan in 2005 as more than 330 billion yen. Business currencies, together with the spread of credit cards and electronic money, are likely responsible for a fall in the amount of cash in circulation.
      In the past, US airlines have used mileage points to retain customers and generate profit by selling their miles. For these purposes, they restricted the use of their mileage points to purchasing reward tickets and focused on the spread of their own business currency. However, the increase in the number of mileage points in circulation has led to difficulties in ensuring that rewards can be provided. As a result, there is a move away from restrictions to enable rewards to be more readily available. One example of this move is the appearance of business currency exchange platforms.
      In Japan, also, business currencies have thrived with tie-ups centered on the airlines. The direction pursued under these tie-ups is to generate the effect of driving customers to partner companies and to carefully adjust the "exchange rates" for each company's business currency to generate profits by considering business currencies as business opportunities.
      In addition to the existing alliances centered on the airlines, as we approach 2010, we propose new types of tie-ups based on product value chains, services and areas according to the customer behavioral processes and product life cycles.
Contents
I Why Mileage Points Now?
II Business Currency Differentiation in the United States
III The Spread of Business Currency in Japan
IV How Can We Make the Best Use of Business Currencies?

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