Are customers truly engaged in loyalty programmes?

The question of whether loyalty programme operators are actively seeking redemption is nothing to do with a moral or ethical quest for inner peace, but more to do with whether or not they are encouraging programme members to redeem the points or currency they’ve earned, according to Mike Atkin of MJA Associates.

Loyalty experts tell us that programme members are not fully engaged with a loyalty scheme until they have redeemed their points or miles and, therefore, operators should encourage ‘burn’ in the same way that they encourage ‘earn’.

Of course, some cynics say that many operators would prefer to enjoy the ‘breakage’ rather than endure the redemption. Indeed, we are seeing lots of creative ideas and offers that encourage participants to earn more points and miles (with double or triple points promotions and other bonus offers abounding), so why aren’t we seeing similar campaigns to encourage redemptions?

Typically, Tesco is enabling its Clubcard members to increase the value of their points by redeeming them for higher margin products, or with programme partners (thus reducing liability, increasing the perceived value of the points, and driving business for the partners).

This not only improves the value proposition for the customer but, of critical importance, it also means that customers don’t use their points to buy things they would have bought anyway. In other words, it avoids discounting the shopping basket.

We see offers from airlines, hotels and other travel loyalty schemes that are designed to get consumers to book flights and accommodation, and to earn bonus points. So why can’t consumers have offers that encourage them to burn their points? There have been a very small number of these campaigns recently, but why shouldn’t every programme offer “points are worth double” offers for the right kinds of reward redemptions?

Technology has improved significantly in respect of bonussing capabilities, and it is time to see some more creative bonussing efforts to help reduce funding liability and increase customer satisfaction.

This article is an extract from the 30 chapters of detailed coverage in ‘The Loyalty Guide 4’, which is The Wise Marketer’s latest global guide to customer loyalty and engagement techniques, best practices, models, metrics, practical advice, market data and research. The report provides hundreds of detailed case studies, forecasts, trends, tables and visual materials to support new initiatives, presentations and proposals. See how customer data can increase profits, reduce churn, and increase frequency, spending, and share of wallet, and find out where your competitors are succeeding or failing, and why.

25 years of Ancillary Revenue, what will the future hold?

Airline Business 25 years issue; article by Collinson Latitude, business planning director, Janet Titterton

When ancillary revenue first began in the late 1930s, it was motivated by operational constraints, as opposed to any sense of commercial opportunity. On the pre-war trans-Pacific Pan Am Clipper flights, excess baggage beyond 77lb (35kg) was charged at $3.25 per lb – a generous price given that the island-hopping journey from San Francisco to Hong Kong took six whole days.

The next significant development was the offering of in-flight duty-free sales, introduced in the 1970s, followed by car and hotel bookings. Although these “extras” were available, they rarely sold successfully. Pre-internet, it was difficult for telephone reservations clerks to convince customers that an airline could reliably sell anything beyond plane tickets.

When the dotcom boom happened in the late 1990s, airlines realised they could now use their websites to drive ancillary sales of other travel-related products and services. This, combined with soaring fuel prices and an increasingly competitive market, first saw the low-cost carriers seek to generate new revenue streams with bag check-in charges, which, given its success, quickly spread to the legacy carriers too.

Today, however, the term “ancillary” can be applied to two different elements of airline revenue.

First, there is the revenue from unbundling. This really is nothing more than changing the pricing structure in an effort to avoid having to raise ticket prices.

Although unbundling charges have been reluctantly accepted, there is no easy way for customers to compare the true total cost of their own specific itinerary. Unbundling continues to be profitable, and some carriers continue to innovate, motivated by the margin available from packaging their own inventory. However, unbundling can be developed only so far. Continental Airlines recently reported that 70% of its business customers now choose not to check in their bags at all.

Second, airlines are generating more and more revenue by offering added-value products and services from third parties throughout the online booking process. Brands such as easyJet, Air Asia and British Airways all present relevant, useful hotel and car hire options as an integral part of the online customer journey.

At the recent Aviation Outlook conference in Singapore, one travel insurance supplier noted that 99% of its success comes when the sale is seamlessly incorporated as an integral part of the booking process, and only 1% from the extraneous “book insurance” tab on the home page. Offering customers a choice of destination-relevant insurance just after they have booked their flight is a great example of how to provide the right message, to the right audience, at the right time, allowing for ancillary offers to be further tailored to the choices the customer has already made.

This approach represents the true future of ancillary revenue and will see airlines thinking beyond journey options and towards adding value to the customer proposition. The most valuable asset any business has is its customer base, and with their long history of frequent flyer programmes (FFPs), most airlines are sitting on an untapped gold mine of customer data. Also, airlines are in a unique position because they have permission to use this data, presenting the opportunity for predictive data modelling that can be used to forecast trends and provide customers with products and services tailored to their needs.

One way for airlines to capitalise on this is to consider the success of the banking industry in offering customers added-value accounts. In the UK, banks collectively earn about £800 million a year from charging current account customers a small monthly or annual fee for additional services, which include banking services as well as lifestyle and travel-related benefits. The fact that many customers now buy their travel insurance and airport lounge from their bank should be a major wake-up call to airlines that are missing out on this revenue stream.

Providing consistently branded online shopping portals, where customers can pay cash or redeem loyalty currency, also has huge potential. Both Cathay Pacific’s Asia Miles and Virgin Blue‘s Velocity shopping portals are excellent examples of where third-party goods as diverse as homeware, jewellery, iPods, clothing and even food and drink are offered in return for customers’ points, thus generating shared revenue and customer engagement regardless of whether consumers will actually be flying with the airline.

Finally, as the world goes increasingly mobile, the future of ancillary revenue, combined with real-time GPS technology, will see airline brands offering customers additional products and services based not only on who they are, but where they are.

The key to adding value though ancillary revenue, and building a relationship with customers, is relevance, both to an airline’s brand position and also to its customers. With that in mind, the next generation of ancillary revenue or, as we call it, AR2, will be centred around creating profitable customers for life, by adding value, not adding costs; by rapid implementation of new technologies, products and ideas; and by seamless targeted customer interaction.

The People’s Supermarket

http://www.thepeoplessupermarket.org/our_mission.html

Though the first food co-op opened in the UK back in 1844, according to Google, such cooperatives have not been a familiar sight in Europe in recent years, despite a certain popularity in the United States. Until now, that is. In fact, with the recent launch of the People’s Supermarket, Londoners recently gained a new place to find affordable food.

Only members can shop at the People’s Supermarket, but they all get a 10 percent discount on prices as well as a say in how the store is run. In exchange, members pay an annual membership fee of GBP 25, and they also pledge to volunteer four hours of their time per month working as store staff. Because the supermarket’s workforce is nearly all volunteers, staff costs are kept low this way — an advantage that can be passed on in lower prices. Any profits that are earned, meanwhile, get put back into the store to bring down prices even further.

Food co-ops are not uncommon in the US, but it’s interesting to see their re-emergence in the UK following a bout of unusually tough times. Could this be the beginning of a widespread comeback… and more importantly, are you prepared to work four hours a month in order to benefit from their reduced prices and be part of something?

Ever heard of Hotel Haggle?

HotelHaggle.com, a new site that lets consumers negotiate hotel prices, has been launched.

Launched by Ronan Carr, an entrepreneur based in Cork, Ireland, the company says its site’s value lies in the consumer-driven travel itinerary and the consumer-tailored results. Rather than putting the burden of finding a hotel bargain squarely on the shoulders of the consumer, HotelHaggle creates a collaborative approach to finding the best deal.

Users create an account, log in, share the details of their travel itinerary and the price they are willing to pay for lodging. HotelHaggle’s software filters the results, contacts the appropriate hotels and then puts the user’s business up for ‘bid.’ The resulting list of hotels that meet the location, schedule and price parameters is supplied back to the user for final decision and online booking.

The site says it offers a safe environment for confrontation-free bargaining and puts the customer back in the driver’s seat. Hotels in turn, enjoy a broader reach, receive valuable insight on consumer priorities and can book unsold rooms at an acceptable rate.

The site says it is possible to save anywhere up to 70% on a single hotel stay, with some bidding as low as $20 per room.

HotelHaggle.com will focus solely on hotels in the beginning, but will soon expand to include B&B listings, vacation rentals and timeshares. There are more than 120,000 hotels in the HotelHaggle.com database, according to the company.

www.eyefortravel.com reported on this yesterday, could be a great way for customers to save money on their hotel bookings, but more interestingly for the industry its a very innovative way for hotels to reduce distressed inventory!

Airline industry facing up to death of Airmiles

New research we commissioned, in conjunction with Airline Information, shows that 90% of airlines are being forced to find new, more profitable ways for customers to redeem their frequent flier currency.

These include partner offers such as hotels and insurance, with less than 50% of Airmiles programmes reported to be profitable.

Respondents cited accounting pressures, such as the need to record loyalty currency on balance sheets as a taxable liability, rising operational costs and shrinking seat capacity as a combination of factors causing the majority of airline brands to lose money on every seat they give away.

This shift to airlines seeking a broader range of redemption platforms is reflective of a wider trend in Airlines’ ancillary revenue and loyalty activities.

Consumers today demand more choice of how they redeem loyalty currency, and airlines are increasingly able to offer additional products and services from partner brands, seamlessly and securely, via their own sites. This allows airline brands to both enhance the customer value proposition and deliver enough revenue for redemption programmes to be, at the very least, self-funding.

Airline brands are clearly being forced to continually adapt their loyalty programmes in what is still an incredibly tough business environment. New models demand high levels of customer engagement, with tailored reward and recognition content that drives loyalty from a wider customer base.

Whilst broadening their redemption offering to consumers, it will be crucial for Airlines to add value by using their customer data, developing genuine insight and applying it to offer customers more relevant benefits, products and services. Airlines are uniquely placed to leverage their customer data, as they not only have a large volume of data collected about their customers but more importantly they have permission to use it.

Offering memberships via unique bundling of, for example, travel insurance or wi-fi and airport lounge access provides a platform for airline brands to build a relationship with customers. It’s by focusing on the relationship instead of the revenue, that the airline industry will be able to develop additional sustainable streams of income.

 

Starbucks and Yahoo partnership…

Just read an article by Chris Reed (www.partnershipmarketing.com) on the impact of the above partnership, thought you might find it of interest and am keen to know what you think…

Starbucks and Yahoo have created a brand partnership to form the glamorous sounding Starbucks Digital Network which has just gone live in 7,000 US stores. You can get a collection of hand-picked news, entertainment, lifestyle and local content. It offers six channels: News, Entertainment, Wellness, Business & Careers, My Neighborhood and Starbucks. Content providers include LinkedIn, New World City, The Weather Channel, Bookish Reading Club (free access to books), Foursquare and GOOD. Customers can access a social media marquee on the footer of the home page that links to Facebook. Twitter, My Starbucks Idea and YouTube. Yahoo will also offer search capabilities that will take users to Flickr, Yahoo Sports, Yahoo Finance and Yahoo News. Now I can see what’s in this for Yahoo. They receive millions of dollars of free media, millions of customers who may otherwise visit Google or MSN and brand endorsement from a brand arguably much cooler brand (certainly in America anyway!). But I can’t see what’s in it for Starbucks. They claim that they want to create a stronger connection to customers who seek online content at its stores. But customers can get this content anyway so what’s new? None of this content is unique it’s all just rehashed and rebranded Yahoo content or content from already popular sites. So why make customers go through the Starbucks/Yahoo portal as opposed to letting them have the freedom of the web? There is no compelling reason apart from money. Are Yahoo so desperate for brand exposure and brand endorsement from a supposedly cooler brand that they have paid for this relationship?

Real-time location based marketing – a new opportunity for loyalty?

There has been an increasing level of interest and debate in the topic of real-time location based marketing and this will only increase as Google and Facebook enter the space in a serious way. That said I have been surprised at how little of the conversation has focused on the opportunities this new technology creates for brands with established customer loyalty and reward programmes.  

For example, the mobile social network/game Foursquare was widely in the news after signing up its first national UK brands – Debenhams and Domino’s Pizza. The app detects player’s whereabouts, and when they visit the store or restaurant they gain points for ‘checking-in’.

Brands get involved by offering deals to users based on, for example, the number of times someone ‘checks in’ to their local branch. Businesses get increased footfall, and ideally, a network of brand ambassadors who will pass on recommendations. The consumer gets great deals that are relevant not only to who they are, but where they are. – E.g. Debenhams giving Foursquare members a free cup of coffee in the restaurant when they check in

So it’s no secret that smartphones and branded applications are an incredibly cost effective way of targeting and engaging consumers. By creating tools which engage and add value that your customer base can download and use on a regular basis, you can integrate with their lives in a way that advertising never has.

The iPhone is clearly the leader with repsect to the app marketplace, mainly due to it being the easiest to develop for. Whilst some point to the iPhone’s still relatively low penetration of the overall mobile market (at around 2%) and even of the smartphone market (14%), it is quickly starting to grow in a market that will also continue to grow exponentially. It is also worth recognising that the iPhone already accounts for 50% of all mobile web traffic.  

The next generation of apps will use smartphone’s GPS capabilities in a way that enables brands to hit a moving target. The key insight here is that loyalty programmes should connect with all the different stages of the customer journey, from planning to booking, and from departure to arrival. Mobile technology can actually be viewed as a very direct way to plug in to that journey, wherever the customer may be.

What this means is that brands will already have a good idea of where the customer is going to be and when, as well as knowing how much loyalty or reward currency they have. This can be matched against the various outlets that reward programmes have affiliate marketing relationships with. Also, as the customer loyalty programme provider, you already have a huge amount of customer data, including payment information. As a result the mobile device could actually be used, even offline, to facilitate some of the purchasing processes.

Say, for example, the customer uses a mobile app to find the nearest hotel where they can spend their loyalty points, they could actually book a room and check in via their smartphone. A key principle of properly developed reward programmes is that they use as much customer insight as possible to make sure that the services and products offered are exactly what the individual wants and needs. This data should be used not just to meet customer expectations, but to exceed them.

It’s also worth noting that there is a lot of trust inherent in the relationship you have with your customer base, which retail partners can benefit from. Furthermore, because the customer’s payment details are not held on the mobile device, but rather by you as the programme provider, no sensitive financial data needs to be transmitted. This resolves a major consumer fear and barrier to location based marketing with a lot of wif-fi related communication

Another capability that mobile offers, is to actually push messages onto the customer’s device. Relevance here is absolutely crucial, it is a disruptive technique that can increase engagement with the right insight, but can easily irritate if the correct principles are ignored. There is a clear benefit however to being able to message a customer to let them know that now they’ve touched down, there is a restaurant nearby where their reward points are worth double.

Utilsing highly accurate GPS capabilities will also create new data, with new patterns emerging of how your loyalty customers behave when on the move. It is effectively an entirely new way to observe consumer behaviour, and should potentially lead to us being able to pre-empt customer needs specific to where they are.

However, just as your communications with the customer must be relevant to what the customer actually wants, so must your offerings match your brand values and what the specific objectives of your loyalty programme are. That could be looking to reward and encourage high spenders, get low users to spend more, motivate your customer base to use more of your wider service and product offerings, and so on.

Finally, I think there is a real opportunity for reward programmes to use peer based social media capabilities. So instead of the app just saying ‘here are the closest five car hire outlets where you can earn or spend loyalty points’, it could say, ‘here are the top three in your vicinity accdording to ratings provided by your fellow gold card holding members’. Providing scores, notes, suggestions, related recommendations and so on from a group of people who have similar tastes, aspirations and levels of affluence creates a great deal of trust and authority. Obviously companies like Amazon have been doing this for years, but connecting it with your reward programme via mobile technology takes the concept to an entirely new level of relevance, utility and engagement.”

Guardian to charge subscription fee for new app

The Guardian is to bring out a new iPhone app before the end of 2010 which will cost £2.99 for six months instead of the current app’s one-off charge of £2.39.

Obviously paid for content is not just restricted to the web, as more and more people are using iPad’s and iPhones for browsing news, so it makes sense to create an app for this as people are showing some willingness to pay for content

Social media – taking over the world!!!

Just watched this you tube video from @Equalman, some phenomenal stats… http://www.youtube.com/watch?v=lFZ0z5Fm-Ng&feature=player_embedded

Expedia to Launch Loyalty Programme

Hotelchatter.com have just covered the fact that Expedia are moving away from just offering Thank you points and are developed a specific loyalty programme, interesting development! Below is the Hotel Chatter article…

Expedia to Launch Their Own Loyalty Program in Early 2011

Currently, Expedia is linked up with Citigroup’s ThankYou network which allows you to earn ThankYou points for your bookings as well as use ThankYou points to make your bookings. (ThankYou points can also be used/earned for other things aside from travel.) But Expedia is terminating that relationship on December 1.

Fortunately, your hard-earned ThankYou points will still be valid after this date but you can only earn ThankYou points on Expedia until December 1st. If you have a Citigroup credit card, you can still use the ThankYou network on Expedia to earn points but instead of three points for every dollar, you will only get two.

Expedia is now promising to roll out their new program in early 2011 which has us excited but also a teensy bit concerned

But we’re also concerned because it looks like there will be at least a month where you won’t earn anything for your Expedia bookings. (Remember, ThankYou is dunzo on Expedia after Dec. 1 but the new program doesn’t start ’til early 2011. Again, Citigroup credit card holders are the exception.)

The FAQ section on Expedia about the changes is pretty comprehensive but as for whether your existing Expedia ThankYou points will be worked into the new Expedia loyalty program, Expedia doesn’t have an answer for that just yet.