Executive Interview: Nik Laming on power of coalition loyalty programs
First published on 28th September, 2016
A coalition program of organisations with differing purchase cycles, margins and customer emotional attachment can be very powerful. Importantly, such model appeals to infrequent travellers as well, writes Ai’s Ritesh Gupta
Travel isn’t a frequent buy. So if loyalty is largely equated with how much one spends, then should the “frequency” factor limit the prowess of an airline brand to become a part of a consumer’s lifestyle?
Not really.
As we have witnessed, be it for airlines or even an iconic brand like Starbucks, companies are rewarding best customers based on monetary value spend - meaning that customers who spend more – should be rewarded more than customers who spend less. Now in case of an airline, if one travel twice in a year vis-à-vis a traveller who travels probably 5 times a month, then shouldn’t both be targeted? The frequency of flying or even heftier spend shouldn’t be a deterrent in having a constant dialogue with the so-called infrequent traveller. Simply because we are living in the mobile era, where we have wallets, apps etc. So an airline brand needs to be a part of consumer’s digital lifestyle. A consumer could be spending on grocery or buying seat on an aircraft, but they are getting used to accumulating points for every penny.
So when we talk of engagement and a loyalty program that rewards you for everyday purchases, it boils down to how proficient are airlines at being part of their members’ daily activities say social interactions, tracking behavior with partners (retail, petrol, finance etc.)? We also see mobile shopping wallets being opened several times in a day. There is clearly an avenue for travel brands to refine their own digital assets or even be a part of 3rd party ecosystem, which could be a mix of content, information, media, shopping, travel, finance etc. The idea is to be a part of consumer’s lifestyle in a seamless manner.
Everyday purchases points earning opens up the utility of a loyalty program to the infrequent traveller, says Nik Laming, General Manager - Loyalty at Cebu Air Pacific Air.
“Expanding the potential and the velocity of earning means more travellers can participate and get a real benefit from a program. Most retail and financial card earn options are already spend based so are a natural fit with spend based airline points,” he says.
The power of coalition program
So how to break the shackles of travel not being a regular buy and rather becoming a consumer’s lifestyle?
A coalition program of organisations with differing purchase cycles, margins and customer emotional attachment can be very powerful, asserts Laming.
Laming explained by referring to peculiar behavior associated with different product categories/ sectors. “Supermarkets see customers often and have large spends but skinny margins. Mobile phone networks see handset transactions but rarely know the customer behind the number. Airlines have very high emotional attachment for people but a small share of spend and infrequent transactions,” said Laming, as he also spoke about insurance companies and credit credit companies in the same vein.“Bringing all these organisations together into a coalition program enables the different business to fill in the gaps.” According to him, the key lies in regular, positive communication with identified and profiled customers emotionally attached to the program, delivering attractive and relatively high value rewards. Every participant benefits as the focus is on solving each organisation’s marketing shortfalls.
“Airlines have the most compelling reward and as such tend to be a good leader for such programs,” highlighted Laming.
Lure of flying for free
Travel, as an infrequent category, has its share of lure, too, as there is aspirational value associated with flying.
“Flights are the most attractive and highly perceived value rewards,” he says.
“Programs that offer flight rewards pull harder. Seats are perishable and subject to distress giving opportunities to deliver the most desirable reward at marginal true cost,” says Laming.
The option to be rewarded from everyday purchases has opened up the realms of the FFP to the average or infrequent traveller.
“Having a network of partners funding the program helps the airline, as program owner, to offset costs and even generate revenues. This dynamic has enabled LCC’s to offer rewards as part of their proposition and has resulted in a new breed of loyalty program,” added Laming.
Key considerations:
· Targeting the infrequent traveller: The reason a coalition model appeals to infrequent travellers is simple - share of wallet. A person will spend a small proportion of their disposable income on air travel in a year. Adding credit card, supermarket, department store, petrol and other retailers massively expands the share of disposable income going through the program. With higher total spend within the program ecosystem more points are earned and so even the most infrequent traveller can attain those reward flights.
· Selecting partners: Selecting and nurturing the right partnership is critical. Bank and financial card partners have always awarded miles for everyday purchases. The extension of the concept to supermarkets and other retailers is a natural one for those programs aiming to appeal to a broader audience. “But it is not for all as some programs are designed to retain and reward only frequent fliers. In this model there is less need for more partners as the vast majority of points will come from flying and natural partners to accelerate earn are the credit cards which are prevalent amongst this audience,” said Laming.
· Capitalizing on data: Another critical aspect of a coalition program is to ensure that airlines go through all aspects of data points of the customer journey. As much as airlines can capture the flying data, there are still going to be elements of daily purchases such as co-brand cards/ financial partners/ petrol partners/online retailers partners that loyalty specialists need to capture and able to capitalize on for monetization and superlative member experience.
Hear from senior industry executives at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).
Twitter hashtag: #MegaEvent16
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