4th June, 2020
Nik Laming, Airline Loyalty Consultant
This is the second post in our two-part optimizing airline loyalty programs series. In this, Nik has shared five recommendations to get corporate structure right for FFPs.
History has presented us with large and progressive events where airlines have failed and succeeded with loyalty programs. Innovators such as Qantas and Air Asia are pushing the boundaries of loyalty programs to become substantial data, media and digital businesses. In the previous article I explored these events and innovations. I have distilled the lessons into 5 key points below. The objective is to learn from innovators and past mistakes optimizing structure and governance to best serve members, partners, shareholders, and parent airline. What should we take from the past and how do we optimize corporate structure to serve all the stakeholders sustainably?
As more digital and data businesses are incubated it may become necessary to follow the AirAsia approach and put in a mini-holding company above X Loyalty, perhaps X Digital Ventures, but for now the simple addition of an independent loyalty subsidiary would be a major step forward.
It therefore makes sense for the new business to become a centre of excellence for analytics, data monetization and targeted marketing which should be available to the airline and other anchor partners to use.
The future is bright for airline loyalty businesses that are set-up, structured and managed for success. Digital disruptors are prospering under more realistic business conditions presenting opportunities for airline loyalty programs which come with a rich and well affiliated member base, broad digital marketing channels, low cost base and a strong underlying business model. As a long time practitioner, builder of loyalty programs and advocate of their transformation into digital and data businesses I am excited by the potential and will make every effort to continue to drive the industry in the right direction.
Nik Laming is the founder of Urban Leopard Ventures a boutique consultancy helping companies reboot and build loyalty programs to extract which deliver maximum value and revenue for airlines, banks, retailers and other companies. He is now focused on helping companies optimize and build loyalty programs into digital and data businesses.
Formerly he was SVP Asia Pacific at AIMIA both managing the SEA regional business and working with clients across all disciplines in loyalty marketing and consulting. Most recently he designed and built the GetGo coalition lifestyle rewards program for Cebu Pacific Air, an LCC and the largest airline in Philippines. A next-generation, lifestyle rewards program targeting and monetizing a broad base of 5.5 million members and serving 250+ partners.
He is a regular commentator and adviser on all things loyalty including the potential and requirements to create a new model - digital and data incubator business from traditional loyalty programs or under-utilized customer data assets.
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2nd June, 2020
Interview with Nik Laming, Airline Loyalty Consultant
"The future is bright for airline loyalty businesses that are set-up, structured and managed for success. Digital disruptors are prospering under more realistic business conditions presenting opportunities for airline loyalty programs which come with a rich and well affiliated member base, broad digital marketing channels, low cost base and a strong underlying business model," Nik told Ai's Ritesh Gupta in an interview.
21st May, 2020
Interview with Seth Cassel, President, EveryMundo
Airlines must leverage a variety of data sources to assess demand for travel, even as they take initiatives to support their loyal customer base in the best possible manner.
Be it for forecasting an airline loyalty program’s liability, getting the messaging right, offering relevant deals etc., nothing is straightforward.
EveryMundo has indicated that after a crisis, previously loyal customers will not be as dependable as they once were, and airlines need to "treat loyal customers like they need to be earned again".
Seth spoke to Ai’s Ritesh Gupta about the same:
Ai: This is an extremely uncertain situation for airlines, with liquidity crisis garnering the maximum attention. How can airlines bank on fare marketing and content-related initiatives to target their loyal customer base?
Seth: We are witnessing our airline customers begin preparation for the “restart”: the immediate moment when they return capacity to the skies, and load factor increase becomes critical. Airlines can walk and chew gum at the same time, i.e. manage liquidity while returning to the market. Fare marketing is at the heart of the restart, given the attractive fares airlines will leverage to help capture the limited demand available in the market at the moment. This applies to loyal customers as well - airlines will need to re-acquire their loyalty base and encourage them to be early adopters of the restart. Fare marketing will bring the loyal customer base back into the fray faster. We've detailed our plan for this in our playbook.
Ai: How can airlines evaluate demand to aptly target loyal customers? What are the challenges considering that there is no empirical data to examine and envisage how things are going to shape up in the future?
Seth: During these uncertain times, airlines should consider alternative data sources to understand demand.
Using historical data to forecast future demand is clearly off the table; EveryMundo advocates a switch to real-time demand data coupled with the agility to react quickly to changing indicators.
Specifically we are providing real-time demand data to our airline customers using IBE search data via our FareNet technology, as well as Google Ads search impression data. Between these two sources, we can piece together an accurate picture of route and travel date demand as a series of real-time snapshots.
(For instance, data tools to enable airlines gauge real-time demand on a route level during this highly dynamic period. These tools will help airlines better understand the fluctuations in consumer demand and the needs of their customers, particularly in the context of their local markets. A way is to place a pixel on an airline’s booking engine to collect in real-time the flight and fare information based on user searches. Every time a flight search is initiated by a web visitor, relevant information about the user search including origin and destination, travel dates, number of passengers, cabin class etc. is garnered. This can aid in network planning by determining which routes to reopen according to traveler interest. Plus, there is a provision for an insight into route performance, volatility in search demand and average fare via their actionable Internet booking engine (IBE) dashboard).
Ai: What would you term as common mistakes when it comes to reaching out loyal customers via airline-owned channels?
Seth: At times, it seems airlines' loyalty strategy is to extract more value out of a loyal customer on a per-transaction basis: premium perks for a premium-paying customer. Given the current circumstances, airlines should re-focus efforts on loyal customers flying sooner and more often. Loyal customers can be the early adopters that accelerate the restart. We believe fare marketing -- presenting attractive, compelling fares to the loyal customer base -- is a key pillar of the strategy to re-acquire loyal customers.
Ai: How can airlines bank on their databases and platforms (for example – customer data platform, CRM and frequent flyer databases) to complement some of the tools, for instance, an API that can return the lowest fare available for a given route?
Seth: This depends on the extent to which these databases, platforms, and tools are integrated.
For example, an airline can execute email campaigns targeting its customer/loyalty database, featuring the best available fares on routes frequently flown in the past by each customer.
Ai: It is a delicate balance to get that messaging right in these times. How can airlines focus on content and make booking rewards travel easy for members of their loyalty program members?
Seth: Airline messaging regarding health and sanitation measures is, needless to say, critical for the foreseeable future. But that is not mutually exclusive to the messaging of deals and offers, including reward travel. This starts with promoting reactivated routes as airlines restore their networks. With improved network visibility, airlines can then market award travel through redemption tools where customers can search by route, date, and award budget.
Ai: Airlines are offering members options to purchase miles, gifting of miles etc. How can airlines make the most of their digital assets, such as the desktop site, mobile app etc. to make the most of the same?
Seth: A consistent flow of messaging in high-traffic areas of the website and mobile app of miles offers will be useful in creating a sense of normalcy for previously frequent fliers. That being said, valuable digital real estate (i.e. high-traffic pages) should be leveraged to drive flight search and booking. Increasing load factor -- starting with mobilizing the loyalty base - is priority #1.
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20th May, 2020
15th May, 2020
Airlines have taken a couple of initiatives to safeguard the interest of its esteemed members. Ai’ Ritesh Gupta spoke to IBS Software’s Binay Warrier about the same.
Airlines have been trying to soothe the concerns of their FFP members, especially those who are accustomed to travelling frequently. These members are worried about their loyalty currency, benefits etc. and keen on gauging whether loyalty is a two-way street.
A challenging scenario
The entire economics of loyalty works on maintaining a tight-rope balance of managing liability while preserving cash. On a normal day, a majority of redemptions are seen as a positive sign of member engagement, and is encouraged. Redemptions in general, ultimately lead to further earn and is therefore reasonably encouraged.
“What we see now across programs are panic redemptions, while at the same time the opportunities to earn miles/ points and bring back cash into the program are limited. This is indeed a challenging scenario,” Sydney-based Binay Warrier, IBS Software’s Head of Business Development told Ai’s Ritesh Gupta.
“While some are putting restrictions or a temporary clamp down on redemptions, earning member's ire and causing anguish, a few others have been innovative to channelize and extra incentivize redemptions that are ultimately most profitable for them. This include extending points validity, offering cheaper cash + miles options for future bookings, cheaper award tickets for flights well into future, higher prices for consumer good (citing lower availability) etc,” shared Warrier.
Reciprocating for esteemed members
Key initiatives to cope with the liquidity crisis and expectations of members:
Also, airlines with enough clout have also been negotiating hard with redemption product suppliers to defer payments to preserve cash.
While extending member's status makes sure that they do not get auto-downgraded due to lack of flying (not their fault), this additional move presents an excellent opportunity for members who had already retained their status, and were on the verge of getting to the next elite tier, but now are left with no flying based option to rake up tier miles. This encourages elite members to continue being loyal on the ground within the program's partner ecosystem, so as to reap the benefits of a higher tier when flying resumes, says Warrier.
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12th May, 2020
Is the burden of economic woes and other consequences of the pandemic too heavy that loyalty has vanished?
Gabi Kook, Loylogic’s Chief Commercial Officer spoke about the same to Ai’s Ritesh Gupta:
4th May, 2020
Interview with Andy Choi, Founder, Do Good Points
The COVID-19 pandemic is resulting in unmet needs above and beyond the usual. During these times, Do Good Points, being described as the first loyalty program for doing good, has emerged as apt example of how one can overcome issues like donor fatigue, and rather enable one donate to charities without spending a single dollar.
“We are the first platform where a user does not have to spend a single dollar in order to make a charitable contribution. So just by engaging and interacting, and learning about social causes and organisations within our network they are able to make a charitable contribution. And something we talk about a lot in social impact marketing is donor fatigue. People, honestly from a user standpoint, are getting bombarded with request to donate etc... we intend to offer people a unique way to engage in social impact,” Andy Choi, Founder, Do Good Points told Ai's Ritesh Gupta in an interview.
Choi spoke about the company, association with the travel sector etc.
Do Good Against also recently bagged The Ai’s Lions’ Den (Ancillary Revenue Edition) Best Product award (judges' choice).
20th April, 2020
Ai Editorial: Airlines can’t ignore the significance of being in touch at this juncture. A visual depicting benevolence or a message sent in advance regarding the cancellation policy (be it for offering a voucher or facilitating a refund) can go a long way in soothing the concerns of a passenger, writes Ai’s Ritesh Gupta
Being safe, healthy, social distancing, work from home…all of this and more continues to engulf our lives today.
In this context, certain travel brands are managing to strike a chord by exhibiting empathy and compassion. Be it for an ad or any other creative campaign, or regular operational messaging, airlines need to keep the conversation going.
Drifting away from selling
Rather than taking no initiative to be in touch or not opting to run any ad campaign, the likes of S7, Kuoni and Hotels.com are reaching out to travelers. Drifting away from unrealistic communication or ads ones that revolved around a dream holiday or indulging in an extravagant experience, certain travel brands are doing great in terms of being with their audience.
In case a travel company intends to work any communication or campaign around the latest developments, then as GetYourGuide asserts, guidance of governments is being followed carefully.
Tao Tao, GetYourGuide’s COO recently mentioned: “At this time, there are no ways to message around COVID-19, or to carry on with business-as-usual in spite of it. The only appropriate response from tourism businesses is to acknowledge the situation head-on, be clear and direct about the actions they are taking to ensure safety, and to uphold commitments to customers and partners.”
Equally important is being proactive when comes to be in touch.
As a specialist, 15below asserts that travel companies can't afford to stop communicating during the COVID-19 crisis. “…the airlines that are going to be in the best position when the crisis ends are those continuing to maintain communications with passengers, despite a significant number of aircraft being grounded,” asserts Nicholas Key CEO, 15below.
In its short guide, 15below has listed few key aspects to focus on:
Travelport also recently came up with a guide for airlines with the objective of helping airlines to capitalize on the prowess of mobile as communication channel. Travelport focused on how airlines can identify opportunities that would require little or no development. Referring to the functionality built into the iOS and Android operating systems, it mentioned the same offers travel brands a distinctive avenue to pass on information about COVID-19 to their travelers using Wallet passes.
These are valuable tips for airlines. They can’t ignore the significance of being in touch. A visual depicting benevolence or a message sent in advance regarding the cancellation policy (be it for offering a voucher or facilitating a refund) can go a long way in soothing the concerns of a passenger who is currently unsure about many things. It is worth being in touch with consumers at the time of crisis, and letting them know you care!
4th April, 2020
Travel companies, including airlines, have made announcements in order to protect their bond with their loyal set of customers. Halting loyalty currency expirations, offering extension for statuses, lowering elite threshold requirements etc. are some of the initiatives that have been taken.
When airlines dwell on, for example, status extension, how are they evaluating their database for the same? Plus, more than looking at miles expiration or statuses, airlines shouldn’t forget the way they deal with travelers at the time of crisis, especially dealing with existing bookings, is going to be a driver of the future association.
Some other areas that need introspection:
Also, airlines must dwell on identifying those are likely to travel whenever the rebound happens, and work out and push special deals accordingly.
23rd March, 2020
The entire travel sector has been shaken by the acceleration of the Coronavirus outbreak. As the leaders of this wonderful industry deal with financial implications and attempt to stay afloat, they must exemplify empathy and just not look at layoffs, writes Ai’s Ritesh Gupta
The travel industry is evaluating financial actions including cost containment, adjusting guidance, and gearing up for scenario planning and financial modeling for potential consequences owing to the COVID-19 outbreak.
From an airline’s perspective, the immediate calculation is about staying afloat and meeting their debt obligation. Focus is on curtailing operating expenses and capacity cuts to compensate for plunging demand. Evaluating where Southwest Airlines stands, an airline with robust balance sheet, it had a cash stockpile of $6.2 billion post recent additional financing. Analysis by The Motley Fool indicated that the airline is projected to face a quarterly operating loss of less than $3 billion next quarter.
And technology companies belonging to this sector are in the process of removing cash costs from the business. Sabre has started working on several immediate actions with regard to its workforce and other costs, totaling over $200 million in cash costs.
“We believe Sabre is well positioned to navigate this challenging environment,” Sean Menke, President and CEO, Sabre. He attributed the same to significant aspects of the business’ cost structure being variable. Other than workforce-related cut, the group is also looking at $250 million semi-variable technology hosting costs.
Airlines are also on lookout for support from the government. For instance, Virgin Atlantic recently appealed to the UK government for clear, decisive and unwavering support for the UK aviation sector, comprising emergency credit facilities to a value of £5-7.5bn, to bolster confidence in the industry, and to prevent credit card processors from withholding customer payments, and slot alleviation for the full summer 2020 season.
Don’t rush, evaluate all the options
The longer-lasting effects of the outbreak on consumer habits are difficult to predict. As Menke admits, the global travel industry is facing challenges beyond what has been experienced before.
"The speed of the demand fall-off is unlike anything we've seen," Delta chief executive Ed Bastian said late last week reportedly in a note to staff.
So what does it mean for travel industry’s workforce? Does it make layoffs inevitable?
In this context, The Harvard Business Review suggests rather than over-reacting and or being too slow, leaders must demonstrate the ability to “keep your cool in a critical situation. Few recommendations:
The article ends up with a positive message: “Going through a downturn and making tough decisions to keep your company afloat is hard. However, if you lead with compassion you will touch the lives of your employees in an extraordinary way and come out of this potential slowdown stronger than ever before, enhancing the shared values of your staff”.