Leveraging 3rd party mobile wallet as entry point for travel

 

23rd July, 2020

Interview with Björn Goß, CEO, Stocard, an app with over 50m user

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Connecting mad rush for toilet paper with emotional loyalty

22nd July, 2020

It is imperative for travel brands to dig deeper into consumer psychology and why certain behavior continues to exist or sway owing to the pandemic.

For instance, from travel loyalty perspective, how loyal shoppers, generally referred as affluent shoppers in this category, are spending, which categories they are looking at and how can full-service airlines bring the “earn and burn” cycle into the same?

Also, according to Comarch, consumer purchase decisions are influenced by their emotional state, and this intensifies during unsta­ble times. And to achieve emotional loyalty, brands must build and maintain three key components: affinity, attach­ment, and trust.

Highlighting the same in its latest report, Comarch mentioned: “this irrational and emotional state of mind results in a trio of buying states: “panic-buying,” evidenced by the mad rush on toilet paper that ensued; “social buying,” whereby shoppers grab what everyone else seems to be scooping up; and “frozen buying,” which finds consumers retreating from buying altogether, paralyzed by fears like, “‘my 401k looks pretty bleak; I’m afraid I’m going to lose my job”.

In this elevated emotional state, brands have an opportunity to stand out by offering the support that the consumers need to build a deeper and long-term relationship that can continue once the crisis is over.

Comarch emphasizes that companies must prepare for change in the organizational mind-set to put customer-centricity at the core of everything a brand does.

Download Comarch’s report

Some of the key points:

  • Understand the customer journey to provide seamless and emotional experiences
  • Personalize every customer interaction with the power of data and technology
  • Ensure transparency to build trust
  • Listen to customers
  • Build a loyalty program focused on customer needs
  • Continuously test and learn

By removing friction, rewarding members instantly and frequently, giving customers the ‘power to choose’, using ‘surprise and delight’ tactics and including “gamified” elements, brands can create a loyalty program that promotes lasting customer loyalty.

 

By Ritesh Gupta

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Five recommendations to get corporate structure right for FFPs

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?

  1. Form a Separate Company Entity under Airline Holding Group -There is a huge opportunity for airlines to diversify income streams by adding digital and data businesses on top of a well-structured and managed loyalty program. The airline is left to focus on its core operations and ecommerce distribution functions and the new business serves as an incubator for new businesses to disrupt the market using the rich data and marketing engine of a loyalty program as the foundation.  The sheer scale and discipline required strongly suggest adding loyalty as a separate entity under the holding company which results in the following corporate structure:

 

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.

  1. Experienced and Independent Leadership Team - The loyalty company must have an experienced and independent leadership team to ensure governance and maintain focus on the business in hand. It should not just be folded into the core airline hierarchy several layers down from the board with occasional CFO influence.  There should be a board of directors for the loyalty business containing professionals from airline, loyalty, financial services and other industries with its own independent CFO and governance in place.  It should not be dominated by the airline and treated as an afterthought as the stakes are now way to high.

    The scope of the management team should be loyalty, data, analytics and digital business incubation such as payments, fintech, e-commerce and insurance. The skill sets required are diverse:
  • Loyalty
  • Fintech and payments
  • Marketing and CRM
  • Insurance
  • UI/UX, mobile app and technology
  • Partnerships
  • Operations and member care
  • Data management & analytics
  • Privacy and other support functions

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.

  1. IFRS Accounting and Establish a Trust - The IFRS accounting principles need to be followed with rewards properly accounted for at fair market value and as a cost of sale rather than a promotional expense.  A trust should be established to ring-fence a sufficient percentage of future redemption monies owed to members.  This is to ensure the program can continue to maintain the value to its investors – the members and partners under any situation and to prevent a cash-starved airline from dipping in to feed from the cash.
  1. Develop a Solid Legal Agreement - There must be a detailed, well thought through, totally binding and very long term agreement in place between the airline and the loyalty business to prevent it being exploited at the expense of any shareholder, but also to set out the rules and the way of operating very clearly.  These agreements are often neglected but become incredibly important as sunny days turn to rain and leadership of the entities change together with revenue management policies, CFO pressure and market changes such as Aeroplan, AIMIA and Air Canada.
  1. Generate Cash from the Program but Consider the Longer Term - The holding company can choose to sell a minority stake to generate cash but more importantly as a strategic partner to provide support, increase governance, discipline, commercial drive, and rigorous accountability. However, it does need to be approached carefully and with caution.  Under no circumstances should the airline ever relinquish control or its majority interest in the loyalty business.

    When a crisis strikes or times are tough there are mechanisms for using the loyalty business as collateral, for finance or to pre-buy redemption seats as exemplified by AeroMexico.  I would advise against pre-selling points to banks unless times are very desperate, and the terms are not too onerous as the amount of unencumbered cash generated net of future redemption cost will be relatively small.

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.

 

Follow Ai on LinkedIn: https://www.linkedin.com/company/airline-information/?viewAsMember=true

 


Ai Video: Getting corporate structure right for FFPs

 

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.


Ai Editorial: Counting on real-time demand data to target loyal customers

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.

 

Follow Ai on LinkedIn: https://www.linkedin.com/company/airline-information/?viewAsMember=true

 


Ai Editorial: Showing elite FFP members that loyalty is a two-way street

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:

  • New ways to retain the spend within the program: One way is to ensure the currency spend is retained within the airline/ program or at least incentivize redemption where the profits are higher than normal.

Also, airlines with enough clout have also been negotiating hard with redemption product suppliers to defer payments to preserve cash.

  • Earn tier status miles for spending with partners: Airlines are exploring various ways of improving ability to earn on the ground working closely with their partners. For instance, an opportunity to earn tier status miles for spending with partners.  

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.

Follow Ai on LinkedIn: https://www.linkedin.com/company/airline-information/?viewAsMember=true

 


Ai Video: Did coronavirus kill travel loyalty?

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: