Ai Editorial: Focusing only on customer acquisition is a losing cause for airlines
First Published on 6th July, 2016
Ai Editorial: If airlines refrain from owning the customer experience via their own product and touchpoints, then they are in danger of falling way behind Google, writes Ai’s Ritesh Gupta
There are several big questions that airlines need to answer today when we talk of managing customer acquisition cost and even going beyond to optimize the experience.
One of them relates to avoiding wastage and even annoying travellers with irrelevant “retargeted” digital ads. It’s true that retargeting drives conversion when the intent is understood, but no point in showing London-New York routing when the idea has been dropped. Also when we talk of creative or messages, airlines need to look at every single piece of data that’s available, and segmentation would result in tailored ads.
The other one is about how to work with Google. If airlines continue to share their data around price and availability, then the prowess of Google would only get stronger. Google can stitch unstructured behavioral data like social posts or searches together, providing context and determining intent. This data helps shape the audiences for its advertising network, ultimately enabling Google to only serve up the most relevant ads. Be it for paying for leads/ bookings or ensuring airlines dampen their own ability to directly sell non-air ancillary products, airlines need to minutely scrutinize how they count on Google, both as a supplier and an advertiser.
Competing with alacrity
Philip Rothaus, Director, Global Business Development, EveryMundo, recommended few areas that airlines need to look at:
Ø Garnering data: Rothaus says airlines and other travel-related business aren’t data-omniscient – it’s not as if they have automatic access to all of a traveller’s digital preferences. “In order for an airline (or any other entity) to acquire data on a consumer's activity and tendencies, the consumer has to engage directly with the brand,” he says. “Right now, online aggregators - such as online travel agencies and meta-search engines have the lion’s share of high-value customer data, chiefly because they attract more travellers through online search than the airlines do. That provides them with the intelligence to deliver targeted marketing offers tailored to their interests.” Until airlines invest in the digital marketing infrastructures and customer acquisition strategies that can help them compete with OTAs and meta-search engines, they won't have the data do the same.
Ø Performance content: Software tools can help airlines compete in the search ecosystem more effectively. Namely, performance marketing technology can be integrated with an airline’s existing website and IT infrastructure to enable airlines to quickly deliver up to millions of high-performance landing pages, in any language or country, in response to consumers’ travel searches. Airlines need to transform existing inventory content into performance content – deployed via dynamic, SEO-optimized webpages showcasing every product, category, and segmentation relevant to their customers. The result: better search-engine results that encourage more direct-channel bookings.
Ø User experience: Consumers increasingly utilize their mobile devices during the travel-purchase process, but their buying experiences with most carrier websites is far from `omni-channel-optimized’. “Airlines’ mobile conversion rates are already averaging roughly one fifth of their desktop conversion rates due to poor mobile user interfaces and site experience,” says Rothaus. As mobile search activity continues to grow the revenue lost to airlines by not providing a mobile-optimized experience will increase drastically.
Moving on from acquisition to ownership
Whereas Google and the travel-aggregator marketplaces have the luxury of building entire businesses around online search, digital marketing, and data-driven customer engagement efforts, airlines have to focus on their core competency: transportation. To achieve greater parity with the OTAs, MSEs, and Google, airlines will need to find cost-efficient ways to perform better in online marketing and customer acquisition, as well as deliver a desired experience across the journey.
A lead that results in a customer reaching the airline-owned platform for booking or during the course of the journey should be optimized for experience, too.
Here, too, there are huge gaps/ emerging opportunities. Few examples:
Ø Fulfilling basic requirements via airline-owned digital assets: My online check-in experience is far from being satisfied, especially when I travel multiple airlines in one journey. While the experience of Delta and Air France/ KLM is streamlined, I struggled with my online check-in when it came to KLM and Transavia, and Lufthansa and SWISS. For instance, flying back from Barcelona to Delhi via Amsterdam, as I tried checking in via Transavia (for Barcelona to Amsterdam flight) there was an error. Also, when it came to the terminal, there was lack of clarity. In fact, when I searched for the same via Google a day before, the terminal was stated in the status of the flight. This makes travelling strenuous and the brand experience isn’t optimized. Rather if such requirements are met in an easy manner, a customer would cut down on accessing 3rd party sites every time a trip is planned.
Ø Integrating different touchpoints: There are big gaps when we talk about customer service across different touchpoints. For example, if you want your seats to be changed after being allotted your boarding pass, which would be the easiest way? I recently conveyed the same to Lufthansa’s Twitter account. The team acknowledged but couldn’t find a way to do it for me despite a five-hour halt in Munich. The point is why social media team can’t assist, and the same could only be done at the gate. I tried self-service kiosk in Munich, too, but in vain. In fact, when I interacted with the airline staff at the gate, they weren’t even aware of this!
Ø Product needs to stand out during the booking flow: Do I even know I am sitting in a brand new A330-300 as I take my next flight? Can I get my favourite dish as I take a 14-hour long flight? Irony is that content exists, but the industry struggles to show the same in the transaction flow. Get customers excited about your products.
Ø Engaging loyal members: As airlines work on every bit of the passenger experience, members tend to response better. Airlines have so much data available to address individual needs, but yet they usually blast offers to all customers in newsletters, apps, social media etc. One should look at tier level, communication preferences, contextual information etc. in order to come up with offers and promotions that are likely to resonate with members. Also, the focus needs to be on predicting what they are likely to do.
Ø Customer-centric set up: Airlines need to look at a modern CRM platform framework that paves way for integration of all relevant operational systems. Besides the PSS it’s possible to integrate an external identity and access management system as well as social media, real-time arrival and departure information and many more. “Based on all these source data it’s possible to develop applications that can use and combine these data to serve the customers in the best way,” says PROLOGIS’ Matthias Hansen, who added that such CRM platform can create customer profiles based on historical data, and are enhanced with data that the customer is willing to add. The customer service will have access on this information, so if the customer calls the call-centre, they have transparency on his/ her profile. The possible ways to enhance this initial CRM platform will be to integrate the pricing engine as well, so that the airline will be able to first identify the customer within the booking flow and then react on booking requests by offering him a unique and personalized flight-package.
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Airline Loyalty Programs – Corporate structure for success
What lessons should we have taken from past events and new innovations?
25th May, 2020
Nik Laming, Airline Loyalty Consultant
This is the first post in our two-part optimizing airline loyalty programs series. In this, Nik has shared certain momentous events that have shaken the industry over the years, and what‘s there to learn from them. The second post, scheduled for next week, is set to feature 5 recommendations while working on structuring of such programs.
There have been certain poignant moments in airline loyalty program history that can be counted upon to formulate the best corporate structure for success. The objective is to learn from our mistakes and optimize structure and governance to best serve members, partners, shareholders, and parent airline. It is definitely a complex equation to balance.
Typical Airline Corporate Structure
Typically, an airline has a holding company and several subsidiaries to separate the core businesses. For example:
In principle this makes good sense, except if you consider a loyalty program to be a core business in its own right. It is surprising to see many airlines with a substantial loyalty program business buried in the hierarchy of the parent airline under marketing, commercial or even technology functions. One example comes from American Airlines with total operating revenue of $45.8b in 2019, including $863m from its cargo subsidiary but $2.9b reported from other revenue (AAdvantage affinity cards and partnerships and airport clubs).
The loyalty business is triple the size of the cargo business, so why does it not warrant its own entity and governance?
American Airlines is certainly not alone in this approach with Singapore Airlines and many other examples of the same approach around the world.
There have been a couple of failures, too, that command attention as far the corporate structure is concerned:
- The Ansett Australia Experience - In September 2001 Ansett Australia collapsed and 2.5m loyalty program members unwittingly became part of the administration process as unsecured creditors. After some initial confusion members realized their hard-earned points had become worthless. Major partners Diner’s Club and Westpac bank lost millions of dollars they had invested in the program via Ansett points for members. The airline was under a holding company with separate entities for international and freight, but the loyalty program was tucked under the airline. An epic fail.
- TopBonus hits the Bottom - Fast forward to August 2017 and the demise of Air Berlin. A few lessons were learned from the pain of Ansett, resulting in change to the accounting rules for revenue recognition and the fair market value accrual for future rewards cost. IFRIC accounting standards brought an end to revenue being recognized upfront when a point is sold to a partner and ensuring the final cost of rewards is set and accrued to a realistic level not zero or marginal cost in the books. TopBonus, the loyalty program was even a separate entity from the failing airline again under a holding company. However soon after, TopBonus was also out of business with administrators sending a letter to members giving an extremely low claim value of 0.36 Euro cents per mile. The explanation proffered for the collapse was simply that it was a consequence of Air Berlin’s insolvency. Worse all member balances were set to zero and redemption was stopped with no notice given. As the business was separate entity and managed at arm’s-length from the airline it would indicate there was simply not enough cash on hand to fund future redemption and Etihad as the majority owner simply did not want to support or absorb TopBonus. Another failure.
Transforming airline loyalty programs into digital disruptors
- Jet Airways and JetPrivilege - There is a precedent where an airline didn’t survive, but since its FFP was carved out as a separate entity, the latter did. A case in point – Jet Airways and JetPrivilege. Jet Airways succumbed to bankruptcy in April last year. All eyes turned to JetPrivilege which was a large and successful program but now had its umbilical cord ripped away. And members were understandably worried about their rewards. The program was carved out into a separate entity in 2014 and had a passionate and committed team led by Manish Dureja. The business did not wither and die, it added members and transformed in aspiration into a digital and data business using the valuable database of customers. Without a parent airline some things had to change, but importantly there is still value to the members and to Etihad the major shareholder. Although no program can be as attractive after the demise of the parent airline at least it must survive and deliver as much value as possible to the stakeholders.
- In 2019 AirAsia announced its ambition to transform into a digital business targeted to deliver 60% of its profits using its data, loyalty program and digital channels as a foundation. Tony Fernandes sees it as a natural extension to the business and a good way to sweat the considerable assets and customer base AirAsia has across Asia. He stated in an interview “Amazon started selling books and is now selling cabbages” so do not underestimate the potential airlines have. To capitalize on the opportunity the AirAsia holding company has formed RedBeat Ventures alongside the airline entity which boasts a diverse portfolio of subsidiaries including BigLifeLoyalty, Teleport (logistics), BigPay, a media business and an OTA. This is structuring for success with sufficient resources and focus on each business area.
- Australia revisited with Virgin Australia and Velocity - A struggling Virgin Australia has recently gone into voluntary administration this year. Australian’s are loyalty junkies and have long memories, so Ansett alarm bells are ringing all over social media and the news. Velocity is close to my heart after working on the launch while at Carlson Marketing and so I am pleased that it was housed in a separate entity with an independent CEO and management team, and a trust holds members redemption funds giving the program every chance of continued success. The value of members’ points should be safe and there is no reason for them to panic. There are two flies in the ointment, firstly Virgin Australia used valuable cash to buy back the spun-off stake of Velocity from private equity and secondly the fate of the parent airline.
In 2014 Virgin Australia sold a 35% stake in the Velocity loyalty business to Affinity Equity Partners raising A$335m. It recently bought back the stake for double the amount. Unfortunate timing but it demonstrates the strategic value of these assets. The question has been raised by commentators, should Virgin have sold the stake at the outset? I believe the answer is a resounding yes. Firstly, it raised cash more than 5 years ago, but more importantly it ensured independence, high quality management, commercial discipline, business drive and rigorous accountability. The program and the business grew fast over the period and delivered stellar results. In 2019 Velocity delivered the second highest EBIT to the group A$122m with the only other profitable segment being Domestic with $133m.
The fate of Virgin Australia is unknown, but there are several interested parties to buy the ailing carrier and no doubt transform it into a leaner and meaner animal to take on the might of Qantas. Velocity is set to play a large role in the revitalization or complete overhaul of the airline. The customer data coupled with external revenue streams make it a great foundation stone from which to rebuild or build an airline. Velocity can survive even if Virgin Australia cannot find an investor to save it, but it is a much better scenario for all if the airline is saved or reinvented as then the loyalty business can thrive.
The Shining Light of Cooperation featuring AeroMexico, AIMIA and PLM
In July 2018 AeroMexico made a rather cheeky offer to buy back the 49% stake of its spun-out loyalty business - PLM from the strategic investor AIMIA for $180m. The offer was immediately rejected by Aimia which was still reeling from being smashed into submission by Air Canada to relinquish Aeroplan. A short aside, an airline should never sell the totality or even the majority of its loyalty program because it simply does not work. An invested strategic partner, as an independent voice, is healthy but it needs to be managed very carefully including a well thought through and tight legal agreement between airline and loyalty entity.
Returning to AeroMexico in the present, a deal has now been reached. In summary there is now the following value for all the parties:
- $100M in financing to AeroMexico from PLM including $50M pre-purchase of redemption seat inventory for AeroMexico.
- A 20-year extension of the agreement between the airline and PLM.
- A 7-year option to buyout AIMIA stake in PLM at 7.5x EBITDA with a floor of $400M.
- Guaranteed value for members from the loyalty program into the future while helping the airline weather the Covid-cash crisis.
A great example of a win for all the stakeholders underpinned by strong management, the 3rd party strategic partnership with Aimia, financial independence and using a separate loyalty dedicated entity.
Qantas – the Aussie Loyalty Machine
Qantas has been quietly achieving in Australia for many years with a mature loyalty program and an ambitious drive into new business areas such as insurance, media and data. The extract below from the 2019 annual report shows just how significant the loyalty business is for Qantas delivering the second highest EBIT with a meaty A$374m:
Moreover, it achieved the same level of EBIT on $1,654m in revenue versus JetStar with$3,961m and a vastly different risk profile, potential for volatility, cost structure and capital requirement. Qantas Loyalty is a separate entity with an independent CEO and a dedicated and experienced leadership team. It has a substantial income from a huge range of partners and has built out a data analytics and marketing business called Red Planet which serves to monetize the vast data set available. Qantas is using its loyalty subsidiary as an incubator for new business and revenue streams building a substantial payments and insurance business. New business earnings increased by 27% and insurance grew by 46% in 2019 diversifying income sources and future proofing the business. Qantas has resisted the urge to sell off a stake in its loyalty program as it realizes the potential to generate consistent income and uses the program and its gold-mine of data to grow new digital and data businesses.
The second post will cover - The Ideal Corporate Structure for Airline Loyalty and 5 recommendations. What should we take from the past and how do we optimize corporate structure to serve all the stakeholders sustainably?
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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Ai Editorial: Delivering a seamless CX as partners - how SAS and Avis do it
First Published on 13th June, 2016
Ai’s Ritesh Gupta interacts with SAS’s Haroon Rana about optimizing the experience of travellers via diligent partnership marketing.
Booking different components of a trip can be an exacting exercise. The value proposition that I come across, say on airline.com vs. OTA-owned platforms vs. Google vs. TripAdvisor etc., varies. All have a role to play in the booking funnel. But what this means is I do end up with multiple sessions across searching, cross-checking (for instance, for me a hotel review on OTA still falls short on the “collective trustworthiness” or sheer display on TripAdvisor), buying etc.
So seamless customer experience (CX) is fittingly a big area of focus. And partnership marketing featuring airlines and other travel suppliers is a luring way to fulfill it.
In fact, partnership marketing has proven to be a proficient way of meeting the needs of loyal travellers, stepping up the average order value, and most importantly, pleasing customers for what they want and the way they want.
The end result, as two successful partners SAS and Avis say, is “happy customers – happy revenue”. Happiness here implies satisfied stakeholders – loyal customers and better revenue generation for suppliers.
SAS’ Partnership Manager, Haroon Rana and Avis Budget Group’s Stig Williams, International Partnership Manager, who jointly presented during Ai’s recently conducted Ancillary Merchandising Conference in Barcelona, say it is definitely “Better together”.
Making it work
So what’s the most challenging aspect of managing airline partners relationships to ensure competitive commercial bilateral agreements?
According to Rana, who has been associated with SAS, Peugeot and Telenor, points out that the most overlooked part by airlines is providing customers with four aspects:
Relevance - attractive service/ product (offers that are relevant to many, broad customer base from the start)
Strong offer - a good deal (this is going to generate sales, key to attract members)
Recognition – of the customer’s choice and their purchase, plus rewarding loyal customers
Collaboration – to maximize loyalty, a win-win-win mindset
“The important part for all four aspects is to give time - analyze customer needs and preferences (when, where and how do they need your service), analyze data thoroughly, make offers and marketing attractive, to make continuous adjustments and assess afterwards critically. Plus, from a bilateral point of view, it is also important to having a view of the cooperation being mutual important and beneficial,” said Rana.
Here we look at areas that can be important for the collaboration:
- Understanding the customer: Rana says the key is the customer – the individual customer or micro-segments of customers with same needs. “The customer should feel that the product is made for them,” he said. “Every contact with the customers has to be optimized to being customer-centric, empowering the employees to take action and decision, along with making strategies with market focus. This is also the way we work at SAS EuroBonus.” For instance, SAS is looking at aiding passengers during the course of their journey. Here in-flight attendant equipped with details on an iPad (blend of flight-related details as well as information about the passenger) can enhance the customer journey.
For their part, Avis Budget Group asserts that their service extends beyond the rental:
a. Post rental survey – provides Net Promoter Score tracking specific to SAS EuroBonus customers
b. Experienced and engaged customer service team
c. Reporting capabilities – tracking performance by channel to ensure focus on key revenue generating opportunities
- Leveraging assets or joint promotions: SAS, which has over 4.3 million SAS EuroBonus members, and Avis work together right from the planning stage of a journey. They run joint marketing campaigns and also leverage each other’s assets (like SAS’ aircraft feature Avis video advert on all long-haul flights and are aired before take-off and before landing or Avis promoting SAS EuroBonus on its own platforms). So partners are working out relevant content/ offers as per the booking funnel.
Also, airlines are getting smarter when it comes to the timing of ancillary offering; say whether to go for online booking path cross sell or to offer on the confirmation page of a transaction or pre-trip email etc. They are closely working with partners. There is an opportunity for ancillary revenue generation at various cross-sell points, but the products and offerings need to be targeted and differentiated based on audience and context. Timing plays an important role. So, for example, if I am on airline.com and buying trip essentials, then the timing of car rental, room booking or ticket for an event would differ.
- Integration/ sharing information: It is vital that exchange of information between partners is swift. There is a need to avoid lengthy integration projects required to enable interactions, such as transaction processing. Also, there are interesting options such as new loyalty and rewards platforms, built with blockchain and smart contract technology. This technology has introduced interoperability to the currently fragmented industry, multi-branded coalitions, superior program liability management and dynamic issuance/ redemption options.
Scope for improvement
Partnership marketing isn’t new but improving the conversion rate or the efficacy of loyalty programs is a work in progress.
Even from the CX perspective, there is a lot of scope for improvement. Airlines and other travel-related business aren’t data-omniscient – it’s not as if they have automatic access to all of a traveler’s digital preferences. So as airlines and other suppliers invest in digital marketing infrastructures and mark budget for customer acquisition, it is imperative they find ways to meet the travel shopping needs astutely. Rana agrees that customers are “often demanding a one-stop shopping place for their travel with relevant and strong offers”. “Companies aggregating service providers can be good for this as it is faster/ easier to implement, but I think in-depth collaboration with key partners within the travel sector is vital and has proven to be much more valuable for collaboration and monetary gains.” He also added that loyalty programs of suppliers can be an attractive proposition, as some benefits are given by the airline and some by the partner – the total travel experience should though be brought together for the consumer.
Hear from experts about loyalty and personalisation at the upcoming 3rd Mega Event Asia-Pacific, scheduled to take place in Kuala Lumpur (23-24 August, 2016)
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Ai Editorial: Disparate databases not really a big hurdle in starting data-driven FFPs
First published on 10th June, 2016
Ai Editorial: Implementing data-driven technology can be a complex issue in case of dozens of databases. However, not all of the databases might be relevant to implement first steps, writes Ai’s Ritesh Gupta
I recently interacted with a couple of senior executives, one associated with a full service airline and the other one with a LCC, to gauge areas where airline loyalty programs can improve.
A common point of discussion with both these executives was being astute with the available data, and working on the requisite infrastructure to make the most of it. A common theme was managing data, to be precise what and how to manage, and achieving results. Here we focus on both the aspects -
1. Managing databases – focus on relevancy
Talking of managing databases internally, the FSC’s executive acknowledged that the number of disparate data sources is over 75. The relevant data is available. But these databases “are not yet talking to each other”. In terms of progress, a team has been established to address the issue.
Implementing data-driven technology and business rules might indeed get quite complex in case of dozens of databases, says a source.
“However, not all of the databases might be relevant to implement first steps towards data-driven technology. (For instance, for distribution) the majority of the important information is most likely stored in the PSS, the CRM and might be enhanced with certain other sources. You probably won’t need to connect all available databases together,” explained the source. As for how an airline approaches areas like digitalization is not necessarily the type of carrier they are. “The main difference on how quick airlines are moving towards digitalization or data-driven FFPs is more the internal mindset from what we’ve seen in the past. Airlines that have achieved to implement a mindset that’s open for change and innovation are moving faster than airlines that don’t support or even force innovation that much. Ryanair, for example, has established a dedicated innovation lab to drive and push change towards digitalization and to be able to keep up or even ahead of the competition. Other airlines don’t have this mentality and focus more on stabilizing the systems rather than changing them. A key element here is iterative development, one that indicates gradual progress.”
Talking about FFPs, the LCC executive I spoke to mentioned that for as long as each department has their own databases and there is no push for a unified or central datawarehouse, “there will be loads of customer data within the organization”.
Another source added, “A regional low cost carrier in Asia began its loyalty program with multiple types of membership - paid membership with basic loyalty card, paid membership with a prepaid card, free virtual membership (card-less). The membership with the financial product naturally resided with the financial service provider! Internal database simply is a collection of data regarding information on market and consumer behaviour. So yes, there will be many of these databases within an organization. The task for CRM would be to consolidate all this data throughout the organization and use this to analyse, segment and connect with customers accordingly).”
Carriers are now looking at a modern CRM platform framework that enables the integration of all relevant operational systems.
A carrier in Europe is working on one such initiative. This carrier currently only offers a booking based login for their customers. They don’t have a customer profile, as a customer I’m not able to see an overview of all my bookings. As a consequence, the airline has no transparency on the customer. The new CRM platform will create customer profiles based on historical data, but also enhanced with data that the customer is willing to add. The customer service will have access on this information, so if the customer calls the call-centre, they have transparency on his profile. The possible ways to enhance this initial CRM platform will be to integrate the pricing engine as well, so that the airline will be able to first identify the customer within the booking flow and then react on booking requests by offering him a unique and personalized flight-package. “This solution is currently still a concept and not implemented, but that’s the direction where the journey will lead to,” shared a source.
Key points to consider:
- Not all of the databases might be relevant to implement first steps towards data-driven technology.
- Identify all relevant operational systems, and look at optimal ways to integrate them.
- There is also a need to explore other sources of data. Data your partners hold may be the missing link in your marketing chain.
- Treat each new data source individually and focus on formatting and structuring it so there are constant updates and that it remains accurate. By then focusing on commercializing individual data points one at a time – FFPs can build out their marketing platform in baby steps.
2. Serving the FFP member better
The bar has been raised considerably when we talk of delighting a customer.
One would expect to be able to receive relevant offers, either based on information one has shared with the airlines or from understanding of my transactions / behavior pattern. “As a traveller, I would be pleasantly surprised if the airline used this information to connect with me. It would certainly hit the right chord with me,” shared the LCC executive. But this isn’t happening at large when it comes to “personalisation to individual needs”. He added, “Airlines have so much data available to address individual needs, but yet they usually blast offers to all customers in newsletters, apps, social media etc.”
Also, it is still challenging for airlines to act on real-time operational data to improve upon their FFPs. “At the moment it is very challenging but in the future we are going to address exactly this point, which will help us to differentiate us from competitors and enrich our customers journey, which should result is loyalty beyond the classical FFPs,” share the FSC executive.
Nod from senior management
The LCC executive pointed out that the “push must come from the top to consolidate and merge all data available within the organization, into a single datawarehouse, for better engagement and eventually better customer experience”.
“From experience, the biggest challenge would be to get the internal buy-in, from the various departments, on why a consolidated, single view of the customer would be better for the organization and in the long-term, reap the benefits of a highly engaged and loyal customer),” added the executive.
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Ai Editorial: Learning from Starbucks’ mantra for loyalty
First Published on 28th April 2016
Ai Editorial: Airlines need to look at Starbuck’s way of marrying of convenience and experience to drive a fruitful association, writes Ai’s Ritesh Gupta. Top 6 loyalty considerations, regardless of whether you’re an airline or a coffee chain.
Recently I came across a post on ICLP blog that explained why Starbucks are getting loyalty right, even as the iconic brand chose to offer rewards based on dollars spent rather than on the number of visits.
I thought of delving deeper into what Starbucks is achieving, and what airlines can learn from the renowned American company.
There are fundamental differences the way one can associate with a coffee brand and air transport, which for most can be a commodity. Yes, airlines have been improving on their product, amenities they offer etc. but it all becomes unfounded when a senior hotel executive tells me: “Loyalty is a bit of a misnomer. Since air transport is a commodity, my preference is driven by the points currency - how easy is it to accumulate “usable amount of points” and how easily I can redeem these points for things (trips) I value. My main consideration is availability of the preferred airline’s inventory for the desired route. I’d likely be as frequent a Delta flier simply because I live and work in Atlanta. Points are just a perk.”
It seems customer devotion is missing in this case.
Significance of customer devotion
Loyalty programs aren’t a solution to all your problems, but they can definitely be the first step to driving customer devotion, says Tom Nichols, Strategy Analyst at ICLP.
According to Nichols, brands need to consider customers as “valued assets”.
So where do airlines need to improve their operations/ processes to replicate the success of Starbucks in the arena of loyalty?
“Starbucks have shown giving out points/ stars/ miles doesn’t have to be the element that drives the complete customer experience,” says Nichols.
He says the in-store experience for all customers in Starbucks is positive, whether they are interested in collecting ‘stars’ or not. It fundamentally doesn’t matter whether an FFP is revenue- or distance-based, there are aspects all airlines can improve to create a better overall customer experience.
Taking two examples that Starbucks do really well, Nichols explains:
· In-store Wi-Fi and personalised service: Norwegian’s spend-based proposition is simple to understand, but whether you’re a Reward member or not, you can still take advantage of the free, high-quality on-board Wi-Fi. Likewise, Starbucks write your name on their cups to reinforce that personal touch, whether you like it or not.
· KLM offer something similar with their on-board staff iPads that link to the customer database, so they can personalise service to individuals as easily and efficiently as possible. Starbucks’ approach to loyalty is likely far easier to manage operationally than in airlines, but the concepts are still valid: providing good quality services for everyone, personalising where possible, and underpinning everything with a mileage structure that rewards your most valuable flyers.
Marrying of convenience and experience
In case of Starbucks it’s neither purely coffee, nor a generous loyalty program that actually fosters loyalty.
Nichols says its overall marrying of convenience and experience into a holistic customer value proposition across all touchpoints that pays off.
As for flights, combining maximum customer convenience and great customer experience across the whole travel journey is the way to meet these expectations. Each airline will have different customer pain points, but they should all be addressed as much as possible. “One great example around this from Starbucks is their crowdsourcing platform, My Starbucks Idea. Customers are able to engage with the brand and give feedback – recent examples have ranged from in-store music requests to suggestions for new flavours of drinks, and the most ‘liked’ ideas get evaluated by Starbucks and implemented if successful,” says Nichols.
“The overarching goal in loyalty is to drive customer devotion and lifetime incremental value, although we’re seeing customers becoming increasingly fickle towards brands. To overcome this, a data-led approach combining quantitative and qualitative sources is critical here. On top of your existing data, optimise the customer feedback loop and find out from your frequent flyers themselves how you can delight them and drive their loyalty to your brand.”
For airlines, as with many other sectors, ‘convenience’ is increasingly delivered by efficient technology and ‘experience’ is driven by people, says Nichols.
“We live in an on-demand economy, and customers want everything delivered to their fingertips at a few taps on a smartphone screen, but it’s the personalised service delivered by staff that makes a customer feel valued,” he said. This can be supported by technology and data as necessary and KLM is a great example of this – not only do the on-board staff iPads allow for instant, personalised service, but their recent announcement to use Facebook Messenger as a platform for check-in notification, boarding pass, flight status updates etc. makes the ‘admin’ element of travelling as simple as possible, collating all the relevant information in one platform that many smartphone users use every day as standard. Similarly, their 24/7 access to the KLM customer service team on social media is also a strong part of their CVP. It’s ultra-convenient, and caters for the ‘always-on’ behaviour of today’s consumer. Nichols adds on a less digital level, Emirates are another really good example. Their route network strategy connecting secondary hubs (such as Manchester and Glasgow in the UK) with Dubai improves convenience for many travellers, while the complete in-flight experience across staff, entertainment, food and even the planes themselves is widely regarded as one of the best in the world. Underneath this, their Skywards program is relatively generous and easy to understand. Emirates aren’t really doing anything ‘new’ in this regard, they’re just meeting all the necessary customer needs, and meeting them well.
In-app functionality
Starbucks developed in-app functionality allowing users to order remotely and combine this with a great in-store experience. So what can airlines learn and how to work out new features via their digital assets (websites, apps) and also at the airport?
Nichols says Starbucks have embraced digital disruption, and have redefined the whole experience of buying coffee, and he expects airlines will be next to follow suit.
“The growing trend for BYOD (Bring Your Own Device) with which you can watch in-flight entertainment and download newspapers and magazines to read is one example of this in the skies already. I think there’s great opportunity here for airlines, particularly focusing on the experience and journey in the airport before and after travel,” he says.
Airlines could start to take more advantage of beacon technology and smart devices to give the customers the relevant information at the right time, whether that’s a boarding card on a smartwatch, or a push notification to a smartphone telling you the gate number and how to get there. It’s innovation like this that can help an airline stand out from its competitors. What airlines must be wary of, however, is the potential for airports to get in there first and fight for control of the real-time, in-airport customer journey, added Nichols.
Managing change
Nichols while making changes to FFPs, it can work well if managed and communicated to consumers effectively, but often loyal consumers can be made to feel as less valued as a result of short-sighted program changes and poor communication. Offering a personalised approach to the consumer, however the airlines choose to do it, can also be a successful way of driving incremental revenue, although, as always, there needs to be a balance against cost. Rewarding for engagement with the airline brand across a wider cross-section than just mileage or spend is perhaps the next frontier for FFPs. No matter how innovative, the difficult part for airlines is how to reward wider engagement and how to ensure it continues to drive profit.
Nichols’ top 6 loyalty considerations, regardless of whether you’re an airline or a coffee chain:
· Do frequently re-evaluate your program to work out whether it’s an attractive customer proposition, driving the right incremental behaviour and remaining profitable.
· Do try to meet customer needs across as much of the customer journey as possible, and don’t be afraid to be digitally disruptive in doing so.
· Do listen to your customer’s frustrations and use them to optimise your customer experience as much as possible.
· Don’t feel you have to change your program mechanics just because your competitor changed theirs.
· Don’t overcomplicate your program earning and redemption mechanics if you don’t have to.
· Don’t alienate your most profitable customers in the long-term by only changing your program to focus on key growth segments in the short-term.
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Ai Editorial: Marketer being a technologist is fine, but how to excel?
First published, 6th May 2016
Ai Editorial: While optimizing digital spend, every marketer needs to remember that technology is extremely important but it’s only a key facilitator; not a driver of digital transformation, writes Ai’s Ritesh Gupta
The journey of a brand creating an aura of desirability to interspersing the booking funnel with apt messages and offers to eventually enticing a customer to transact repeatedly is riddled with a series of challenges never experienced before.
One disappointment at any touchpoint and the customer can desert this journey.
So in a marketer’s parlance, every penny be it for crafting superlative content, messages/ ads, offers etc, optimizing ad spend for a healthy mix of brand awareness and performance marketing, setting up a digital infrastructure for a unified view of a customer etc. needs to be accounted for.
And is all of this enough?
Not really.
I remember interacting with a senior marketing executive from ClubMed North America in 2013.
His perspective on the role of a CMO is still vivid: “(my role is divided in following ways) 30% around analytics–related subjects, 30% for IT-oriented discussion, 30% to manage the marketing mix and 10% as “internal politician” for the change management in the company linked to the overall transformation!”
Today the task entails capturing that perfect the blend of data, analytics, algorithms, content and screen (chosen by the customer) at any given point of time.
No wonder every marketer has to be a technologist.
Challenges that never existing before
The benchmark for delighting a customer has touched unprecedented levels, with everything being talked about in real-time. Here are some aspects that need to be addressed:
- Addressing individual needs - In the era of personalisation, one has to be spot on with the timing of message, the stage of the booking funnel, location, behavior pattern, context etc. So if a particular FFP member uses his company desktop for a particular pattern of travel and his mobile app for a completely different one, then it is vital to evaluate context based on data. Singapore-based Frank Bornemann, Head of Marketing, Loyalty Programs and Provider Management APAC, Lufthansa German Airlines says the industry at large is falling short when it comes to “personalisation to individual needs”. He says airlines have so much data available to address individual needs, but yet they usually blast offers to all customers in newsletters, apps, social media etc.
- Going overboard and spoiling the experience - Bornemann also referred to the danger of information overkill while attempting to be customer-centric. It is very easy to blast everything to everybody, but respect for our customers’ time is crucial to break through the communication clutter and build trust, he said.
- Dealing with time consuming, uncertain areas - It is of course very challenging to merge all data points, apply the right algorithms and have the right text and visual components come together to create a seamless flow of information to customers. Also, today airlines are struggling to cope up with the tendency of shopping on several avenues such as PC site, mobile site and app. Definitely not easy to coalesce unidentified visits that initiate on desktop, mobile web, or the app, and then unify them post log ins.
- Ad tech developments – In the world of programmatic buying and real-time bidding everything happens at a scorching pace as each bid request can be processed in under 100 milliseconds. Buying media programmatically is not the hard part, but buying it at the right price and optimizing it efficiently is where most novice ad buyers fail. For instance, a U. S.-based ad tech specialist might be do an excellent job in their territory, but the same might not be enough to run programmatic ads in China. The plumbing required for China is very different, the programmatic networks are different. As I learnt from Criteo, owing to the powerful firewall in China, time out and missing of data may occur when displaying ads in China. So this can have a negative impact on any campaign, considering the real-time, dynamic nature of this medium.
- Coming to grips with power of Google, Facebook, PayPal etc. – If I land up on Google, and am being given an opportunity to wrap up my booking with airlines in a Google-hosted domain, airlines need to pave way for such booking environment. Google can stitch unstructured behavioral data like social posts or searches together, providing context and determining intent. This data helps shape the audiences for its advertising network. So are airlines are at risk of being positioned as “just logistics providers?” So yes, airlines need to find ways to provide more value-added services when searching, and reasons for travellers to book with them, but they also need to partner with Google and others to be a part of a customer’s shopping experience.
Prioritizing expenditure
It is an arduous task to remain afloat and not miss out on any technological advancement. Everything needs to be timely, and rolled out in a way that it becomes a part of a customer’s journey with a brand.
Of course, airlines shouldn’t miss out on leveraging their own assets. For instance, as highlighted during Ai’s recently held Ancillary Merchandising Conference in Barcelona, there should be consistency in airline content, be it for airline-owned channel or 3rd party distribution. Irony is that content exists, but the industry struggles to show the same in the transaction flow. If an airline invests in improving the quality of the food it serves, and if doesn’t show during the flight shopping process, then airlines are not fully leveraging its product.
Also, when I asked how airlines need to prioritize their digital expenditure to ensure a top notch travel experience can be offered, Paul Byrne, Senior Vice President of Development at OpenJaw Technologies, referred to the significance of sticking to “basics”.
“I agree that it’s extremely challenging for airlines (or any retailer) to keep pace with all the new technological evolutions. But do they really need to? Airlines are not technology providers. They are service providers,” highlighted Byrne.
He said airlines need to follow a customer-centric approach rather than a technology/ solution-centric one. Byrne recommended few steps, underlining the significance of “back to the basics” –
· Research your market(s) and customer base extensively. Get business insights from the data you already have and try to understand how technology is disrupting your markets.
· Identify the low hanging fruits and the long term initiatives needed to provide a rich customer experience.
· Most probably you would have enough information at this stage to start planning how the latest technologies could be used to exploit identified market growth opportunities.
· Prioritising your digital spend and aligning KPIs becomes a much more manageable task at this stage.
“The key point is that it’s more important to keep pace with your market and customer base than to run after the technological advancements. Digital transformation needs a user (and market)-centric design thinking and execution strategy. Technology is extremely important but it’s a key facilitator; not a driver of digital transformation,” explained Byrne.
Importantly, airlines should be focused on their customers and making the customer experience as seamless and painless as possible. “A great customer experience will create customer stickiness, loyalty and increase lifetime share of wallet. A recent Forbes survey showed that top airline executives believe customer experience is the primary brand focus,” shared Byrne. He highlighted that customer expectations are set by other industries; technology is the enabler for customer experience ; however, lack of (investment in) technology is the biggest obstacle to achieving this goal.
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Ai Editorial: Serving loyal flyers – can we keep it simple?
First Published, 15th April 2016
Ai Editorial: It's an art to develop and implement a loyalty experience that is simple yet impactful. Processes are in place, but are they efficient? Ai’s Ritesh Gupta finds out
Travelling is refreshing. Meeting new people, trying new cuisines, exploring unknown places and things etc. has its own charm. That’s what travel is all about.
Plus, the sheer joy of embarking on a trip or even receiving a confirmation pertaining to your hotel or flight booking are simple things that build up the crescendo. But sometimes simplicity gets overshadowed. Let’s explore some unwanted areas and areas that can be improved:
Go beyond the mundane: This week I planned a surprise for my wife and daughter, booked at room (Pullman New Delhi Aerocity) three days prior to my travel. The purpose of travel was a city break, a weekend getaway to celebrate my wife’s birthday. I also downloaded Accor’s app and checked-in for my stay. Post this I received an email, enticing me to avail a deal (either for Pullman and Novotel in the same area), something that I had already done. At the bottom of the email there was a note that did mention that the offer “may not take into account the latest transactions passed on the previous 24 hours”. Fair enough. But I expect a better piece of communication. I had spoken to an executive at the time of booking. I conveyed to him about this special day and the reason behind the trip. So I would rather expect a post booking email which has something to do with it. This will be my fifth stay at an Accor property in three years, including a stay with my family in Goa last year.
Emails and push notifications need to be more meaningful, relevant as per the status of my journey, and luring enough to lend a “feel-good” factor.
Be cautious with tracking of digital footprint: Recently I interacted with Atlanta, Georgia-based Del Ross Managing Partner, Noctober Value Partners. He mentioned that he doesn’t generally seek “surprise and delight” experiences when he is travelling unless it is purely a leisure trip that features travelling with his wife. “Since most of my trips are business-related, my biggest priorities are to avoid hassle and problems. To an extent, I would prefer that my accumulated behavior were not tracked and leveraged without my explicit permission - unexpected offers, no matter how relevant, run the risk of being creepy,” he said.
There is a need to build trust with travellers and offer assurance that personal details/ information will not be utilized other than for the exact reason that the passenger grants access.
Redemption options: Airlines need to find ways to overcome complications and inefficiencies associated with their respective loyalty programs. In a recent interview, Sean Dennis, Co-Founder and COO, Ribbit.me highlighted that travellers want their points right away, and they want more redemption options. “As a customer, I often feel undervalued in loyalty programs. Examples include the `event-type’ reduction in the value of points that I have already earned, in order to limit the operator's liability,” he said. This happens more often than people realize, and can actually have an opposite effect of loyalty.
Also, tier qualification is poorly done sometimes – for example only business or first contributing to top status is too restrictive and just isn’t viable in this day and age.
Understand my journey, my preferences: While loyalty used to be measured by how much you spend, how many times you fly, the number of miles you do – this simply isn’t the case anymore in a data driven world of analytics and business intelligence. Its important to ensure how does a loyalty program offer the perfect level of personalization, rewarding and recognizing each customer throughout the entire pre and post trip process. This should be done without creating a heightened level of expectation that is difficult for the airline to meet consistently – while keeping in mind the potential costs of providing the deepened level of personalized insight.
Effective personalization requires a “collect, predict, act” approach. As a senior executive from GuestLogix told me, airlines need to collect relevant data about the customer, often from a variety of sources, and airlines with a CRM and FFP/ loyalty program partnership already have a decent start. However it is also necessary to have single e-commerce platform that provides a 360-degree view of all digital interactions (including past transaction history and current online behaviour etc.) across the omni-channel (including desktop, mobile, tablet, on-board, contact centre etc.) for the entire customer lifetime, in order to make the most of the personalization opportunity.
While there may be a complex array of data sets, modelling, predictive analytics, machine learning, 1000’s of servers crunching numbers night and day, and teams of data scientists hypothesizing new models 24/7 – the consumer needs to have a beautiful experience not inhibited by any of this.
Recognize me: FFPs as a customer touch point remains a mere support function of the entire customer experience for the airline to get it right, the first time, every time, says South African Airways’ Suretha Cruse.
Let’s face it; there are a large number of inter-dependencies across the airline and all the customer touch points are substantially cross-functional. If the customer satisfaction is not being met by the complete customer experience provided by the airline, the FFP members’ true loyalty towards the airline is questionable and their loyalty to the rewards of the FFP is an unintended consequence.
Whilst most airlines recognise the need and/or invest in their customer experiences to ensure personalisation by anticipating and striving to understand the unique convenience or recognition needs of customers; by large the airline industry is still lagging in their quest for a deeper level of personalisation.
Process and operationalization do not tend to be viewed as a major priority for marketers. For a consistent CX, one has to clearly define processes and execute flawlessly.
Delivering benefits such as priority boarding or baggage handling requires consistent process across wide networks.
A senior loyalty executive told me there is no shortage of proposals that promise results – most focus on technology-driven solutions in tandem with business- intelligent processes and yes, it is required as enablers. However, it is the delivery of results that is harder to achieve than the “what” and “how” statements as the critical success factor is often in fact the people aspect. It is an art to develop and implement differentiated and personalised customer experiences that are consistently delivered through people at all customer touch points vis-à-vis a customer experience that the market both expects and is willing to pay for. Adding emotional value, mostly through people, is what primarily develops relationships that guarantee customer loyalty.
How challenging is to make sure loyal customers get what they want? Hear from senior industry executives at the 10th Ancillary Merchandising Conference (to be held in Barcelona, 21- 22 April 2016)
For more info, click here
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Ai Editorial: Gearing up for personalisation? Don’t snub PSS yet
First Published, 7th April 2016
Ai Editorial: Airlines acknowledge the need to re-engineer their internal processes to get closer to personalisation. But it doesn’t mean one needs to do away their PSS. Ai’s Ritesh Gupta learns more about the same
I recently interacted with a Systems Engineer, who has spent 30 years in our industry. He has the experience of flying with over 100 airlines, and has been to over 160 airports. Going by his expertise, it was pertinent to know to what extent a Mainframe Systems Architect gets recognized? Is it strong enough for a personalised experience? And also, how to deal with a legacy PSS regarding the same?
Retailing and airlines – no match yet
The conversation initiated around the necessities of a modern retailing infrastructure that airlines need to deploy.
“I sometimes wonder if all this talk about “retailing” in the airline industry is really relevant. Most passengers don’t even know what type of aircraft they are flying on. They couldn’t tell you if it was an A320 or a Boeing 737. In some cases, they don’t even know what airline they are actually flying especially if they have booked/ had booked a marketing codeshare segment. They just want to get from A to B as cheaply as possible.
The airline sells the seat and gets the passenger from A to B with a (variable) amount of service. Finally they deliver the baggage,” he said.
He added, “But, there is a case apart. That is the “real” frequent traveller who is loyal to a single airline.
That traveller can be in a minority of 5% of passengers who provide up to 80% of airline revenue. To serve that critical minority of passengers better, I see the airline strategy of moving those passengers onto the web channel where they can be offered personal discounts on flights, increased baggage allowance (if it is noticed from the datastore that these passengers regularly travel with lots of baggage), offers to sporting events and on other goods and services.”
Hotels are doing it
He said this already happens outside the airline industry.
“I am a Gold Member at Accor Hotels. The price I get offered on their website is often - not always - lower than anything I can find on hotels.com or booking.com. Accor knows my movements, my likes (top floor room) and my preferences - I always take breakfast in the hotel. And they serve me well. When my wife’s dress was left in a hotel room recently, they took care of it and returned it to us. Would they have done that to a non-Gold Card holder? May be not.”
The way airlines can do the same
“Knowing the customer” is an oft quoted cliché, he said. “The airline industry must invest in taking all the rich, but raw data that is collected on the core PSS system, analysing it for their most frequent travellers and producing tailored offerings for those key passengers.”
Citing an example, he said, “Wouldn’t it be nice to greet a passenger whose previous flight was delayed or had problems opening the door with an offer when they next travel.
“Sorry your last flight to Paris was held for 20 minutes waiting for a Stand Mr. Gupta, can we offer you a Duty Free Voucher for 30 USD today before your flight?”
It can be done, he asserted.
The driver is getting to know the top passengers much better than at present.
The data is there.
“Offload as much data as possible. But keep the mainframe for its phenomenal message processing capability.
Use the data which is there on the mainframe, but do that analysis offline,” he said, referring to what all needs to be done to ensure that an airline ends up with prudent IT decision-making, and doesn't undermine the role of a PSS.
“The core PSS is not the place to analyse that data, but it can be the place to place the offers and incentives to the passenger face to face – perhaps better than anonymous e-mails after the flight which are invariably deleted as not many have the time to read all their mail these days.” Empowering airport customer service agents with valuable key customer information is key to that, he said in his parting message.
Keep PSS aside, don’t expect everything
A section of the industry clearly stipulates that the key lies in separating the core PSS capabilities, which are essential to running any airline, from technology that enables true brand and product differentiation.
As for making most of the data strategy, and coming up with actionable insights, an industry executive indicated that he would rather focus on real time PSS data reliable interfacing to the external contemporary system where the proper data aggregation could be maintained. He said the major problem lays in data aggregation as it comes from different sources such as human input, legacy systems, web based modern tools. We are not limited by technology as there are already systems available on the market which can process personalized communication with the individual passenger, using highly customized and sophisticated business rules, but again the problem lays in data quality. The only solution is to build the independent modularized system which will help to compete on the market, and this would pave way for personalisation, too.
Hear from senior industry executives about how airlines are gearing up to improve IT-related decision making and foster loyalty at the 10th Ancillary Merchandising Conference (to be held in Barcelona, 21- 22 April 2016)
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Ai Editorial: Leveraging blockchain for fostering loyalty
First Published, 23rd March 2016
Ai Editorial: Travellers want their points right away, and they want more redemption options. How can blockchain technology play its part, Ai’s Ritesh Gupta finds out
There are several challenges that continue to impede the lure of FFPs.
One of them is how quickly do I earn when I spend? Can it be real-time? For merchants, it is imperative to plan their liability management, i. e. how to reduce, allocate, share, track, or liquidate rewards liability.
Interestingly, tradable, blockchain-based loyalty tokens promise to combat such hurdles.
As a blockchain technology specialist, Ribbit.me, intends to lend a new dimension to loyalty.
“People want their points right away, and they want more redemption options,” says Sean Dennis, Co-Founder and COO, Ribbit.me.
So what disappoints Dennis when it comes to loyalty programs? “…complications and inefficiencies associated with the loyalty programs. The lack of innovation and options as a client. It all feels rather bulky and outdated,” pointed out Dennis.
In one of his blog posts, Dennis pointed out that Millennials can be very loyal, they “just want points that are applicable to them and their needs. They want easier to earn and redeem and a broader range of redemption options.”
RApp or Rewards Application
For its part, the company has come up with its offering, the LoyaltyPlatform.
As Dennis explains, program operators are able to leverage blockchain and smart contract technology in order to:
- Either create or make far better, their redemption networks (reduction in friction for inter operator redemption),
- Manage program liabilities, and
- Offer dynamic issuance and redemption options to their customers via SmartRewards
Referring to the concept of the Token Tree, Dennis explained: Operators of a network are able to create a Rewards Application (RApp) with set rules and parameters. Below this, every partner operator in the program is able to create a Sub Rewards Application (Sub RApp) that must follow the rules and parameters set by the RApp above. These rules may cascade from top to bottom, creating the uniformity of a coalition program, but with the benefit of being able to individually brand, issue and redeem every Sub RApp. “Imagine if the airline coalition groups decide to utilize this feature and individually brand the partner operators, whilst still being under the Coalition rewards program,” said Dennis.
The company has partnered with a number of the largest financial, advisory and banking technology providers to approach operators and provide them with a platform that meets their individual needs.
The feeling of “being valued”
The company’s platform makes it so easy to include redemption partners in a program, without the high cost of implementation.
“The underlying blockchain and smart contract technology allows for speedier issuance, giving the consumer higher perceived utility and a feeling of being valued,” asserted Dennis.
“As a customer, I often feel undervalued in loyalty programs. Examples include the `event-type’ reduction in the value of points that I have already earned, in order to limit the operator's liability,” he said.
Through using the LoyaltyNetwork, operators are able to actually target levels of breakage and reduce redemption variance risk. Breakage can be embedded into the rewards point. The operators within the redemption network are also able to share the liability in a frictionless manor between the issuing and redeeming partners at an agreed upon rate.
Benefits
With this emerging technology, reward points are going to generated by an algorithm and issued in the form of a digital token on the blockchain.
So what sort of impact is going to be there on the profitability of an airline’s loyalty program?
From a B2B business perspective, Dennis says the company clearly provides a platform for these operators to function in a far more efficient environment with regards to their loyalty offering.
Operators may benefit from liability and network redemption management tools, better targeting of their customers through dynamic issuance, resulting in more sales and last but not least, lower loyalty program operation costs. This way one also ends up adding effective liability management tools including targeted breakage outcomes.
Also, there would be zero lag in reward redemption with blockchain technology. “Because all partners in a redemption network share a secure platform, the rewards can be transferred instantly between clients as needed. Think of the blockchain as the Internet of value,” shared Dennis.
Investment – if any?
As for what sort of preparation is required, Dennis says integration with the platform is relatively simple, and legacy system integration with operators (which is most likely with existing large operators) is easy and “we will work with large operators like airlines and hotels to customize as needed”.
“The smaller operators in the industry are likely to choose something more of a “plug and play” option when it comes to their Rewards Application,” said Dennis. “The larger operators will develop their own highly customizable Rewards Application (most of which they already have in terms of parameters or desired outcomes).”
Blockchain as a technology
Payment specialists point out that blockchain has a way to go before a critical infrastructure like one for payments should be built on it.
Dennis agreed on this, and said payments and settlement are areas that are being highly focused on for blockchain application. But for large operators, there is a way to go before adoption due to hurdles and regulations that need to be overcome. This is a major reason why the loyalty industry is the perfect application, he said. “The payments industry has undergone constant innovation, while the loyalty industry has remained fairly stagnant, and is built on a system that no longer satisfies the consumer, and is inefficient for the operators to run. Our technology stack using blockchain (Distributed Ledger) and Smart Contracts addresses this need,” he said.
Learn more about the latest developments in the arena of blockchain technology at the upcoming 10th Annual Airline & Travel Payments Summit, scheduled to place in Barcelona, Spain (26-27 April, 2016)
For more information, click here
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