First Published on 15th February, 2017
Ai Editorial: Airlines have shown that genesis of digitization lies in digital transformation. This can boost loyalty-related initiatives in a big way, provided airlines exhibit enterprise-level readiness, Ai’s Ritesh Gupta
When any airline prepares for digitization, the ambit of knowing the customer is going beyond interactions that take place with an environment owned by the airline.
It isn’t easy for sure, but yes, it is being asserted that if airlines (or any business) intend to foster loyalty or sustain it, then customer experience isn’t just about interactions with a brand.
If we talk of airlines, it is heartening to know the kind of effort that is being made - Allegiant Air pursuing ways to engage loyalty program members during the non-travel phase or Malaysia Airlines attempting to keep track of daily purchases by coordinating with online retail partners, via co-brand cards etc. Airlines have shown that genesis of digitization lies in digital transformation, as depicted by flydubai. The carrier has chosen not only relook at their IT architecture, but also refining their API connectivity to offer a connected, seamless experience.
And of course all of this needs to be taken further with enterprise-level readiness.
Then only any initiative, be it for one related to data, analytics and content management, can have direct impact on loyalty.
Here we assess some of the initiatives:
· Data collection and integration: If digitization is about knowing and serving customers, then the initiative wouldn’t yield results if one can’t garner data from all disparate sources. There is a need to look at all acquired data in one place. Specialists recommend an audit of data sets, finalizing of a data model, evaluating mapping of data, and if all of this is consolidated via one dashboard, then it can lay strong foundation. How can one reap benefits? For instance, rather than ending up with “messaging overkill”, an airline can tailor messages as the booking funnel or preferred channel. Also, if we talk of artificial intelligence, bringing data together and integrating it is must. A central hub for data makes AI run efficiently - personalize, automate decisions, and analyze customer behavior. Just as AI is propelling the functioning of autonomous cars, robots and smart appliances, it can enable airlines to work on intelligent conversations across all of their devices.
· Gearing up for new experiences: Any new customer-facing execution should run through relevant teams, and has to be purpose-built for enterprise requirements. Take the case of chatbots. They are omni-channel – can be set up where passengers already are (Facebook Messenger, mobile app etc.). Right from automatically recording and categorizing message successes and failures to ensuring how messages between users, bots and all enterprise systems are secured and exchanged in real-time to assessing the accuracy of conversation, every minute detail needs to be understood in a swift manner. This level of enterprise-level readiness is must for every interaction, every experience – relatively old or new.
(On another note, airlines can also look at applications of such initiatives to improve their operations. For instance, the prowess of business intelligence can strengthened further by adding alerts and report delivery via a bot. A notification for a decision-maker via a bot, without the need to log into the BI system, can be quite useful).
· Assess sensitivity of any new initiative: The idea of turning any consumer gadget, accessory or wearable into a payment device is luring. Turning any Internet connection into a commerce experience is exciting, but don’t forget that security of smart devices is still being questioned. Data breaches remain a big threat, and if IoT devices aren’t safe enough, then fraudsters will have avenues to potentially go after credit card numbers, login credentials, and personal details.
· Build on efficacy of a proven channel/ touchpoint: Email id has proven to be a unique identifier, and travel marketers are looking at emails featuring item-level ecommerce receipt data. From online and offline receipts to travel itineraries and brand preferences, the inbox is becoming a go-to source for business intelligence Armed with rich, detailed data, airlines can attempt to understand where consumers are transacting, when they are buying, what they are buying, and how much they are paying.
· Learn from what doesn’t work: The value of non-converting data can’t be undermined. Say a user visited a website, and left the site at some point. This user is being followed with retargeted ads, but didn’t convert despite showing early promise. Was there is anything wrong, say any unmet need, during the course of the booking flow or user experience on the website? Was the creative of retargeting enticing enough to get the user back on track? Non-converting data can help in areas like waste ad spend, frequency capping etc. for a marketer. Also, assess areas that the ad tech industry hasn’t found a solution for. For instance, overcoming limitations of dark social traffic channels. Dark social is when people share content through private channels such as instant messaging programs, messaging apps, and email.
· Delivery of content: Content management, be it for going for an architecture that supports delivery of content for emerging technologies and all devices, adopting personalization rules that tailor a site content based on visitors’ profiles, or monitoring how content is performing, without navigating to a separate web analytics system, is one key area that is demanding action in a swift manner.
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First published on 3rd February, 2017
Ai Editorial: When Amtrak last chose to re-launch their rewards program, the team decided to take care of their elite customers. There is plenty to learn from this approach, writes Ai’s Ritesh Gupta
The sheer delight of being “valued”, taking family for special trips or the convenience quotient associated with travel are facets that loyal members, especially those belonging to the elite category, associated with travel loyalty programs.
But changes in loyalty programs of established travel organizations in the last year or so, as witnessed in case of Starwood and American following Delta, United etc., have resulted in bad experiences as well as PR.
There are elite “loyalists” with more than a couple of decades of association who have expressed shock, and are peeved with changes, for instance, raising of reward point requirements in case of Starwood. Come to think of airlines’ stickers and tags all over on your luggage, and suddenly you are left with only fond memories of all the perks you enjoyed, sad, isn’t it?
There are few areas that can be looked upon - what could be done to avoid or salvage the precarious situation:
· Why not leave “elite” members if everything is working well: Vicky Radke, Senior Director, Amtrak Guest Rewards at Amtrak, shared that when the organization last chose to re-launch their rewards program, the team relied on customer insights and “came up with measures regarding on how to base our success”.
Amtrack decided to focus on increment in enrolment, in engagement and making redemption simpler.
At the same time the team felt the need to take care of their elite customers – they know how your program works, what they want etc. So the team didn’t change elite benefits. “We made sure those customers still felt valued. Changes were made to simplify and streamline the program.” The team relied on both quantitative as well as qualitative research for the changes in the program. “Customers indicated that there was lack of understanding about how the program was working, and how they would get enough points to redeem. We used this focus group insight as well as member satisfaction scores to understand the opportunities we had to improve the program, and make the changes that would drive additional engagement,” shared Vicky.
The key KPIs included over 15% in engagement, 25% in enrolment and also increase in redemption.
· Feel the “sentiments” of a loyalist: One elite business traveller can’t digest the fact that Starwood made changes, and felt “betrayed”. For business travellers, FFP perks tend to be the number two reason just behind schedule that determine which airline the customer chooses (assuming they are not handcuffed by a corporate travel policy). Besides carrying around their elite status as a badge of honor, customers cherish the perks provided in order to alleviate the stress of business travel and they overall create a much more comfortable travel experience. At the airport, preferred check-in, expedited security, priority boarding all aim to make travelling more efficient. On board, upgrades to first class and/ or priority seating improve the comfort of the flight and provide more room to work or to relax. Additionally, when things do go wrong, elite customers know they are going to be given priority for customer service and rebooking. When all of this goes away, then it will result in acrimony.
· Do communicate about the change and the future: I came across a post on LinkedIn that referred to Starwood making changes to their rewards program, but this elite member wasn’t informed in advance and got to know only after implementation happened. This member searched on Google but found no official announcement on the corporate site also. And then he goes on to add that the Marriott-Starwood strategic alliance only added to the woes, as perception around Marriott and their “limited room availability for reward stays” for business travellers wasn’t an exciting development either.
As we explained in one of our articles, the old systems of airlines in the U. S. awarded both more award miles (used for free flights) and more status-earning miles to those who flew in premium cabins compared to those on cheap tickets. The problem with the old systems was that the “spread” or “differential” between cheap-fare earning and high-fare earning was minimal. In many cases as low as 1.5. That meant you really didn’t “much more” for spending more. So – to move to a more “revenue-based” earning system – the imperative was to increase the “spread” or “differential” to better reward high-fare customers relative to low-fare customers. This needs to be explained.
Airlines also need to ease off the transition for erstwhile “high-value” travellers, especially not pushing them to do what all otherwise was part of the services for “elite”. For instance, don’t make your customers bounce from department to department in order to voice their dissatisfaction. Explain them the change when they get in touch.
· Looking beyond “gaming” and looking at the profile of a traveller: Can airlines look at the way their “elite” customers reach the status and cut down on the possibility of grievances? For instance, a business traveller who ends up travelling from the U. S. to Asia several times a year and manages to achieve the elite status provided he or she is buying full fare or business fare tickets. This is fine. But there could be a traveller in the U. S. who travels domestically every week 1K miles each way, and takes off 4 weeks for vacation and holidays, and is now because of change coming short of the threshold necessary for elite status. So in this case can a certain mileage-run or sheer volume of transactions be considered, finding a way to differentiate between the genuine traveller and one who is finding a nefarious way to reach the status. Can aggregated behavioral spending data help in this case?
FFPs should not react by copying a revenue-based accrual / earning structure of another FFP. Did United and American simply copy Delta’s program? FFPs must fully comprehend their own business model in respect of their revenue and cost structures, as evolving to a fully fledge revenue-based model (accrual and redemption) requires monetizing the value of a mile/ point – a critical success factor to maintain commercial sustainability of the FFP, which by default will impact all rates negotiated with long-standing accrual and redemption programme partners as a result of a previous calculated cost of a mile/ point.
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First published on 25th January, 2017
Ai Editorial: Loyalty isn’t just restricted to how a member interacted with one particular brand. Airlines are duly looking at areas like shopping, eating out etc. to target the infrequent traveller, says Ai’s Ritesh Gupta
A transaction or an experience isn’t defined only by how a traveller interacts with a travel brand.
In this context the worth of a co-branded card or a coalition program is on the rise, and airlines’ are trying to dig deep to ascertain what a loyal member looks like beyond their own purchasing funnel. Data and emanating insights is what one is after. In the whole exercise what works in airline’s favour is the lure of flights as a freebie or the overall perceived value.
So today airlines aren’t just looking at the usual sources of data (behavorial, transaction, device etc.), for instance, going beyond attribution models that only contribute in understanding a particular booking funnel.
The plan is to identify ways to be more relevant by acting on data, not just when the probability of a conversion is there. Even in cases when customers aren’t regular buyers of an airline’s core products, airlines are finding ways to be a part of their lives. So be it for inspiring them to take their next vacation or evaluating their transactions, the ploy is to understand travellers when they are in the non-travel phase.
There are few areas that airlines are working on in order to target the wallet of the infrequent or leisure traveller:
· Elevating the brand with every transaction: The concept of a co-branded credit card isn’t new. But what’s novel is the way data is being collected, shared and acted upon. Yes, the role of partners is vital in a coalition program, but it is clear that air travel is among the most attractive rewards. Take the case of Allegiant Air. A major reason behind the US-based airline’s first-ever co-branded credit card, The Allegiant World Mastercard, introduced in conjunction with Bank of America few months ago, was to assert the brand’s presence in the lifestyle of the same set of travellers who fly with the airline once-a-year. “The play for Allegiant in the future is that we have the most powerful redemption opportunity – easy, affordable access to exciting destinations, very “aspirational” the kind of place travellers think of day-dreaming,” says Brian Davis, VP Marketing and Sales, Allegiant. The plan is to interweave this with the day-to-day lifestyle of travellers – gas stations, grocery stores etc., making Allegiant brand part of those transactions. “So as customers go about mundane transactions, they day-dream about their next travel and destination,” said Davis. As for the travel and benefits, some of them include priority boarding, free in-flight beverage when the cardholder shows their card, Buy one, get one free airfare when the card is used to purchase an Allegiant vacation package with 4 or more hotel nights or 7 or more rental car days etc.
· Engaging during the non-travel phase: David referred to the low frequency model and the significance of the seasonality factor for the leisure traveller. “Most loyalty programs are crafted around high frequency travellers, business travellers, and these aren’t usually on our airplanes. It’s more of once-a-year vacation family travel. The program is relatively new, set up right from the scratch, so it will result in more and more insights into their lives,” he says. As Davis says, the focus is now to be a part of their lives once the actual travel phase is over. The lead customer – around 80% of the total buyers – is typically the housewife, who is in late 40’s, has two kids, and she is in charge of the family vacation. While there has been scrutiny of the decision to charge $59 annual fee, it is clear that Allegiant is banking on the initiative for evaluating everyday purchases. Davis explained that the airline’s relationship with their customers tend to be once-a-year when the traveller takes the vacation, and then they go back home, living their respective lives, the other 51 weeks of the year. Insights about those 51 weeks – who they are, what motivates their purchases, how they eventually spend money etc. becomes very important.
· Insights from data and acting on it: A coalition program can result in tangible benefits - expand member base, decrease marketing cost, cross-market to each other’s members, what products to push etc. Overall all can get better at doing analytics, as there is an efficient dataset. So rather than only relying on model section, the quality of data and size of data comes into play as well. One can also look at the merchant-fit in terms of what is that your members are likely to respond to. So choose a loyalty program partner as per the behavior of the member. For instance, the data analyzed over a period of time indicates that a particular member whenever travels with a family doesn’t hire a car, and rather prefers public transportation. Why not to offer a relevant ground transportation deal for the entire trip, say when a traveller is going to Switzerland, then why not offer a discounted pass for the duration of the stay? So do plan to influence the customer touchpoint, and be meaningful to them by indicating you know them, by making an effort to surprise them, delight them with a utility-oriented relevant, attractive (discounted or contextual or any other value etc.) offering.
Davis also acknowledge the utility of such data as the airline is now evaluating the non-travel phase behavior – what kind of stores they shop at, what kind of restaurant do they eat at etc. “It would be about building offerings around our customers. Data has played a big part in where we are today (with our loyalty program), but we have just started out this initiative,” he said.
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 members.
· Product and customer experience: “This foray into the loyalty space is all about understanding the customer first, and building the right product for them. The team at Allegiant counted on data to understand passenger profile, travel pattern, and how Allegiant is different as a carrier from others in this context,” shared Davis. Mechandising is a journey, and so is crunching the data, so how is the airline looking at taking customer loyalty to the next level? “It (co-branded credit card and data from the initiative) allows to shape up our business – what other ancillary products we need to bring on, and how should our partner mix needs to look like, as we build the business around the customer,” added Davis.
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First published on 23rd January, 2017
Ai Editorial: Rather than just banking on historical data, airlines also have to assess data emanating from connected devices, and accordingly collect, manage, and analyze real-time data, writes Ai’s Ritesh Gupta
As a traveller, how would you define your experience – satisfying, extremely annoying, wonderful…? Evaluating such emotional reaction can be an arduous task for an airline.
It’s becoming increasingly important for travel brands to deliver a connected experience, and for this there is a need to integrate touchpoints, context and also refine the ability to optimize workforce and processes.
So how to get closer to knowing the customer as well as the emotion associated with their journey/ lifecycle?
Specialists point out that the answer lies in knowing the data, but it is easier said than done as one needs to bridge the gap between data and human emotion, which is a sum of multiple interactions (emanating from multiple devices, sessions etc.). So how to bridge this gap in the connected consumer journey?
The answer lies in working on a single source of truth about the traveller – it is still a work in progress. But one thing is for sure – one needs to gear up for today’s connected era. An era in which airlines need to count on both historical and real-time data (what is happening now) in their data center, via the cloud.
Here’s how change is taking place:
· Connectivity: “Be your own API,” this statement during one of our conferences in Kuala Lumpur last year is a testament of the fact systems that airlines operate can no longer be “closed”.
APIs are integral part of any data-centric organization as a layer of API paves way for technology integration. It is vital for vendors to gear up for open API to facilitate connectivity or integration with other programs. Airlines are becoming more customer-focused and are attempting to effectively use the customer data which they already have, but the processing of the data and on-request real time usage is definitely a challenge. It is especially a problem of data integration from different systems based on completely different philosophy and aggregation methods. “I would find legacy PSS systems as a major obstacle in getting quick and well aggregated customer view as it requires complicated interfacing which may impact data accuracy and reliability,” says an experienced e-commerce executive. Now evolving from a PSS to a new version isn’t easy, but as shown by the hospitality sector, time has come for systems to be designed for true cloud environment, for instance there are hotel systems with full PMS (property management) functionality as well as API connectivity for other companies to integrate within.
· “Actionable” data: Airlines, just like retailers, need to garner and assess the rising amount of data on a continuous basis, turnaround the same into actionable intelligence in order to improve customer experience as per their booking journey or their respective customer lifecycle.
Airlines have to gear up for various data types and vast volumes of data – manage volume, the response time, structured and unstructured data such as text, sensor data etc. The quality of data lays a strong foundation.
Organizations must consider latest cloud native big data services to tap into for all kinds of common data use cases. Experts say one can start modeling and analyzing data sets in minutes. There are enterprise-level open data platforms that are capable of releasing actionable intelligence from all data: data-in-motion (the process of analyzing data on the fly without storing it) and data-at-rest (data stored on a hard drive, archived etc.). Use cases include algorithms that spot where travellers are in the lifecycle and then evaluate the chance of conversion, defection, or inactivity; geo-relevant shopping recommendations, for instance, a voucher for lounge at the airport depending upon the shopping behavior shown on airline.com or even app post booking etc.; predicted future value for every single traveller etc.
· Cloud: There are questions related to cloud/ platform as well – how to make the most of Hadoop open source programming framework? How to integrate the same with existing enterprise data? How to set up business intelligence applications? The role of a platform can’t be undermined as it allows to connect, secure, mobilize, share data, and get insights across applications. The platforms need to support enterprise-level configurability to meet business needs. Nowadays platforms are being driven by cognitive capabilities to integrate all data sources on one common platform. Companies like IBM have worked on offerings that allow deployment of data assets in an automated manner, and leverage an open ecosystem. To serve customers better, such platforms should facilitate continuous refining of omnichannel customer data profiles and should be handy for all sorts of customer campaign and engagement. This should include all interactions from digital, physical, and mobile channels. And eventually machine learning and predictive models should be able to enhance the relationship.
· New technology: Technology and its use tend to move faster than airlines, hotels etc., so the travel industry needs to respond in a swift manner. For instance, the potential of IoT commerce requires airlines to embrace mobility, connectivity and IoT thought processes and strategies. As highlighted in one of our recent articles, in the airline environment, IoT can connect travellers’ baggage to their mobile device for real-time tracking and updates. It can create verified IDs from distributed documents, speeding the process of passing through security, customs or boarding a plane. It can be used to provide real-time alerts about flight changes, status updates or emergency notifications.
Airlines need to prioritize and re-look at their systems around payments, data collection, data integration, security and other activities. Instead of storing data in separate silos or divisions, the IoT assumes that data can be accessed and acted upon in real time, regardless of where it originates. Are airlines looking at this aspect of their IT infrastructure?
IoT cloud service are being used to streamline management - connect devices to the cloud, analyze data in real time, and integrate data with enterprise applications, web services etc.
Once an organization is in a position to capitalize on data from any source—cloud, on-premises, big data repositories, IoT etc. then only one can think of being in control, and getting closer to knowing the emotional reaction, and possibly the reason behind it.
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First Published on 13th January, 2017
Each email address is a unique identifier, and can pave way for creation of targeted profile and personalisation, says Dwight Sholes, Senior Consultant, Travel and Hospitality, Return Path.
Email can result in winning over micro-moments, an aspect that is so crucial today in the fragmented travel planning and buying journey.
From online and offline receipts to travel itineraries and brand preferences, the inbox is becoming a go-to source for business intelligence. In fact, email today offers value beyond marketing.
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First Published on 10th January, 2017
Ai Editorial: Is the redemption rate of airlines’ loyalty programs taking a beating? Airlines need to re-assess the situation as redemption can have a tangible impact on members’ behavior, writes Ai’s Ritesh Gupta
A frequent flyer program might undergo a major transformation owing to accounting and liability pressures, but if the redemption rate isn’t up to the mark, then the whole point of creating an aura around a brand and boosting loyalty is missing.
Yes, loyalty programs aren’t the same anymore, especially with the advent of spend-based models.
Airlines are grappling with pertinent issues today - have frequent flyer programs become too transactional in nature? Are infrequent travellers or relatively “low-spenders” being alienated? Is the redemption rate of airlines’ loyalty programs taking a beating?
Airline executives themselves acknowledge that the legacy of being rewarded for distance travelled has set an expectation amongst customers which is difficult to reset. The commercial benefit of changing to revenue based rewards is just too great for program’s to ignore. So if travellers aren’t redeeming miles accrued, then they are not actually engaged. As highlighted by 500friends, a Merkle Company, there is a need to engage leisure travellers, a segment that is being “overlooked”. Airlines need to minutely assess how to improve upon the redemption rate, evaluate an appropriate benchmark for the rate that fits their business, and also avoid too much focus on short-term margin and direct revenue.
We look at some areas:
Ø Assess the utility of everyday spend: The option to be rewarded from everyday purchases has opened up the realms of the FFP to the infrequent traveller. As per the current trends in the digital loyalty commerce arena, as indicated by a survey conducted by Collinson Group, members appreciate the ability to earn points on everyday spending. Around 46% of respondents mentioned that they liked this feature about their airline loyalty program. “Expanding the potential and the velocity of earning means more travellers can participate and get real benefits from a program. Most retail and financial card earn options are already spend based so are a natural fit with spend based airline points,” says Nik Laming, General Manager - Loyalty at Cebu Air Pacific Air.
Ø Perception – getting it right: According to Collinson, two major challenges with loyalty programs are availability and affordability of the rewards. Perception of the value of a programme’s currency continues to be an issue. As per one of the studies last year, Collinson found that over 50% of survey participants didn’t expect that they would “ever be able to earn enough points to redeem anything of value”. According to 500friends, airlines need to identify gaps that exist in rewards structure. Leisure travellers are earning fewer miles than they did in the past and without mile-attainability driving their loyalty, travellers start “focusing more on price, convenience, service, and other factors to choose their carrier”. So these need to be included more in the program structure so that members end up perceiving adequate value. Loyalty program need to offer something substantial – a sense of instant gratification, and aspirational value, too.
Ø Count on the power of coalition: A coalition program of organisations with differing purchase cycles, margins and customer emotional attachment can be very powerful. While a program does away with the limitation of only offering a limited range of rewards, adding credit card, supermarket, department store, petrol and other retailers massively expands the share of disposable income going through the program. The reason a coalition model appeals to infrequent travellers is simple - share of wallet. A person will spend a small proportion of their disposable income on air travel in a year. With higher total spend within the program ecosystem more points are earned and so even the most infrequent traveller can attain those reward flights.
Ø Count on data: More tailored the offer, more the chances of redemption. Airlines are looking at their members’ demographic, behavioural, and tier data. Attempt is being made to understand members better by profiling and segmenting them not just based on tiers but also their airline and non-air preference and behavior. “Airlines need to work on data-driven offers ones that pave way for context-sensitive merchandising and understand the pain and joy points in the journey,” shared an executive. The loyalty technology are constantly being developed and enhanced to ensure the real-time data are captured and further manage members’ experience in ensuring miles are credited timely.
Plus, there is a need to work with strategic partners to study daily transaction behavior e.g. banks, petrol, online retailers to provide more value to members. Of course, a major challenge today is whether airlines are capturing enough data. “As much as we captured the flying data; but there are elements of daily purchases such as co-brand cards/ financial partners/ petrol partners/ online retailers partners that we need to capture and able to monetize our members with value added rewards,” shared an airline executive from Asia.
Ø Keeping it simple and communicating well: How to redeem against your loyalty program should be easy enough to understand. Also, if a member is inactive, then airlines need to identify appropriate reason or context, and present themselves via a push notification or an email. Be it for an email about long-forgotten points, or pushing offers and rewards via one’s preferred channel in real-time, such initiatives can take a member closer to redemption. Location based triggers, too, can work. According to one of Sweet Tooth’s recent blog posts, a case study about Expedia+ indicated that the program does create a web experience that is fully committed to member recruitment. But there is lack of clarity about how it works, and expiration dates are “hidden”.
Ø Evaluate online activity: According to a study by Sweet Tooth, actions that encourage a member to engage with a brand’s social accounts “have a larger impact on average redemption rates than any other action”.
· Programs that are rewarding for Instagram follows have a redemption rate that is 7.76% higher than average.
· Programs that reward for Facebook likes are 12.26% higher than an average program, and
· Ones that reward for Twitter follows are 16.39% higher than the average rate. This is likely due to increased brand exposure.
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First Published on 29th November, 2016
Ai Editorial: Be it for competing financial goals, looking beyond “costs”, being customer-centric or managing change, airlines need to sort out issues internally to refine their FFPs, writes Ai’s Ritesh Gupta
FFPs are evolving, and coping up with capacity, regulatory, accounting and liability pressures isn’t easy.
Also, these programs need to keep pace with the expectations of their members. A lot - data, analytics, program metrics, redemption etc. - is being scrutinized.
But airlines, as organizations, also need to assess their approach toward FFPs.
We assess some of the issues that loyalty specialists, including executives from airlines, believe need to be addressed today:
1. Overcoming competing financial goals: FFPs have themselves become more complex. On one hand, a key business goal of FFPs is to drive new incremental revenue by way of incentivizing passengers to increase their frequency, spend and affinity (advocacy) for the airline. Even if a passenger can’t spend more than they already are, the airline wants to “lock-in” high-value customers and increase their share-of-wallet. On the other hand, FFPs have become highly-profitable businesses in their own right by selling billions of dollars’ worth of miles to banks and other third-parties, whilst maintaining an incredibly low cost of redemption. This high-margin revenue stream is driven by the high affinity that consumers place on the airline’s mileage currency. FFPs are an easy-to-quantify cash-cow when it comes to third-party revenue, but it’s a lot more difficult to quantify the cash return to the airline in the form of incremental passenger spends on actual transportation. It’s this ambiguity that drives conflict between loyalty program managers and senior airline executives, as both groups of management are seeking (what appears to be) competing financial goals. It’s also worth noting that FFPs rarely sit under “Sales” in the company structure, but usually under “Marketing”. This is a mistake as FFPs are a profit-generator and should therefore report to a profit centre, not a cost-centre.
2. Look beyond “costs”, focus on value proposition: An executive based in Southeast Asia told me: “Most airlines look at these (FFPs) programs as cost and hence are reluctant to build engagement with program members. Airlines have rich data of their program members, as they capture members’ journey and even possibly credit card details and information from other program partners. Proper analytics will allow these airlines to better engage with members, with relevant communication of offers, at the right time, via the right channel and so on. This is unfortunately lacking, even with the legacy carriers.”
Simply from a financial standpoint, loyalty programs are profitable if the incremental revenue from the program is greater than the cost of redemptions, while also taking into account the operational cost and points liability. The important question to ask is how much money the airline would save or lose in the long-term if you stopped the program completely - and that could include all the frequent flyers, who might move to a competitor and therefore eradicate not only their incremental revenue, but also their lifetime value in general. If you can build a loyalty proposition that is simultaneously attractive to customers and continually profitable for your business, then you can regard it as a success. An attractive customer value proposition should ultimately drive revenue, and if the costs of that are managed and controlled properly, then the program should flourish.
3. Managing change/ assessing risk with P&L responsibilities: There is a danger in rushing to “spin-off” FFPs as the results can not only be varied, but can undermine the ability of the airline itself to leverage changes in consumer behavior. However, simple steps that an airline can take are to treat the FFP as if it was a separate, but a wholly-owned subsidiary. It’s not necessary to actually spin the FFP into a separate subsidiary like Qantas has, but the business unit reporting should treat it as such. This includes accurately accounting for transfer-pricing between the airline and the FFP (such as when passengers earn miles); and even more importantly – accurately and transparently accounting for the revenue generated by the FFP. The implications of new accounting requirements (such as IFRIC 13) will be better accommodated by this transparency. For FFPs to run as business unit with P&L responsibilities, an airline executive said key management team members should get involved in all aspects of planning. “Establish a clearly demarcated unit with defined goals, and employ experienced and dedicated resources. An arm’s length financial arrangement and documented agreements between airline commercial and the loyalty program on the financial exchange, airline and loyalty commitments (is must),” said the executive.
Talking of change, in case of South African Airways, the SAA Voyager program changes were aimed to unlock asset (customer and financial) value by changing to a fully fledge revenue-based FFP. This intervention was furthermore a step-change towards commercialisation of the division and formed part of the first stage of reform to improve the efficiency, alongside the implementation of required administrative changes to the operation and management of the program as a division of the airline. The commercialisation of SAA Voyager enabled the team to capture opportunities for greater efficiency and optimum service delivery, in addition to ensuring a clear business definition for future commercial sustainability, to the benefit of all stakeholders.
4. Dealing with “legacy of being rewarded”: The phrase FFP neatly encapsulates the biggest issue faced by many program owners today. The legacy of being rewarded for distance travelled has set an expectation amongst customers which is difficult to reset. The commercial benefit of changing to revenue-based rewards is just too great for program’s to ignore. And understandably customers do not like change as it locks value invested to the value you can glean from the program. This move removed the ability to easily “game” the systems. And it is not just legacy FFP’s, take a look at the recent revamp at Starbucks to align reward value to the drinks you buy. There is a growing awareness of the limitations of the legacy FFP models or mileage-based due to an increase in the line-up of partners for greater customer participation which continue to put more pressure on the limited award seat inventory of airlines that was initially intended and often priced to fill empty seats. It is therefore no surprise that the widening of the target audience to include low and medium frequency travellers, primarily to generate more third party revenues for the FFP, undoubtedly provoked the evolution of FFPs from mileage-based to revenue-based models.
Moving from miles to a revenue based accrual structure is a huge challenge with no easy answers. There will be a fall out. It is just a question of which group will be impacted the most and how to preserve the members that matter. The pill needs to be sugar coated as much as possible by packaging the negative with positives and clear communication on how members can benefit from the new structure. A hybrid approach can work well as demonstrated by Singapore Airlines PPS Club which is accessed via revenue targets whilst points redeemed for flights are still based on mileage. There are various weightings applied to earn rates as a proxy for value, for example, factoring earn rates downwards for promotional fares.
It is also needs to be noted that failing to adequately reward and engage lower spending passengers will result in them either failing to enrol or failing to engage with the program. The option to be rewarded from everyday purchases has opened up the realms of the FFP to the average or infrequent traveller.
5. Being customer-centric: Whilst the FFP has the ability to personalise and publish its customer value proposition both in terms of product and service against the backdrop of a perfect 10, the FFP 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. 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. Award miles are but one minor component of the decision-making process for high-value customers, who often care more about the “recognition aspects” of the program such as priority security/boarding/baggage, reduced or eliminated fees, lounge access and priority support when things go wrong. The additional marginal utility of a few extra award miles isn’t going to get a customer to switch airlines as much as poor (or superior) customer experiences will.
As for making the most of data, the push must come from the top to consolidate and merge all data available within the organization, into a single data warehouse, 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).
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First published on 23rd November, 2016
Ai Editorial: Relevant messages/ ads, timing, current association with the brand, right channel/ device, and personalisation. These 5 areas are must for every piece of communication. Otherwise forget loyalty, writes Ai’s Ritesh Gupta
When brands serve a message, a push notification or an ad, there is plenty at stake today.
More than optimizing the expenditure that is being incurred, it is the perception of the customer that needs to be counted.
In an era when every touchpoint, every interaction is being examined, inept messaging or irrelevant content will have detrimental impact on the brand.
· Ineffective emails/ ads: A low-cost carrier in India has been sending emails about their new rewards card. There have been over 50 of them in my Gmail box over the last 100 days, and they are all the same! No frequency capping, same creative/ content, and of course, not acknowledging anything about my past experiences with the carrier. A couple of these emails were delivered on October 29 and 30, the weekend of Diwali, also known as the “Festival of Lights”. The bombardment of emails was a letdown and the attempt to connect was being detested in a big way. I do visit this airline’s website, as the market here is very competitive. So rather factoring in my website behavior and converting past purchases into recommendations and email campaigns would add value.
· Evaluate current association with the brand: Talking of the same airline, I first travelled when the airline launched its operations in 2005, must have flown at least 20 times and my last journey in March this year was marked by a 3-hour delay. It ended up in an unsatisfying response via Twitter! I don’t even remember whether I ever signed any loyalty program with this airline if there was any, and even if I did, the last 50 emails haven’t conveyed anything to indicate how we can build on the association.
· Timing: Retargeting is effective and has proven to be an effective way of building association. Be it for a first time visitor or a regular customer who is visiting a company’s website, retargeting can result in a fruitful targeting. I recently wrote 2 articles – one on growth hacking (growth hacking agency Rockboost.com) and the other one on web application security (Acunetix). I was served commercial messages/ ads on Facebook to follow the business pages of these companies (and of course, a way to go back to their websites). Though I read blog of these companies via my PC, I ended up viewing these sponsored links on my mobile. It worked on 2 counts – the messaging was relatively non-intrusive (I count emails and notifications as intrusion as I need to swipe or click, otherwise they remain unopened or new), and the connect was apparent as I had come across these brands and stayed on their sites for more than 10 minutes.
· Right format/ platform: Email vs. notification vs. ads? So if a user has abandoned a shopping cart, if you are targeting via email what are the chances that he or she would open and take action? Or would it better to send a push notification that the deal is about to get over? Similarly, whether the user should be served ad on Facebook, Twitter, paid search etc.? Of course, technology has made rapid strides, and action is taking in real-time in an automated manner. RTB (real-time bidding) technology buys individual impressions at the most efficient price available – milliseconds before the ad is served. One can also look at performance, and work on frequency capping, and custom-built pacing to plan expenditure. Also, context targeting (content read online), retargeting etc. can be availed.
· Know your audience: Airlines and travel companies need to look at data in a holistic manner that can pave way for a meaningful, relevant experience in real-time. Whether including market automation, CRM, business intelligence or other data, there is a need to assess online and offline information to craft such experiences. There are platforms that de-duplicate, aggregate, and merge multiple sources of data. Internal alignment is must today, and platforms like web analytics, CRM systems, social scheduling tools and dynamic display need to shift towards a set of shared KPIs. And when it comes to who is being targeted, organizations need to look at: Situational data (geographic location, referral source, device and browser); Inclination (interests, frequency of visits etc.); Intent (rationale behind every visit – what is being looked at, clicks etc.); Profile data (demographic data, offline data, etc.).
Brands have to work out how to address consumers, and with what content, for each communication they send. In order to get closer to this, one needs to capitalize on every “data trail” left by a user.
· Make most of preferences: It also needs to be understood that one can’t label personalisation in one category. It could be algorithmic, broad-based or meant for an individual where a company is learning about a customer, their profile and intent in real-time. A simple learning could be how I travel with my family. Lufthansa messed up our seating, and even transferred Euro 100 for an error. So why not offer 3 seats together for a family of 3 when we travel next time?
· Count on context: Also, communication can be based on context. Travel brands are already counting on IP-based location data and serving dynamic email content. So one could be shown different images of a destination, weather information etc. as per the location.
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First published on October 31, 2006
Ai Editorial: Consumerism and workplaces are undergoing societal and technological transformation at this juncture. And at the forefront of this phase are millennials, writes Ai’s Ritesh Gupta
Millennials as a group is immersed in their individuality and doesn’t always fit within stereotypes. An example being, “if you can’t trust your workforce to their job flexibly, why hire them?” Productivity is being explored in a new way, especially when emails and business applications can be accessed via mobile devices. The 20 and early 30-somethings are re-shaping everything with the way they communicate, they way they interact with brands, the way they shop etc. In fact, technology needs to adapt to them, rather than the other way around!
As for the travel industry, start-ups are responding. Today there are offerings that serve best airfare available as proactive alerts or one can avail an on-demand, personal travel service through a smartphone app. Before we delve into how the travel sector is responding to this age-group, lets assess what millennials tend to prefer and how the same can affect their booking funnel:
The key takeaway is immersive travel experience.
Sabre, in their blog posts in September this year, shared that the dreaming phase is marked by visit to social media platforms, with Instagram being the most common source of inspiration, followed by Facebook. However, inspiration does drop down to the bottom line: 39% of millennials ultimately book a trip. As converting inspiration into travel for millennials, Facebook contributes most (66%), followed by Instagram, Pinterest and blogs. Other findings: Millennials want to keep their itineraries flexible; Millennial travellers trust word-of-mouth recommendations – ones from friends and social networks matter; Ready to count on expertise of an agent; Technology is an integral part of the journey, ready to pay more for removing pain points from travel; compelled to share their experiences.
Responding to millennial psychographic
Two of the speakers – Hitlist’s Gillian Morris and LikeWhere’s Simon Dempsey - who attended MegaEvent16 in Toronto, Canada last week, both representing start-ups, shared their perspective on being focused for this generation.
San Francisco-based Gillian, CEO & Founder of mobile app Hitlist, a personalized mobile travel agent, underlined that new business ideas have a certain gestation period before they go mass. “Disruption doesn’t come out of the blue. It’s a process, where trends develop over a long time before they hit the mainstream,” Gillian said.
She noted that “millenials” and “mobile” are two trends that are tipped to signal a new era in the flight search category.
Referring to emerging trends in the flight search space, she mentioned that this segment is witnessing several approaches. These include assisted (FlightFox, TRVL, Lola, Slingshot), inspirational, proactive alerts (Hopper, Hitlist), customer-first (Skiplagged) and socially integrated, shared Gillian, who took an unusual career path, marked by her journey of staying in different countries and opting for different assignments in around 10 countries. She eventually ended up a venture-backed start-up. As for Gillian’s company, Hitlist proactively finds best itineraries for users, helps them to make the most of data in their social graph to provide them with relevant destinations and deals.
“Millenials buy in a different way,” she said. It is being estimated that 40% of overall travel spending is going to be contributed by this segment by next year, as the level of spending from this age-group is set to go up. As for mobile distribution, Gillian mentioned that the industry is yet to see the real shift the way travel is marketed and distributed. “(Mobile) is a personalised, super-computer in your pocket, present all the time,” she said. This group embraces mobile offerings faster than “older” generations, and it is time for travel companies to engage millenials on their terms, offer a range of payment methods.
“Their (millenials) “value” set can’t be ignored, it is fundamentally different from previous generations,” mentioned Dempsey, founder, CEO at Ireland-based LikeWhere. The start-up uses the local knowledge each passenger has of their home city to help them unravel an unfamiliar destination based on the data they provide as they are about to browse, and this propels airlines in a position to shape up the entire experience. “Millenials seek convenience, seek to belong and co-create, for them it’s about creating stories around travel, and being part of an authentic experience. Airlines need to recognize this and serve their mentality,” explained Dempsey.
Be open to change
It seems things millenials are engaging in, business processes aren’t accustomed to. For instance, this generation hangs out on messaging apps, speak their language – we are already talking about paying with a “selfie”. If Facebook isn’t sure of a check-in from a new location, a way to confirm the user identity is to recognise photographs of connections. So yes, travel brands may have to invest in digital assets or even ecosystems owned by 3rd parties, but there is no way businesses can ignore what millennials are doing today.
Last year around 43 trillion mobile messages were sent globally through social networks and mobile devices, according to Juniper Research, with traffic expected to reach an astounding 438 billion messages daily by 2020. As CellPoint Mobile points out, airlines need to find a way out to capitalise on this steady streams of mobile communications for travel-related interactions and transactions.
Airlines need to prepare brand-owned channels wherever possible for planning, booking and servicing. For instance, if a traveller is waiting at the airport lounge, he or she decides to use personal digital assistant and asks: “Can I have mango pudding during the flight? Is it part of my dinner or lunch?” Is it possible for technology to answer this question? And can the price be known if the same traveller wishes to buy and can it be bought, say via Apple Pay, via the same device? Is this what is going to define digital commerce? Other than letting millennials buy the way they want, they also need to be informed and inspired. Here social or micro influencers, who possess relevant influence around specific topics and can influence the decision-making of their “connections,” are playing a key role. So there is a need to minutely look at the booking funnel, and gear up for each phase with apt blend of mobility, cloud, social media, big data and analytics and artificial intelligence while gearing up to serve millennials.
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First published on 18th October, 2016
Ai Editorial: The explosion of data, backed up by affordable processing power and storage plus the expertise of data scientists is taking machine learning to a new level, writes Ritesh Gupta
How accurate a prediction can be that a human wouldn’t be capable of making?
Finding an answer to this question is fascinating indeed, as machine learning algorithms are now more luring than ever.
Before probing into this, I would like to recount one remark from a speaker, who explained the meaning of machine learning during one of our conferences held in Fort Worth, Texas around the same time last year.
“Machine learning is not big data,” he said. The executive even spoke about the significance of being data-driven, right from being clear with what to look for, how to work around it with the help of a proficient team etc.
Today it seems 12 months is a long time.
Today we are talking of sophisticated use cases. Travellers’ experience, be it for planning a holiday or optimizing miles, is being shaped up by smart algorithms. Even combating fraud or revenue leakage is being controlled with the help of algorithms.
An algorithm that essentially is about learning patterns in data (and then foretells similar patterns in new data) can propel the operations of an airline. It is true that machine learning isn’t new – data scientists, analytical software developers, and even use cases have been around for a while. But the explosion of data, backed up by affordable processing power and storage is paving way for outcome that is being deemed as fast and reliable. As it turns out, machine learning often encompasses different types, and simply using one type (predictive analytics) is insufficient.
It is also important to understand that pattern recognition, deep learning and stochastic optimization all have a role to play. Yes, carries have been using algorithms for operational decision-making, such as maximizing the profit on each flight based on the types of fares offered on that specific flight. But new avenues are opening up. For instance, there is a different approach to airline ticket sales auditing leading to revenue protection, featuring knowledge algorithm to manage the complexity and dynamic changes in terms and conditions, flight schedules, reservations, check-ins and fares.
Here we explore some of the areas in which machine learning algorithms are helping travel organizations:
· Cross-device targeting: The world of ad tech continues to find an answer to cross-device advertising as travellers’ shopping journey is fragmented. This subject is complicated. Matching the intent of a traveller and delivering a marketing message/ ad with laser-sharp precision, irrespective of the device, location etc. isn’t easy. How well a digital consumer is being identified? Can machine learning understand a traveller’s immediate context and forecast the desired experience of the moment? Single-ID based targeting technologies that rely on probabilistic algorithms have been around for a while. Such type of matching is derived from algorithmically assessing anonymous data points – device type, operating system, location data etc. Yes, a machine learning algorithm can process data and assess if it’s more likely than not that two devices are linked. The outcome is shared in big data records comprising groups of pairs of matched devices. Specialists continue to refine their algorithms by learning what works and what doesn’t. Also, other than probabilistic, there is deterministic or exact match methodology. It is pointed out that travel isn’t similar to retailing, the decision-making is prolonged as there is lot more time to use more devices. So it would be worth following how algorithms play their part as cross-device targeting is still a work in progress.
· Fraud management: It is being highlighted that airlines can rely on an algorithm –an optimized fraud risk management algorithm – to make decisions designed to optimize sales as much as possible while keeping fraud and chargeback rates under control. Fraud management is going beyond predicting future fraud based on historical data. With pattern recognition, even without any prior historical data, the machine is able to detect patterns across different transactions and diagnose if the transaction exhibited bot behaviour or human behaviour. Using big data, the system collects information from the merchant’s website, such as the user’s web movement behaviour, social media accounts, likes or comments on the website, e-newsletter subscription or alternative payment methods. Combined with pattern recognition, the system draws patterns (for both positive and negative behaviour) to map the DNA profile of the user, and determine if other incoming transactions exhibit the same (fraudulent) behaviour or not. The large quantity of information collected from big data makes it difficult for fraudsters to cover all of their tracks, therefore increasing the effectiveness of preventing fraud.
· Loyalty: Machine learning is being spoken highly about in the arena of transaction monitoring. For instance, in case of loyalty programs, once a loyalty transaction take place in the blockchain environment —issuance, redemption, or exchange—an algorithm-produced loyalty token emerges. This token is foundation for all sorts of rewards, including points. The availability of this token and distinct identiﬁers are rationalized on each participant’s ledger. Various online protocol terms administer how points behind these tokens function. On a basic level, interoperability between programs and partners that use the same dataset to record and transfer value will result in enhanced efficiencies in transaction processing and invoice reconciliation. For travellers, this will result in quicker availability and better usability of their points and miles.
· Personalisation: Algorithms are being used to analyze and predict customer behavior, sharpening retailing by looking at historical data, buying pattern etc to evaluate propensity to buy. A major aspect is consideration of personal preferences. The blend of right algorithms and customer data can strengthen personalisation strategies. As Boxever highlighted in a blog positing recently, with greater automation and reliable queries, filters and propensity models, companies can maximize their investment in developing their customer database, extending the value of having a single customer view by making the data actionable.
While machine learning, as a concept, always strives to improve, there are times when things can go awry. For instance, algorithms can’t be as meaningless as targeting wrong audience. Also, there are times when one comes across a challenging remark from the proponents of machine learning. For instance, it isn’t a routine task to keep pace with developments in the world of ad tech, analytics, ecommerce, mobile technology etc. Programmatic buying, deep linking, new payments options, progressive web apps, robots, mobile wallets, etc…it seems like a tough ask to manage digital assets and marketing. As one of the senior marketers from Lufthansa told me: It is 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 our customers. But yes coming across a relevant message from an advertiser on my chosen device or dealing with fraudsters is a welcome change, and it means machine learning is delivering today.
Interested in machine learning? Hear from senior industry executives at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).
Twitter hashtag: #MegaEvent16
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