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
Follow Ai on Twitter: @Ai_Connects_Us
Ai Editorial: Be it for interoperability between programs and partners, targeted offering or enabling stronger relevance in a customer’s everyday life, blockchain technology promises to lend a new dimension to loyalty, writes Ai’s Ritesh Gupta
Blockchain, as a database technology, is opening up new value propositions.
As a concept, blockchain features a distributed ledger, which is an array of cryptographically-linked blocks supporting data records. This data, which could be a Bitcoin transaction, a smart contract etc. is decentralised, and, as it is being said, this data can’t be manipulated. The possibility of working with a network’s shared ledger is via a “chaincode”. Such codes “read and write values” to the ledger.
The use of blockchain and smart contract technology is exploding worldwide, says Robert Moerland, EVP – Global Business Development, Loyyal.
Referring to a recent report issued by the World Economic Forum, he says over US$1.4 billion has been invested over the last 3 years in the technology in the financial services industry alone. Over 2500 patents have been filed.
“Many believe that 2017 will be the year that blockchain will break through on a wide scale,” says Moerland.
In the travel industry there are a number of projects underway, for example, secure biometric authentication of passengers by SITA that will simplify document checks during the passenger journey. Loyyal is the only company that has a built technology stack available for travel loyalty programs today.
So how this emerging technology is proving to be beneficial for the travel industry, especially loyalty programs?
Here are a couple of concrete examples:
- Increasing efficiency: One of the advantages is cutting down complexities associated with cross-enterprise business processes. “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,” Moerland says. “For travellers, this will result in quicker availability and better usability of their points and miles”.
- Targeted offering: One can also bank on smart contracts for a special offering. “One can create a whole new world of value propositions. One example is the possibility of multi-branded points that have a special value or benefit associated with them, potentially for a limited period of time. This means for travellers that more relevant targeted offers with an increased value will become available in a higher frequency,” says Moerland.
Sub-programs or multi-branded offers generate more value not only for customers, but also for merchants as program partners
- Increasing relevance: As Moerland says, there are cases that help to boost engagement and hence program profitability by enabling stronger relevance in a customer’s everyday life, greater currency liquidity and higher velocity of transactions. For example, the interoperability powered by Loyyal allows programs to join efforts in rewarding members leveraging each others’ redemption capabilities. Also, it can be used to create “fungibility of loyalty currencies” by easier and faster exchangeability or combined offers.
So how should airlines prepare for blockchain technology?
Moerland says most programs are looking how to continue and expand the monetization of their data and currency.
“As such we find that they are open to making changes to their infrastructure in order to become “future proof” and get ready for an increasingly connected world (think also IoT). This connected world means in the case of the loyalty industry a global distributed ledger catering for new and broader ecosystems compared to the fragmented and siloed way the programs co-exist today,” pointed out Moerland.
In general distributed ledger networks face a number of challenges relating to regulations, security, privacy, speed and performance, infrastructure replacement and standardization. However, when applied to ecosystems like loyalty programs, a lot of those challenges can be addressed by creating multiple interoperable private networks on one universal permissioned distributed ledger. In fact, Loyyal aims to become that standard protocol/ ledger that enables interoperability between programs and partners, whilst providing the tools to agree on the rules of engagement between the parties via their patent-pending Abstracted Value Consensus Protocol.
Moerland also asserted that blockchain is not the solution to each and every problem.
It is important to evaluate whether the solution one is looking for is best solved by a blockchain solution or in another way. It is also important to recognize that an effective blockchain solution depends to a large extent on the data that gets into it in the first place. Again, blockchain caters for more efficiencies and new capabilities, but it only gets as good as the data that gets into it.
In layman’s terms the blockchain itself creates a shared repository that helps multiple parties to look at the same data, a layer of truth so to speak, says Moerland. This not only simplifies data exchange and invoicing processes, but also enable new datasets for analysis and target marketing purposes.
But just recording data is one thing, actually doing something with the data is what matters. “Smart contracts allows to apply rules to points and miles, that not only govern the way they are recorded or what action they trigger, but also enable to assign dynamic qualities to them. Points and miles become records of behavior rather than simply units of value, and can be targeted as such with “incentification,” shared Moerland. “Interoperability between parties combined with this new way to generate relevance and value will help to shape the next generation of loyalty programs.”
For Loyyal, being a blockchain technology specialist with a commercial product, it is still early days in terms of being able to fully demonstrate and substantiate the ultimate vision with tangible results. “We believe that next year we will see a major change of perspective on and uptake of blockchain-based solutions”, concluded Moerland.
Interested in blockchain technology? Hear from experts 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
Follow Ai on Twitter: @Ai_Connects_Us
First published on 15th September, 2016
Ai Editorial: A traveller is dissatisfied with a flight experience, the airline compensates. But is there a way this passenger would be recognized, in case he or she decides to book with the same carrier, explores Ai’s Ritesh Gupta
How to win back the confidence of a disgruntled traveller?
Can today’s analytics software or the so-called single view of the customer derived from several sources and the eventual sum of customer interactions, appease and encourage a peeved flyer to opt for a particular airline brand again? Can a targeted message be displayed to the customer as per the previous experience when airline.com or app is being used to book a seat?
One of my recent experiences with Lufthansa and SWISS made me dig deeper into the same.
Here goes the experience: I flew with Lufthansa, the seats allocated were messed up despite being a word given for it at the airport. I had an indifferent experience at the gate, and was unsatisfied with the fact the team managing the airline's Twitter account couldn’t handle my request or even respond with the status despite a five-hour window before flying. The in-flight crew was considerate but couldn’t help. So I, as a non-loyal flyer, Tweeted about my experience, wrote on Facebook, reviewed on TripAdvisor, wrote an email and eventually the airline called up to sort out. I was compensated, and the episode ended on a much better note.
Now say after a week or a month you are planning your next booking, and you access airline’s site and mobile app, do you think it is possible that you are going to be greeted with a personalised as you are looking for tickets on the same airline's website/ app? In my case, I checked Delhi-Munich flight twice in a span of 10 days – never received any personalised message based on my experience on the airline website, and no message via retargeting, too.
Is personalisation for real?
I spoke to two senior industry executives from Switchfly and Boxever about the possibility of a disgruntled non-flyer getting identified via a digital touchpoint when he or she visits an airline-owned platform again. This is what they had to say:
Kevin Wray, Chief Commercial Officer at Switchfly: There are various technologies available for user tracking, but no company seems to be able to link actions seen on social media to a CRM system that will enable the web experience to be different the next time the user visits. The best chance you have would be to force all users to log in, which would access their profile from the CRM system, and could then potentially show a message relating to their previous poor experience and offer a make-good. But there is a lot of tech that would have to sit in the middle of such an experience, for example:
How do you find comments on Facebook that a user has posted?
o You don’t know their FB ID – it could be a private account.
o How do you correlate that to the ID you have in your CRM?
o There are privacy and terms of service issues with “scraping” FB pages and looking for comments, and storing that data on your servers.
Same comments hold true for Twitter.
You have a better chance if the user posts to the airline’s Twitter or FB account, but they would still have to tell you their true name, which you would have to correlate back to the UID in your system - not easy, very expensive to build.
Even if you could do all this, most, if not all e-commerce sites, allow account-less checkout, and even with cookies used as a tracking mechanism, you would not be able to drop a cookie onto the user’s browser from the Twitter or Facebook interaction – you can only drop a cookie while they are on your own website or a hosted forum that your company sponsors. So – the vision is ambitious and could give customers a true feeling they are being “heard” and taken care of, but the effort would run into a great deal of privacy and access issues. Most companies today seem to be able to email users after an interaction with a call center, with an offer or make-good. Connecting that back to the web experience can be done within closed systems inside an airline or company, but not using social media unless you also capture Facebook and Twitter handles as part of your own registration.
Dave O'Flanagan, CEO and co-founder of Boxever: A customer can be greeted with a personalised message. This is because “customer intelligence cloud ensures all of those interactions are recorded in one place and provides the ability to anticipate what the customer needs next using the AI engine”. However, it totally depends on which airline you are using as only some will have the ability to offer a personal greeting based on your history with them. However, many are still struggling with integrating all of their various consumer channels to be able to provide a single customer view in real time. They have antiquated systems and silos of data that they are unable to unlock as most airlines don’t have an end to end CRM. When it comes to tracking every interaction and then reconnecting from where the customer left the last touchpoint or finished a particular experience, not many in the industry have truly achieved this goal, but companies are investing to solve it because there is incredible value in doing this. Our technology essentially connects with every moment in the customer’s journey (online or even in flight or at the check-in desk) using historical and real-time data across all of your consumer channels to provide a better customer experience or true omni-channel personalisation.
Airlines need to focus on a system that unifies demographic, transactional and behavioural data from silos such as web or mobile clickstream, email campaigns and transactional feeds. We consolidate this data to deliver a detailed picture of every individual customer in real-time. In addition, this customer view isn't limited to only previously identified customers, you can also see every customer that participates in every travel booking. So when a customer starts a new search or is in the early stages of the booking funnel, our system will quickly decide how to handle this specific customer and decide what the most appropriate action should be to increase the likelihood of a sale. This action may include sending a personalised message or personalising the homepage of the airline’s website or retargeting that customer on Facebook as one can work across any platform to deliver true omni-channel personalisation.
Hear from senior industry executives about personalisation and omnichannel marketing 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
Follow Ai on Twitter: @Ai_Connects_Us
First published on 12th September, 2016
Where do 3 leading US carriers - American, Delta and United – stand today after transitioning from their mileage-based FFPs to a spend-based one, explores Ai’s Ritesh Gupta
Moving from a mileage-based FFP to a fully-fledged revenue-based FFP isn’t a new phenomenon. But for me it wouldn’t be wrong to say it isn’t settled either.
With American joining the fray, now all 3 major legacy U.S. carriers, including Delta Air Lines and United Airlines, have embraced revenue-based programs. Factors such as basis of accrual, implementation, the extent to which earnings of miles can be dynamic etc. have been under scrutiny.
“Every FFP is different – there is nothing wrong with basing your earning structure on spend – but I certainly wouldn’t be looking at American, Delta and United as a best case illustration – far from it,” says Catchit Loyalty’s Director – Travel and Loyalty Programs, David Feldman.
In fact, Feldman terms American, Delta and United as “bad examples” of revenue-based programs.
The first thing is to clarify what we mean by “revenue-based” when it comes to rewarding customers. The main premise – is that customers who spend more – should be rewarded more than customers who spend less.
Feldman explains there are many earning/ reward mechanisms available for a loyalty program to implement the same and they don’t necessarily have to be based on raw dollars-spent. In fact, often raw-dollar-spend can lead to misleading assumptions and sub-par performance from the program initiatives, he says.
The single biggest risk to FFP profitability is that (with recent changes and devaluations) if customers no longer perceive an airline’s currency as valuable and aspirational – then the entire business model of selling miles to third-parties is at risk.
For Delta, American and United – this was worth $7.65 billion in 2015.
Gaps in FFPs of American, Delta and United
Referring to these carrier’s new and old programs, especially from their structuring perspective, Feldman says, “With all the press surrounding the recent changes to US airline FFPs – many people mistakenly believe that the old American, Delta and United programs only rewarded folks for the distance they had flown and didn’t reward higher-spenders - which, according to gospel, has now been corrected. This is far from accurate.” He further adds, “The old systems 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, explained Feldman. “Other airlines around the world including leading alliance partners of American such as British Airways, Cathay Pacific and Qantas have much greater “differentials”. For example – the differential on Qantas between Discount Economy and First Class is a factor of 6. 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.”
So the problem – is that the exact system that Delta implemented and United and American blindly copied, as Feldman points out, has almost as many weaknesses and risks as the model which it is replacing, although these can be patched with some minor tweaks.
Here are some recommendations to make the most of spend-based program:
- Managing the shift: You need to ensure that in increasing benefits for your best customers that you don’t make the program irrelevant to others. “This is especially true in major airline FFPs where significant revenue is driven from non-flying activities (which are often underpinned by the actions of medium and regular Best-Fare-of-Day passengers). 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,” mentioned Feldman.
The other aspect that undermines the “we’re rewarding our best customers more” argument is actions such as devaluing the highly-valued systemwide-upgrades that American gave its top customers; and the airlines limiting mileage earning to 75,000 miles per trip. This means a First Class passenger spending $15,000 on a fare is rewarded the same as a Business Class customer spending only $7000 on a fare, added Feldman. This ill-thought strategy undermines the entire premise of the program changes”, he says.
- Identifying the biggest challenges: Feldman referred to 3 of them.
1. Unnecessarily spending money on issuing more miles to some high-fare customer segments who will not actually contribute any additional revenue in return. For example – customers who are “hub-captive”, on managed corporate contracts, those who have no influence over travel decision-making or those who make decisions based on fare/schedule/route and airline hard product;
2. Losing many mid-tier loyal customers by devaluing the program value-proposition (both on the earning and the redemption sides) to the point that many will no longer see the program as relevant and will just choose their airline on the trip-by-trip basis on cost. B.F. Skinner refers to this psychological concept as “extinction”.
3. By “cutting too much” on lower fares and failing to maintain a minimum-mile-guarantee as a safety-net – many self-funded professionals (and casual passengers) who purchase low-fares will fail to be incentivized to sign-up to the program in the first place - which means they have no interest in listening to American’s 5-minute-long PA announcement for a credit card who’s currency doesn’t interest them, said Feldman.
- Just don’t copy a revenue-based accrual / earning structure: Feldman says the important thing to remember is that real currency of a loyalty program lies in its ability to drive changes in consumer behavior. “If you’re an airline executive – you need to stop making decisions about your airline’s FFP.
What you need to do is to ensure that you have the very best loyalty folks running your FFP for you, and that they understand how to leverage consumer behavior. Give them your macro financial goals – and let them come back to you with models that will deliver your desired outcomes.”
Feldman complimented Delta for “going out on a limb and trying a new structure. Unfortunately – it’s pretty disappointing to see United and American simply copy Delta’s program word-for-word - faults and all. The new systems can be fixed to ensure that they are successful. The most prudent move would be to place a safety-net on low-end mileage earning so that all customers feel the program is worthy of enrollment and engagement.” Lastly – when devaluing the redemption charts – it’s important to remember that it’s the very aspirational nature of high-end rewards that attract customers to these programs. Take that away – and you take away the very behavior that generates profits for your FFP.
I also thought of how FFPs are trying to be a part of a flyer’s lifestyle. For instance, letting a member garner points for everyday purchases. Since those members who spend low tend to be perceived as low in value in revenue-based programs. So is there any innovative or meaningful way of engaging them? For instance, rewarding for everyday purchases or working with co-brand partners like fuel, retailers, finance etc. to tap behaviour and act more like retailers.
Feldman says failing to adequately reward and engage lower spending passengers will result in them either failing to enrol, or failing to engage with the program. Customers will only engage in high-margin partner earning opportunities such as co-brand products if they perceive value in the underlying points currency. This is the very real financial risk facing American, United and Delta.
Some commentators erroneously assume that the only people losing in these changes are folks flying on $50 airfares – but analysis has shown that not only are fewer miles being award in total to all passengers – but many business customers, including first class customers are losing out in the new programs. The resulting erosion in loyalty may, or may not be compensated for by an increase in wallet-share amongst the biggest spenders; but will most certainly result in a decrease in partner mileage engagement by the rest of the customer-base (and hence revenue), concluded Feldman.
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
Follow Ai on Twitter: @Ai_Connects_Us