Ai Editorial: Learning from Starbucks’ mantra for loyalty

First Published on 28th April 2016

Ai Editorial: Airlines need to look at Starbuck’s way of marrying of convenience and experience to drive a fruitful association, writes Ai’s Ritesh Gupta. Top 6 loyalty considerations, regardless of whether you’re an airline or a coffee chain.

Recently I came across a post on ICLP blog that explained why Starbucks are getting loyalty right, even as the iconic brand chose to offer rewards based on dollars spent rather than on the number of visits.

I thought of delving deeper into what Starbucks is achieving, and what airlines can learn from the renowned American company.   

There are fundamental differences the way one can associate with a coffee brand and air transport, which for most can be a commodity. Yes, airlines have been improving on their product, amenities they offer etc. but it all becomes unfounded when a senior hotel executive tells me: “Loyalty is a bit of a misnomer.  Since air transport is a commodity, my preference is driven by the points currency - how easy is it to accumulate “usable amount of points” and how easily I can redeem these points for things (trips) I value. My main consideration is availability of the preferred airline’s inventory for the desired route.  I’d likely be as frequent a Delta flier simply because I live and work in Atlanta. Points are just a perk.”

It seems customer devotion is missing in this case.

Significance of customer devotion

Loyalty programs aren’t a solution to all your problems, but they can definitely be the first step to driving customer devotion, says Tom Nichols, Strategy Analyst at ICLP.

According to Nichols, brands need to consider customers as “valued assets”.

So where do airlines need to improve their operations/ processes to replicate the success of Starbucks in the arena of loyalty?

“Starbucks have shown giving out points/ stars/ miles doesn’t have to be the element that drives the complete customer experience,” says Nichols.

He says the in-store experience for all customers in Starbucks is positive, whether they are interested in collecting ‘stars’ or not. It fundamentally doesn’t matter whether an FFP is revenue- or distance-based, there are aspects all airlines can improve to create a better overall customer experience.

Taking two examples that Starbucks do really well, Nichols explains:

·          In-store Wi-Fi and personalised service: Norwegian’s spend-based proposition is simple to understand, but whether you’re a Reward member or not, you can still take advantage of the free, high-quality on-board Wi-Fi. Likewise, Starbucks write your name on their cups to reinforce that personal touch, whether you like it or not.

·          KLM offer something similar with their on-board staff iPads that link to the customer database, so they can personalise service to individuals as easily and efficiently as possible. Starbucks’ approach to loyalty is likely far easier to manage operationally than in airlines, but the concepts are still valid: providing good quality services for everyone, personalising where possible, and underpinning everything with a mileage structure that rewards your most valuable flyers.

Marrying of convenience and experience

In case of Starbucks it’s neither purely coffee, nor a generous loyalty program that actually fosters loyalty.

Nichols says its overall marrying of convenience and experience into a holistic customer value proposition across all touchpoints that pays off.

As for flights, combining maximum customer convenience and great customer experience across the whole travel journey is the way to meet these expectations. Each airline will have different customer pain points, but they should all be addressed as much as possible. “One great example around this from Starbucks is their crowdsourcing platform, My Starbucks Idea. Customers are able to engage with the brand and give feedback – recent examples have ranged from in-store music requests to suggestions for new flavours of drinks, and the most ‘liked’ ideas get evaluated by Starbucks and implemented if successful,” says Nichols.

“The overarching goal in loyalty is to drive customer devotion and lifetime incremental value, although we’re seeing customers becoming increasingly fickle towards brands. To overcome this, a data-led approach combining quantitative and qualitative sources is critical here. On top of your existing data, optimise the customer feedback loop and find out from your frequent flyers themselves how you can delight them and drive their loyalty to your brand.”

For airlines, as with many other sectors, ‘convenience’ is increasingly delivered by efficient technology and ‘experience’ is driven by people, says Nichols.

“We live in an on-demand economy, and customers want everything delivered to their fingertips at a few taps on a smartphone screen, but it’s the personalised service delivered by staff that makes a customer feel valued,” he said. This can be supported by technology and data as necessary and KLM is a great example of this – not only do the on-board staff iPads allow for instant, personalised service, but their recent announcement to use Facebook Messenger as a platform for check-in notification, boarding pass, flight status updates etc. makes the ‘admin’ element of travelling as simple as possible, collating all the relevant information in one platform that many smartphone users use every day as standard. Similarly, their 24/7 access to the KLM customer service team on social media is also a strong part of their CVP. It’s ultra-convenient, and caters for the ‘always-on’ behaviour of today’s consumer. Nichols adds on a less digital level, Emirates are another really good example. Their route network strategy connecting secondary hubs (such as Manchester and Glasgow in the UK) with Dubai improves convenience for many travellers, while the complete in-flight experience across staff, entertainment, food and even the planes themselves is widely regarded as one of the best in the world. Underneath this, their Skywards program is relatively generous and easy to understand. Emirates aren’t really doing anything ‘new’ in this regard, they’re just meeting all the necessary customer needs, and meeting them well.

In-app functionality

Starbucks developed in-app functionality allowing users to order remotely and combine this with a great in-store experience. So what can airlines learn and how to work out new features via their digital assets (websites, apps) and also at the airport?

Nichols says Starbucks have embraced digital disruption, and have redefined the whole experience of buying coffee, and he expects airlines will be next to follow suit.

“The growing trend for BYOD (Bring Your Own Device) with which you can watch in-flight entertainment and download newspapers and magazines to read is one example of this in the skies already. I think there’s great opportunity here for airlines, particularly focusing on the experience and journey in the airport before and after travel,” he says.

Airlines could start to take more advantage of beacon technology and smart devices to give the customers the relevant information at the right time, whether that’s a boarding card on a smartwatch, or a push notification to a smartphone telling you the gate number and how to get there. It’s innovation like this that can help an airline stand out from its competitors. What airlines must be wary of, however, is the potential for airports to get in there first and fight for control of the real-time, in-airport customer journey, added Nichols.

Managing change

Nichols while making changes to FFPs, it can work well if managed and communicated to consumers effectively, but often loyal consumers can be made to feel as less valued as a result of short-sighted program changes and poor communication. Offering a personalised approach to the consumer, however the airlines choose to do it, can also be a successful way of driving incremental revenue, although, as always, there needs to be a balance against cost. Rewarding for engagement with the airline brand across a wider cross-section than just mileage or spend is perhaps the next frontier for FFPs. No matter how innovative, the difficult part for airlines is how to reward wider engagement and how to ensure it continues to drive profit.

Nichols’ top 6 loyalty considerations, regardless of whether you’re an airline or a coffee chain:

·          Do frequently re-evaluate your program to work out whether it’s an attractive customer proposition, driving the right incremental behaviour and remaining profitable.

·          Do try to meet customer needs across as much of the customer journey as possible, and don’t be afraid to be digitally disruptive in doing so.

·          Do listen to your customer’s frustrations and use them to optimise your customer experience as much as possible.

·          Don’t feel you have to change your program mechanics just because your competitor changed theirs.

·          Don’t overcomplicate your program earning and redemption mechanics if you don’t have to.

·          Don’t alienate your most profitable customers in the long-term by only changing your program to focus on key growth segments in the short-term.

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