How to convert passive accumulators into active participants

Transcription

1 How to convert passive accumulators into active participants POINT A guide for Loyalty Programme Managers

2 Introduction Reward programmes in the travel industry are nothing new customers have been earning points and miles since the first frequent flyer programmes were launched in But over time the competitive landscape has changed along with the environment consumers are exposed to. Financial service partners once a cornerstone of driving currency value for airlines and hotels with co-branded cards are now offering their own standalone programmes to try to steal a march on their competitors. Consumers have more access to information, greater opportunities to make comparisons between providers and wider choices in their travel purchase process. All of this means that the context for travel related reward programmes has changed and just as with any form of evolution throughout history, those programmes need to adapt or face extinction. CONTENTS Introduction 2 Less important yesterday vital tomorrow 3 Making your programme valuable to a wider audience 4 Active or Passive driving change 5 Get the balance right between reward and revenue 6 It s a case of doing the maths 7 Use insight to underpin success 9 HOW TO CONVERT PASSIVE ACCUMULATORS INTO ACTIVE PARTICIPANTS 2

3 Less important yesterday vital tomorrow The travel industry has become very good at rewarding the most frequent travellers. There are many successful programmes in place rewarding seasoned travellers and encouraging them to collect points but not necessarily incentivising them to spend them. Sometimes, the less frequent traveller is enrolled in a programme, creating a larger member base, but not actively engaged. Together this amounts to a high number of the passive accumulators that create a headache for the programme manager. They represent a large proportion of the estimated 14 trillion unused loyalty points sitting latent across the globe. They cost money to administer but their lack of engagement means they are not really driving new revenue into the business. The real problem is that this whole spectrum of customers represent tomorrow s income. And as the globe continues to shrink and new target customers emerge in different regions, failing to address the needs of a variety of customer segments today could mean an even bigger headache tomorrow. 14 TRILLION ESTIMATED UNUSED POINTS GLOBALLY HOW TO CONVERT PASSIVE ACCUMULATORS INTO ACTIVE PARTICIPANTS 3

4 Making your programme valuable to a wider audience Customers who only fly occasionally don t tend to fare well when it comes to reward programmes. In the past reward programmes tended to offer rewards from internal inventory, so customers could earn points when they travelled and eventually build up enough for a free flight or hotel stay. Those who travel frequently and who are inspired by travel related rewards proactively participate in this type of programme because the effort to reward ratio is relatively short. But for the vast majority of customers these rewards are either out of reach or unappealing. They don t travel enough to earn those points and so never manage to get their reward or they travel too frequently to see more travel products as a compelling reward. Very quickly these members change from an engaged state on first sign up to passive accumulators who take the points when offered but don t adapt behaviours to proactively earn them. It s a catch-22 situation. They want to engage with the programme, but the rewards are unattainable. Harness the initial enthusiasm with a different approach. 1 2 Extend the opportunities for your members to earn points by creating partnerships with other organisations outside of the travel and financial services industries. This means tapping into your members buying behaviours outside of their relationship with you Extend the range of rewards on offer to include options that require a lower points balance to access them or that inspire the frequent traveller. This means looking outside of your own inventory for inspiration. But approach this wisely. Cost of delivery has to take front and centre when considering adding variety to your reward programme. By taking advantage of the right partnerships it is possible to offset the cost of providing a variety of rewards the choice you offer to your members not only adds value to their relationship with you but also drives tangible returns back into your business. HOW TO CONVERT PASSIVE ACCUMULATORS INTO ACTIVE PARTICIPANTS 4

5 Active or Passive driving change But simply offering a wider range of opportunities to interact with the earn and burn cycle is not enough in itself to create a systemic change in the way your members participate in your programme. Your own approach needs to change from simply designing and providing a programme to proactively promoting engagement with it. This means programme managers must start thinking about the programme as an opportunity to drive new revenue rather than as a tool for rewarding revenues already generated. By accessing the opportunity presented by retailers, manufacturers or distributors to see your programme as a means of driving their own customer acquisition strategies in a cost effective way, you can create compelling propositions for your members that encourage active participation driven by a very real desire to engage. But for this strategy to be successful it needs two essential elements: + A suite of rewards that enables a first redemption experience early in the collection process A fully managed approach to communication to encourage transaction activity Planning communications and including offers and promotions that inspire your members can increase interactions by up to 60% and stimulate a longer term relationship with the programme. Our own analysis shows that members who are proactively managed by programme providers stay actively engaged for up to 7 times longer than those who are encouraged to enrol and then left to their own devices. HOW TO CONVERT PASSIVE ACCUMULATORS INTO ACTIVE PARTICIPANTS 5

6 Get the balance right between reward and revenue Of course, if you re going to invest in your reward programme, you need to know that it s going to pay off. It s a fine balance. Giving too little won t motivate your customers to collect points. But giving too much could leave you out of pocket. So your loyalty programme needs to generate more in increased revenue than you spend on the rewards. By adopting a more commercially oriented approach to programme management you can effectively address this balance. Traditionally strong programmes have sold points to partners to tip into their own programmes. This can prove lucrative and has demonstrated success however in itself it might not be sufficient to promote further spend with your own brand. The relationship might be more connected to your partners brand and as such drives spend with them not you. Focusing on generating interactions directly with your own brand might have a greater exponential effect on your own revenues. This can be achieved by adopting a more transactional based approach to programme delivery, looking at volumes of interactions with your reward inventory as measure of value rather than concentrating only on top line revenue driven through purchase of your own inventory. Use the revenue flow through the earning and burning of points outside of your own product set to proactively manage either the value to your member or the cost of rewards to the program. HOW TO CONVERT PASSIVE ACCUMULATORS INTO ACTIVE PARTICIPANTS 6

7 It s a case of doing the maths As transactions are proactively managed through the programme income is generated from the commissions partners are prepared to pay for providing a new sales channel for their products and services. This helps to fund the programme to make it more cost effective. An earn perspective Your programme members use your programme portal to buy products and services that aren t yours but still earn points. The retailer or merchant pays a commission for each purchase. The commission is then shared between the programme provider and you. You can fund the points earned though this commission. You can also choose to retain some of the commission creating an ancillary revenue stream. CHOICE Browse retailers from a fully branded portal USER EXPERIENCE Purchase via the retailer site REWARDS Earn points or cashback funded by retailers SHARED COMMISION between the programme provider and you HOW TO CONVERT PASSIVE ACCUMULATORS INTO ACTIVE PARTICIPANTS 7

8 A Burn perspective As members use the points they have earned to buy rewards you create an additional commission stream from participating merchants and retailers. This generates the capability to contribute to the funding of points that flow through the process which offsets the cost of enhancing the programme and, as a minimum, drives more customer value that increases participation at no extra cost. COST EFFECTIVENESS Acheive break even quicker by offering to pay with part points, part cash. INVESTMENT BREAK EVEN HOW TO CONVERT PASSIVE ACCUMULATORS INTO ACTIVE PARTICIPANTS 8

9 Use insight to underpin success It s important to analyse all the data you have available on your programme and your members behaviours within it to ensure you get the right balance between the attractiveness of the rewards to customers and the value you are able to generate back to the bottom line. Some of the contributing factors that need to be identified and measured moving forward are: Size of existing base v aspiration the economies of scale needed to make a transactional base approach work are key to success Current transactional volumes v targets make sure this is realistic so that performance can be effectively assessed Use the right conversion targets setting targets that are too high will create an imbalance in the planning process and could impact predicted revenue in the short term HOW TO CONVERT PASSIVE ACCUMULATORS INTO ACTIVE PARTICIPANTS 9

10 This article was brought to you by Collinson Latitude. We are part of The Collinson Group. The Collinson Group help brands across the world manage their customers more effectively. We started out over 20 years ago offering travel enhancements and insurance. We re now a leading provider of customer management, focussed on delivering acquisition, optimisation and retention through people, products and services. The aim of every business within The Collinson Group is to support, delight and reward our customers. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any manner, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher. Copyright Collinson Latitude Ltd