After the break you'll find a detailed description of this graph.
Traditional frequent traveler programs offer points/miles (a disguised discount) and elite status (disguised customer experience freebies) to incentivize repeat and higher value purchases. Does this still drive loyalty in times of Tripadvisor customer empowerment?
In general, discounts are little more than a public confession that the customer “doesn´t buy” a company´s value proposition. Look at really desirable products. Apple never discounts their iPads or iPhones because customers really want them, nearly at any price.
Let’s have a look at the customers to analyze the relationship between loyalty programs and customer experience management (CEM):
Simplifying a lot, there are four types of customers: the price and the value sensitive, as well as those who dislike you and those who like you. These factors can help to structure the design of the right flavor of a loyalty program for every customer:
1) Identify and get rid of the “cheap serial complainers” (Ultra low yield, low satisfaction/NPS)
Sometimes it’s a good idea to “fire” certain extremely price sensitive, unhappy customers. Ultra low-yield serial complainers that drive away other customers airing their sustained dissatisfaction in the Social Media are the customers you really want – to go to your competitors. They do not “buy” any of your value propositions and are therefore a drain on your resources. Literally, they are not worth your effort.
How to deal with them elegantly? Stop sending them special offers. No discounts, no double points. Ignore them. It’s preferable that they swamp the Internet with complaints about our high prices than about your service.
2a) Upgrade those who want to be your best customers, but can’t afford it (yet) (moderately low yield, high NPS)
Many low fare customers certainly do deserve your attention. Customers, who appreciate your services but cannot afford your premium product, can be your future high yield passengers.
I like to call them the “rising stars”. You can identify them by demographics (like age, job profile, education) and buyers of some ancillary services. They will appreciate small service upgrades and privileges. Experience is a stronger loyalty driver than discounts.
2b) Do not under-reward self-paying frequent flyers
Another category here are the self-paying professionals. A major fault of most classic FFPs is the tendency to over-reward corporate customers, whose loyalty is NOT determined by his personal purchase decision, but corporate contracts and policies.
The self-paying professionals take their own purchase decisions but many FFPs penalize heavily the use of discount tickets. Loyalty programs were invented to influence buying behavior, so it is a serious inconsistency when non-decision makers are better rewarded than decision makers.
Make a specific effort to identify this segment (by demographics like profession, size of company, frequency of travel, ancillary services purchased,…) and design a specific experience universe for them. I can assure you from experience that they can become your most loyal and profitable customers.
2c) Show the “cheap lovers” some (social) love (ultra low yield, high NPS)
These customers just want the barebone travel experience from A to B. But still they recommend your company to others, which is priceless and lowers our marketing costs.
Luring them with miles and points into using your services is certainly a better option than openly cutting fares and prices. They are “rational FFP” guys, those who use points conversion calculators to get the most out of your program. They will react positively if you reward their public defense of your company. This is a very clear case for the benefits of integrating Loyalty programs with Social Media.
3) Convert high-yield haters in lovers (high yield, low NPS)
“Haters” are not good for your business. They only stay with you because they are captive customers, ready to defect to the competition at the first opportunity. Worse: they will tell others how bad they think you are.
3a) Some may already feel as premium passengers, but you are not letting them in. Sometimes it is the result of a wrong communications strategy, sometimes your elite status walls are irrationally high for certain, highly profitable groups. If you went to steal a premium customer from his/her dominant home market airline, lower the elite status requirements for your passengers not living in your core markets and who are, in consequence, unable to amass the same critical mass of miles as your home market customers. The inaccessibility of fast tracks, priority boarding, Lounge access or upgrades turns off any premium customer.
3b) Others are forced to pay for services they do not really need. Some obscure fare regulation and corporate policies still prevent many customers from getting a more appropriate lower fare although he doesn’t care about ticket flexibility or refunds.
Relaxing your fare rules could convert them into low-yield, but more frequent and happier customers.
4) Make the satisfied, high-yield passengers really loyal (high yield, high NPS)
These are the customers all competitors will want to steal. They are highly profitable. They hardly generate marketing or after sales service costs. They will take miles happily, but that’s not what primarily drives their loyalty. It’s all about value, recognition, efficiency and incident management. You can give these passengers all the miles in the world, but if you do not get the Customer Experience right, they will invariably defect.
Diagram of how yields can be optimized by applying avionline’s Value Generation Methodology in combination with the business intelligence and tools provided by your CRM/FFP management platform.
Conclusion
Of course, the real world is much more complex than this. New generation loyalty and CRM platforms will allow you to profile your customers in new ways and design the right experience for them, be it value (“rational status”), discount (“rational points”), social recognition (“emotional status”) or collector (“emotional points”) oriented.
The best marketing effort will not be able to fix a systemic failure to deliver the right customer experience. Social Media have enabled customers to speak up publicly, so the best advise is 1) get your customer experience (= “segmented propositions that generate value for customers and revenue for the company”) right and 2) use your loyalty program to identify and reward those who tell others about it.
The loyalty program of the future will be composed by deliberately designed segmented value generating experiences, customer engagement opportunities through the social media, mobile apps and, finally, the status and points system of the FFP as we know it today.
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