Kobie Marketing is a loyalty marketing agency working with airline and frequent travel programs to acquire and retain high-value members, create profitable customer relationships, develop effective promotions and improve “Customer Lifetime Value”. We spoke with VP of Loyalty Strategy, Dave Andreadakis. The conversation will give you a look into what might be coming down the line for loyalty programs.
In general, what role does a loyalty program play in the success of businesses?
Loyalty programs play a few different roles. For the brand, two simple things are happening. The first is that loyalty programs are enticing customers to stay loyal, which is clearly a positive goal. The second is that brands can now get access to deeper granular data—and thus get to know their customers more intimately— through their loyalty program platforms. Consumers sometimes have difficulty deciding to stay loyal to a company. They love the brand, they love the products, but often the notion of sticking around and being dedicated to that company doesn’t always come first and foremost in customers’ minds. Loyalty programs provide a value proposition to the customer—they can see an accumulation of points toward a product or offering or even a trip, if they stick around.
What are some loyalty program trends you’re currently seeing?
It’s a really interesting time in the loyalty space. First, many of the longer-lived programs and their members are seeing their currency lose value, which is causing a great deal of concern among these programs. Program managers do recognize what’s happening and want to return that lost value to their best customers. And for many, that means exploring ways to provide unique value in or outside of the program itself, trying to find not only behavioral incentives but emotional incentives that they can offer customers as a form of rewards. Another fascinating trend we’re seeing is the strong performance from some newer entrants into the loyalty program market. These up-and-coming companies that seem like startups are designing some intriguing programs with unique value propositions that could pose a threat to some of the large, well-established institutions with years and even decades of building and honing their loyalty programs.
How important is social media to loyalty programs?
I don’t think social media is as important to loyalty programs as they fear. Now, with that said, it’s still a critical component—one that many companies in the loyalty space are of two minds about. On the one hand, companies are afraid of possible negative press. They should be, because on social media it’s not possible to fully control the conversation. Customers can post negative opinions when they wish, and deleting those opinions can backfire drastically. On the other hand, companies also hope that positive experiences will turn customers into brand advocates who share those experiences with their social networks, prompting more “likes” that could result in, say, more plane tickets sold or more hotel stays booked. But that’s not necessarily going to happen. What we need to do is treat social media as the real social setting it is and not try to force the customers into a social environment that they aren’t already active in. Real-world social circles aren’t fixed things. These groups are evolving, living, breath- ing things. That’s why it’s better to use social media as a channel in which you can interact and not something you’re trying to control.
Do you think that loyalty programs are doing a good job rewarding their best customers?
In general, I don’t think they are. They offer value propositions that are somewhat enticing and are probably doing a better job rewarding their best customers than rewarding their regular customers. But that’s not the same as doing a good job—I say this because customers generally aren’t satisfied with the relationships they’re having with these companies. People who fly on a weekly basis should feel like they are being given very special treatment, but too often they are not. Hotels are better at this than the airline industry. Even so, take a look at many of the largest programs that still base their rewards on miles flown instead of dollars spent. In many cases their customers feel like they are giving up a lot of their (or their employers’) discretionary income without being rewarded for that spend.
Do you think that the legacy carriers will create a loyalty program based on revenue and move away from mileage-based programs?
Yes, I think they have to. From a profit perspective, the way they reward customers doesn’t make a lot of sense. The last-minute traveler who might have paid twice as much for his airline ticket is getting less of a reward than someone who booked three weeks out—so profitability has to come into play. Programs will have to be smart about how they implement changes because altering their long-established standards means the nature of the relationships they’ve had with customers will also change. Right now, we’re saying to them, “if you travel to an obscure location that requires more stops, we’re going to reward you. And if you go someplace cheap like Florida or Vegas, it doesn’t matter.” What we need to be saying is, “we understand that you’re giving us your money, something precious to you. The more of that precious good you give us, the more we will reward you for it.” And moving toward a program that is based on revenue is the best way to say that. I think that’s fantastic.