The days of a one-dimensional loyalty programme that sees the customer earning points with a particular airline or hotel and redeeming them for a free flight or bed night are over.
Customers are no longer interested in an apples-for-apple programme – they want to exchange strawberries and mangoes and oranges for apples. Thankfully, apple vendors – airlines, hotels and car rental companies – are open to this exchange.
That’s a good thing, because it’s what is going to keep them relevant and in touch with the needs of their customers. Fortunately for the brands, customers still want to belong to loyalty programmes, but those brands on the receiving end are having to work even harder than ever before to show those customers real value.
It’s about value and meaning, driven by a younger generation of loyalty customers that see things differently from their older counterparts.
“Both consumers and businesses recognise the value of loyalty programmes,” says Sharon De Leur, Emperors Palace Marketing Manager for the Peermont Hotels, Resorts & Casinos group. “Businesses and brands are strategically teaming up to offer more unique value-adds and lifestyle benefits to enhance the consumer’s perceived value of the loyalty programme.”
The problem is, in most cases, regardless of the sector, there are so many different brands to choose from. So, what’s going to be the deciding factor?
”Travellers are no longer swayed to stay at a hotel that does not meet their expectations just for the opportunity to earn points,” says Saurabh Rai, Executive Vice-President for Preferred Hotels & Resorts. ”Our goal is to always serve as that trusted source, offering a hotel experience that meets individual needs and a loyalty programme that helps members to quickly identify whether a property can offer a combination of quality assurances with the appeal of points, recognition, and rewards.”
So, it’s also about quality then.
What it isn’t about nowdays, is rewarding only the big spenders at the top end of the market.
The traditional, and somewhat out-dated, model of frequent flyer programmes rewarded only the top 10% of customers, lavishing priority handling, free business or first class seats and airport lounge access on the people who were more often than not flying on the company dime. For the economy class leisure traveller footing his own bill, it was extremely difficult to earn enough miles to exchange them for anything worthwhile.
This left a huge bank of potentially loyal – and untapped – customers for an airline to tap into. But figuring out how to lure them in seems to have taken a while.
”The customer loyalty landscape has changed significantly over the past decade or so, and many businesses are struggling to keep up,” says aha Real Rewards Manager Linda Naidoo. ”Traditional loyalty programmes aren’t delivering the results brands need in an increasingly competitive and consumer-led environment.”
As a result, brands have had to think out of the box.
“Members have come to expect perks such as discounted rates and the points-for-stay model, so to stand out a programme needs to have a unique value proposition supported by brands customers love in the places they want to go,” says Mark Weinstein, Senior Vice-President & Global Head of Customer Engagement, Loyalty and Partnerships at Hilton. “Today’s guest is searching for a personalised, relevant experience.”
So, how does one get ‘up close and personal’ with the customer, in order to deliver the personalised, relevant experience that Weinstein speaks of?
The answer? Data.
We’ve all heard about the value of ‘Big Data’, but it’s how you use that data that is key. Loyalty programmes are no different from many other sectors now looking at the data on offer to help deliver that ultimate brand experience.
“Within the context of the hotel industry, loyalty programmes play a vital role in data collection, which in turn plays an important role in personalisation and repeat bookings,” says Weinstein. “We know true loyalty is about our loyalty to the member and not the other way around, and believe that loyalty programmes need to offer relevant choices and also be simple and straightforward, offering the member the most amount of value on an ongoing basis that caters to their personal needs.”
The value of the data just cannot be under-estimated.
”Besides engaging with and retaining clients, collecting data, including traveller demographics, buying patterns and drivers, tells us clearly who our customers are and allows us to created targeted marketing campaigns,” says Rai.
The Millennial Game
Millennials are the new target market and everyone wants to know how to secure a piece of the millennial ‘pie’. As it turns out, it seems that millennials want pretty much what the rest of us want. When it comes to loyalty programmes, however, there are a few key elements that are very important to them.
It’s generally accepted that they want a transparent and easy-to-understand programme that shows them what their loyalty points are worth. They also want to earn points on all of their transactions, not just a select few. And they want fair and easy redemption, whether they choose smaller items that can be earned quickly, or larger items that they have to save for.
“They will ‘burn’ any brand that gets too creative with its redemption policy,” says Peter Kisbye, CEO of Loyal Solutions. “There are many examples of purchases made with points where the price gets out of hand. One airline’s exchange works out to $40 for a beer if you pay with points! That does not work.”
Loyal Solutions is a provider of loyalty concepts, solutions and technology in Scandinavia. Its aim is to create customer-driven solutions that reflect the different industries, objectives, budgets, ROI and loyalty programme plans. The company has recently signed with Mortimer Harvey in South Africa, bringing its expertise and technology to African and Middle Eastern customers. Mortimer Harvey is an advertising and marketing agency with bases in South Africa and Egypt.
Research conducted in 2015 by marketing consulting firm LoyaltyOne gathered some interesting statistics on millennial loyalty.
A whopping 80% of 18-to-24-year-olds were happy to pay to belong to a loyalty programme if the perks fit their needs. In other words, give them something that’s relevant to their life and they’ll pay for it. But the value of the programme has to outweigh the cost to the consumer.
Over three-quarters (77%) of 25-to-34-year-olds were happy to pay for membership if it was broader than just transaction-based.
“Make it experiential, give them lifestyle benefits as well as a discount on their next purchase and you’ll gain customers,” says Luisa Mazinter, Group Chief Innovations Officer at Mortimer Harvey.
Naidoo would seemingly agree.
”Today’s customers – especially millennials – want experiential rewards that add real value to the relationship and provide something millennials can’t get somewhere else,” she says.
Communication really seals the relationship. The more you communicate relevant offers – the right offer at the right time and place – the more people engage with the programme. To do that, you need to gather that data we’ve already talked about.
Although it’s tempting to lay this development at the feet of millennials, it has more to do with advancing technology than the requirements of a certain group of people.
“It’s a basic human requirement,” says Mazinter. “This is a product of the information age in which we live.”
We have come to expect information at our fingertips, thanks to the development of smart phones and the apps they run. Access to real-time balances are usually no further than three swipes, taps or clicks away from your fingers.
Millennial trends
Kisbye also picks up on some interesting trends identified by Loyal Solutions:
- 68% of millennials believe that brands need a loyalty programme to keep their customers loyal. (The figure for the 35-54 age bracket is 59% and 55+ is 52%)
- The loyalty card is still king, but mobile is rising. Millennials adopt mobile offerings faster, but surprisingly 61% still prefer a card
- Millennials expect to be able to interact with the programme on any platform
- Their focus is based far more on ‘ease of earn’ than other segments
- Millennials are more than willing to join a programme, but if it’s not relevant or fails on transparency, earn or redemption, they will become inactive or leave, fast
- They tend towards instant gratification and prefer to see their points balance in real time
- They prefer partner-based programmes with lots of opportunities to earn points
Millennials are also more likely to prefer non-monetary benefits than the general population, especially when it comes to recognition from peers or social groups.
“Millennials certainly buy into the concept of status, but they’re more concerned with social and peer group recognition status,” says Mazinter.
PwC’s Consumer Intelligence Series interviewed 1,026 business and leisure travellers in 2016 to understand how their preferences are influencing investment priorities for the world’s leading hotel loyalty programmes. The key findings for millennials suggest that their behaviour is similar to that of leisure travellers, leading to a belief that it’s not behaviour but rather volume of travel that is the driving force behind engagement. However, millennials tend to behave more like business travellers when it comes to points redemption, placing value on softer benefits like upgrades more than travellers aged 30+, underscoring the macro-trend of increasing importance being placed on the guest experience.
It’s an interesting time for loyalty programmes, and according to Kisbye, they are becoming ‘the new black’ again, probably, he reasons, due to the disruption in many industries, stiffer competition from online players, and a generally more challenging competitive global environment.
“Everyone wants a loyalty programme, but the programme will only give a positive ROI if it’s relevant to your customer and your business is actually in a situation where you can offer transparency on offers that are attractive and fair,” he says. “These sentiments are reflected in the acronym TAF – transparent, attractive, fair.”
The continued popularity of loyalty schemes has shifted the paradigm of membership from an exclusive model to a rewards-based one, which in turn has helped brands to personalise their approach as they strive to connect with consumers through their interests and use of services and products. It is now commonplace for brands to connect with their audience via their loyalty programme accounts, sharing their news and special offers to encourage the accumulation of programme points.
”The best loyalty programmes are those created by companies that have a clear understanding of their target consumer and his or hers specific lifestyle needs,” says Rai.
As with many things in the modern age, don’t over-think it.
Just get to know your customer, their needs and desires. And then tailor an offering to meet those needs and desires.
It’s not rocket science.
Changes to Virgin’s Flying Club
A Q&A with Oli Byers
Q: Is this a partial move towards a revenue-based programme?
A: We haven’t gone all the way to launching a revenue-based programme, but we do want to reflect that loyalty should be more aligned to spend rather than the number of sectors that someone flies.
Q: Why did you decide to change?
A: If you look at the difference between the cheapest fare and the most expensive fare we offer, and then look at the equivalent number of miles you could earn on those tickets, in terms of the difference between the two, the ratio used to be 3-1 and it is now more like 8-1. So the changes have made the programme more rewarding for those who are spending more on their tickets. The main driver for the changes has come not from wanting to become a more revenue-aligned programme, it was for getting a programme that works better for long-haul flyers. We looked at it and felt it didn’t do enough for those who fly solely long-haul, so this is what we have executed.
Q: Why are you increasing the tier points by 25 times?
A: The new tier point values and thresholds will allow us the option of introducing new ways to earn tier points. The historic rates were two points in economy and up to six points in upper class, and that didn’t give us the flexibility to allow you to earn tier points in other ways.
Q: Are these changes meant to increase the size of the programme and the number of members?
A: Yes. Our goal is to make Flying Club more successful for both frequent and infrequent flyers. We want the Club to be something they all want to join and see a value in.
Q: But you are trying to stop people from taking advantage of the system?
A: Yes, although this isn’t the ultimate goal. We also wanted to stop our members feeling they have to save for a long time before they can redeem their points to get something that is good value. We have reduced economy flights from 35,000 miles to 20,000 miles, which is one of the lowest on a trans-atlantic flight.
Q: But you still have the taxes to pay?
A: Our redemption fares still require customers to pay for surcharges, but now they can use the miles against the total fare.
Q: Do you have a guaranteed number of redemption seats on all flights?
A: No. We have got a lot of availability, but it’s based on where our customers want to fly and we try and create enough availability for them on those flights.
Some of the programmes out there
aha Hotels & Lodges
Real Rewards operates on three tiers: Classic (free), Plus and Premium (both incurring annual fees). All tiers earn Real Rands based on accommodation spend, at an increasing percentage (5%, 10% and 15% respectively), and are eligible for discounts that also increase according to membership tiers, on the best available rates at the time of booking, as well as discounts on spa treatments, hotel dining and Europcar bookings. For R495 ($38) a year, Plus members also receive complimentary room upgrades, extended check-in/out times, a dining voucher to the value of R500 and a ‘Stay 3, Pay 2’ accommodation discount. The Premium membership costs R1,495 ($114) per year. It offers all of these benefits as well as a second R500 dining voucher, a R300 ($23) breakfast voucher and two ‘Stay 2, Pay 1’ accommodation vouchers.
Airlink
Due to its relationship with South African Airways, Airlink doesn’t run its own loyalty programme, but rather has remained a part of the SAA Voyager programme. Voyager offers members earning and spending opportunities from 55 partners including more than 35 airline partnerships (including the Star Alliance global network) and more than 20 non-airline partners in categories ranging from travel-related to lifestyle, retail, property, petroleum and financial services. The programme includes five tiers – Blue, Silver, Gold, Platinum and Lifetime Platinum – based on annual spend, with increasing rewards and benefits. Benefits range from additional Bonus Miles to free chauffeur-driven services, priority airport services, lounge access, and a companion card, to mention but a few.
Avis Rent-a-Car
The Avis Preferred programme operates on three tiers, with five rentals and $1,000 annual spend qualifying members for an upgrade to Preferred Plus status, and 10 rentals and $2,2000 annual spend upgrading members to the President’s Club. Plus members receive a single upgrade, a free additional driver and priority for car availability. In addition to these benefits, President’s Circle members also receive a double upgrade on weekends and a guaranteed single upgrade, which is subject to availability for Plus members.
British Airways
The British Airways Executive Club was launched in 1985 and rewards members when they fly with British Airways, Iberia and oneworld partner airlines, enabling them to collect Avios for every mile they fly. Avios can also be collected through a wide range of travel partners, when booking international hotel chain stays, holidays and car rental. All customers enrol as Blue Executive Club members and move to Bronze, Silver and Gold membership, depending on the number of flights taken and rewards collected.
Hertz Car Rental
Hertz Gold Plus Rewards is designed with three tiers. Gold members are those who book six or fewer rentals in a calendar year. They receive a free additional driver on their bookings. Five Star members are those who book between seven and 19 rentals in a calendar year. These members are rewarded with a one-car class upgrade, a complimentary rental day after the tenth paid rental in a calendar year, and a free additional driver. The President’s Circle is reserved for customers who book 20 or more rentals. They receive all the above benefits as well as dedicated parking bays in select locations.
Hilton
The Hilton Honors programme (no longer called HHonors) connects members to the group’s portfolio of 14 brands and more than 4,900 properties in 104 countries and territories. The Honors app allows membrs to see the hotel’s surroundings and the room’s potential view before making a selection on the digital floor plan. Members who book directly through Hilton channels gain access to instant benefits, including exclusive discounts, free wi-fi and the ability to bypass the check-in desk at over 800 hotels in the US and Singapore with Digital Key on the Hilton Honors mobile app. Members can also earn points with over 65 airline and rail partners and 30 charitible partners. Members can redeem their points for an award night or a stay using a flexible combination of points and money. With the Hilton Honors points and Money Slider, members can choose nearly any combination of points and money to book a room, allowing members to use their points faster for hotel stays, any time, with no blackout dates. Eligible Diamond members will be able to receive a one-time, one-year extension of their status – for any reason – starting this month.
From April, Hilton Honors members will also be able to combine, or pool, their points – a surefire way to appeal to the younger generation. A total of 11 members can pool their points for stays in great locations for family reunions, bachelorette parties or any other event that brings people together. Members can also use their points to shop at Amazon.com. Additionally, with Hilton Honors points, members gain access to experiences that money can’t buy, as well as private concerts and exclusive events.
Peermont Hotels
With every stay at a Peermont hotel in South Africa and Botswana, using a qualified room rate, members earn one Crown Key Point for every R1 or P1 on room spend and qualified room charges, room service and incidentals such as laundry and telephone usage. Benefits include expedited check-in, room upgrade, free broadband internet access and a newspaper delivered to your door. Vouchers and special offers include a complimentary welcome beverage, generous discounts on golf green fees and spa treatments, and complimentary tickets to selected movies and shows at Peermont resorts. Crown Key members are entitled to private airport pick-up from O.R. Tambo International Airport in Johannesburg to the D’oreale Grande at Emperors Palace and complimentary access to the Bidvest Departure Lounge at O.R. Tambo Airport International Airport, both with prior arrangement. Members also receive instant Mango Plus status and when they book flights on peermontrewards.co.za are entitled to discounted rates and special offers, complete flexibility to change flight time or dates, free name change, access to the business class lounge, a complimentary on-board meal voucher for refreshments, and complimentary 10 kilograms of extra checked-in baggage. Discounts are offered on online purchases of wine and Gold Card membership to the Official Proteas Supporters Club, which offers its members 20% discount on tickets and merchandising, ticketless access to stadiums and exclusive VIP access to meet and greets.
Preferred Hotels & Resorts
Launched in August 2013, the iPrefer hotel rewards programme was the first global points-based loyalty scheme for independent hotels. Today, iPrefer benefits are available at more than 600 independent hotels around the world, including 30 properties across the UK and Ireland. The programme offers its more than 1.8 million members access to infinite authentic travel experiences while they enjoy complimentary privileges and other special benefits. In 2016 the programme was enriched to offer more instant benefits, making it easier for guests to earn valuable points and unique rewards. With a simplified structure featuring two tiers – Insider and Elite – members now earn 10 points per $1 spent on eligible bookings, which can be exchanged for cash-value Reward Certificates redeemable towards free nights and other on-property benefits. New benefits introduced into the programme this year include an upgrade upon availability for members at every tier and 50% bonus points earning for Elite members upon every eligible booking.
Customers score Hilton and Marriott highly
The JD Power 2016 Hotel Loyalty/Rewards Programme Satisfaction Report, released in April 2016, showed that chains with multiple brands, wide distribution networks and diverse partnerships have distinct advantages in the loyalty space.
The report measured customer satisfaction by examining six factors: account maintenance/management (23%); ease of redeeming points (22%); ease of earning points (18%); variety of benefits (16%); reward programme terms (16%); and customer service (5%). Satisfaction was measured on a 1,000-point scale.
Hilton Honors and Marriott Rewards tied for first place, with an overall satisfaction score of 741 each. This was the second consecutive year that Hilton’s loyalty programme was ranked highest in this report.
Hilton Honors scored high in the account maintenance/management category (756) and also performed well in the reward programme terms and variety of benefits categories.
Marriott Rewards scored high in ease of redeeming points (755) and performed well in reward programme terms and ease of earning points.
IHG’s Rewards Club was ranked third, with 722 points.