A couple of weeks ago I spoke at Airline Information’s Mega Event Asia-Pacific in Singapore. Though this is only its second year, APAC Mega is proving to be a really interesting couple of days each year, and I always come away with some interesting insights. Here are my top four (and a half) takeaways from the event:
1) The rise of Loyalty Fraud
Aside from the reasonably standard Mega Event parallel tracks of Loyalty, Co-brands and Merchandising, in Singapore there was also a loosely associated IATA co-ordinated session on the subject of Loyalty Fraud. It’s an increasingly popular topic, as we all get quite upset when someone steals our money, but it gets harder to pursue the bad guys when the loss is ‘only points’. The overriding conclusion in Loyalty Fraud, at least for now, is that no programme has a real grasp of how big an issue points theft might be. As the idea of loyalty ‘currency’ grows, I imagine this topic will only increase in importance.
2) Choosing a co-brand partner
I was invited to participate in a panel session on how to choose the best programme co-brand partner. There are three easy steps to this which could apply to any type of loyalty partnership:
- Focus on the ‘brand fit’. If that doesn’t make sense then go no further – a respected and staid legacy carrier airline co-branding with a funky challenger bank will probably leave loyal members scratching their heads
- Ask yourself the question ‘Can I work with these guys?’ Arguably the most important question of all, because, as with all relationships, a supportive and open partnership will see you through thick and thin and is far more valuable than squeezing an extra one tenth of a cent out of the price
- Finally, of course, is the revenue stream attractive? Will there be sufficient volume?
3) Change and interchange: the banks' perspective
In my second session, a solo slot in the Co-Brand track, I presented the banks’ point of view when entering a partnership with an airline. Drawing on experience from several of ICLP’s bank partners, the attraction to the bank of recruiting from the typical FFP member demographic is the fact that they are usually higher spending and more profitable customers. This has to be balanced against the cost of the deal where the savvy bank is also well aware that the airline or hotel is profiting far more from the breakage. With this in particular, banks want to keep airline co-brands in check and are more and more inclined to launch their own programmes as a counter-measure.
A further dynamic shift to watch, is the traditional co-brand relationship coming under increasing regulatory threat from interchange rate cuts: governments are moving fast to reduce the amount of commission that a card-issuing bank receives from merchant issuers. It is through this fee income that the bank pays the airline, so naturally any reduction is likely to lead to a re-negotiation of the co-brand contract and, in some instances we have seen, even cancellation of the deal.
4) To spin off or not to spin off?
The perennial question of whether loyalty is best tackled in-house or spun-off as a separate entity was also given a good airing in the Loyalty track. Much like my message on co-brand partners, my view is that it’s best to answer this by asking yourself a couple of key questions:
- Is your programme ready from an infrastructural and organisational viewpoint? How easy will it be to identify the sum of ‘loyalty activity’ and lift it out of the organisation? Be careful with this answer, as this can extend to any shared resources such as call centre agents, data analytics and marketing communications, so it may not be as simple as it may at first seem
- Is your market ready (especially if considering a wider coalition approach)? This means having a thorough understanding of the breakdown of national household spend and reviewing your market’s loyalty landscape, your competitors and other merchant programmes.
Of course, it is often the case that complete spin-off is a step too far, but it’s always worth considering what individual activities might be handled better by external suppliers and partners. Commodity activities such as card production and other printing requirements are easily handled by suppliers. Conversely, for things like insight, data analytics, or non-air partnership development, it is far more valuable to choose and work with a strategic partner who can help to discuss, advise and deliver for you and your programme. Have a read of our recent white paper [link to evolution or revolution] on improving your loyalty engagement with your customers to get further insight into the questions you need to ask yourself and how ICLP can help.
1/2) The human touch
Finally, just when we think we were all being so clever with our use of technology, mobile and social media, it pays to remember that a simple approach is sometimes the most impactful. I had two separate stays at the Fairmont Hotel in Singapore over the weekend’s bookending the conference. On arriving back the second time, the receptionist on the front desk, who I hadn’t seen previously, greeted me even before I reached the counter with ‘Welcome back, Mr Webster’. What dark magic was this? Quite logically, they had used the photograph from my passport (scanned on my first visit) and circulated it around the morning staff briefing along with a note to identify and greet. So simple, so inexpensive, yet so effective!
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