The next 10% — transforming ‘latent loyals’ into truly faithful customers
Attracting customers and cultivating loyalty, especially under the prevailing uncertainties in the travel industry, is a demanding process.
As people begin to travel globally, brands within the wider travel ecosystem — from airlines and airports, accommodation, and mobility providers, to payment services and insurers — need to adapt to new customer dynamics.
At the same time, intense competition and a degree of loyalty disillusion bring challenges to loyalty strategy.
By way of illustration, let us take a deeper look into a typical frequent flyer program database, where members can be divided into three distinct groups.
The significant long tail of members with low engagement is the biggest one. It consumes a lot of loyalty managers’ attention, disproportionate to the commercial return. So the manager tries to make the program widely relevant and encourage more activity from all members of this diverse group. Call them the pool of hope.
Conversely, you have your top segment with very high engagement; these are the most loyal customers and are heavily rewarded.
A brand’s elite members arguably present a different challenge as the objective is to keep the program fresh and engaging beyond miles or points. However, there are well-established strategies for that.
There is a third group that is not recognized as a segment in its own right yet. It is that potentially rich source of future elite members, often hovering around elite qualification. I call them the next 10 percent.
Lodged between the long tail and the top segment, these are “latent loyals” with decent commercial value and some brand affinity who can make it into the top segment given appropriate incentives and service propositions.
At the same time, they are equally easy to lose to a competitor. Therefore, loyalty managers do well to devote a lot of focus to this member cluster and employ innovative loyalty strategies to shift them in the right direction.
In my experience, those with some preexisting brand attraction are three times more likely to respond to an offer or proposition that rewards their loyalty and incentivizes them to become even more so.
One successful emerging path is through a paid loyalty strategy: Provide outstanding value intrinsically linked to continued and deepened brand engagement. Paid loyalty allows customers to instantly benefit from a clear set of services and rewards — not just the future promise. If the fee is suitable, the overall program performance will skyrocket, and members will be content and loyal simultaneously!
Of course, paid loyalty may be the best, but it is not the only way to attract the next 10 percent. An airline, for example, could provide targeted, conditional trial offers, such as top-tier benefits when booking a specific route or schedule. Tactical points acceleration promotions can also be considered or even outright status purchases; however, I would recommend against the last one, as the strategic challenges outweigh the tactical benefits significantly.
Loyalty managers do well to devote a lot of focus to this member cluster and employ innovative loyalty strategies to shift them in the right direction.
The recent second edition of the Asia Pacific Travel Recovery Report developed by Collinson in partnership with CAPA — Centre for Aviation revealed exciting insights. For instance, 67 percent of travel industry experts believe loyalty and redemption programs with a broad partner footprint are significant in keeping brands front of mind while customers are either grounded or slowly returning to travel. And they are right. Yet, many loyalty programs are to broaden their relevance and appeal beyond the core brand, putting at risk sometimes decades of investment in loyalty.
The next 10 percent are a vitally important source of program longevity, and those loyalty professionals who succeed in turning them into true loyal will thrive. The travel market is recovering quickly, and the time to act is now.
- Peter Gerstle is head of travel products at Collinson.