Ancillary services or customer loyalty: where should the focus be?
20 October 2011
Kevin May,Editor
Poll no. 1
The following is intended to outline our general product direction and is intended for information purposes only. The development, release, and timing of any features described for Latitude’s products remains at the sole discretion of Latitude.
Ancillary services or customer loyalty : where should the focus be?
Janet TittertonBusiness Planning DirectorCollinson Latitude
Webinar content overview:
1. Next generation ancillary revenue2. FFP / FGP - ‘The Golden Moment’3. Driving program engagement
Ancillary services or customer loyalty : where should the focus be?
Ancillary services or customer loyalty– where should the focus be?
Poll no. 2
The evolution of ancillary revenues
Ancillary revenues have transformed the Airline and Hotel industries
Sample Products· Baggage fees· Seat / room selection· Booking fees
· WiFi · Lounge access· Priority security· Extended check-out
Type
Product Unbundling
Product Enhancement
Repackage / Re-bundle
· Entertainment package· Business traveller package· Luxury package
Customer focused
initiatives
Next generation ancillary revenues: a renewed emphasis on the
customer
What is value creation? How can brands add value?
Adding value around the core product – through best practise e-commerce (up-selling, cross-selling) and memberships
Core
Core Product
FFP / FGP
How do FFP’s/FGP’s fit into ancillary revenue reporting?
Reporting of Ancillary Revenues not standardised:
Annual Financial Disclosures of Ancillary Revenue - 20102010 2009 2008 2007
Results posted by 47 airlines
€15.11 billion ($21.46 billion)
Results posted by 47 airlines
€10.95 billion ($13.47 billion)
Results posted by 35 airlines
€7.68 billion ($10.25 billion)
Results posted by 23 airlines
€1.72 billion ($2.45 billion)
Top five reporting ancillary revenue
Airline Ancillary revenue (Euros)
Reporting ancillary revenues
United Continental €3,530,000,000 Not known due to recent merger
Delta €2,612,200,000 Other revenue
American €1,379,524,000 Other revenue
Qantas €1,087,268,000 Separate business
US Airways €834,492,000 Not known
Some examples...
BMI & Air Canada
United Airlines & Jetstar
Premier Inn & IHG
HotelTonight
Trainline – web loyalty
Alexander MeiliEuropean Planning Director - ICLP
Poll no. 3
The strongest ancillary revenue driver: FFPs
N
S
EW
20 mio.
13 mio.
278 mio.46 mio.
43 mio.
Total Members of Frequent Flyer Programmes (FFPs)
© ICLP Research 2010
N
S
EW
$150 mio.
$8.250 mio.
$325 mio.$100 mio.
$510 mio.
© ICLP Research 2010
Total Annual Revenues generated by FFPs through the sale of miles
(estimate)
9.3 billion $
Is there still room for growth? Yes, but…..
The challenge: The answer:
“My miles are not worth anything”
“I can’t get my rewards” Redemption is King
Benefits of “rewarding” your customer
Redemption
‘The Golden Moment’
Members are not fully engaged with a loyalty
program until they have redeemed their points or miles – at least once and after a reasonable short
period of time
(7-15 months)!
A simple principleFIRST
redemption
The Golden Moment – or - Who is the better client?
√ x Points ShepherdPoints Swinger
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 260
1,0002,0003,0004,0005,0006,0007,000
Months
Poin
ts a
ccru
al (r
even
ues)
X 1.5
GoldenMoment
Accrued 10-38%
more miles in Y2
Case study
X1.1
X1.4
X1.2
‘Golden Moment’
11 months Points Shepherd
Points Swinger
Year 1 Accrual Pace (miles earned)
1-20.000
20-40.000
40.000+
Year 2(avg. miles earned)
4.505 4.095
24.292 17.597
54.147 46.909
Similar Logic: American Express Membership Rewards
“Ease of redemption is critical to the perceived value of rewards. This is a nice addition to the American Express program”
Colloquy Awards Jury – September 2011
Consequently, actions to best leverage the power of the Golden Moment…
James BerryDirector, Product and Planning The Collinson Group
Poll no. 4
What is value creation? How can brands add value?
Airline and hotel Sees:
• Opportunity to engage customers, even when they are not booking with your brand
• Makes proposition clearer / easier to sell
Customer Sees:
• “This brand knows me and has everything I need”
• “This is helping me get better value from the loyalty points currency”
o Redemption – more choice, incl. points + casho Real time offers
Core
Core Product
FFP / FGP
Convergence of travel, retail, technology
Travel
RetailTechnology
Loyalty points as a valuable currency
“I have a choice of cash or points to purchase with”
“I got realvalue out of that engagement – I
won”
“I want to earn or redeem on a transaction – let me decide”
o Connected when I need ito Relevance and choiceo Aspirationalo Fun and interactiveo Global and local
Technology enabling multiple touch points
Mobile / tablet
Online
Global / Cross-border
In storeAt check-in
In the airport
On board
Some examples...
Asia Miles and Velocity
In summary
Choice
Connected
Value Creation
Relevance
Q & A
Thank You!
Archive copy of today’s webinar will appear on www.tnooz.com within a few days
Send questions and comments to Kevin May, [email protected]