simpliflying featured - the future of loyalty is social

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QUARTER 4 / 2011

THE FUTURE OF LOYALTY IS SOCIALToday’s loyal passenger with a problem will not call your hotline to tell you, says Shashank Nigam

Tim Freyer was upset. An Executive Platinum member of American Airlines’ AAdvantage programme, he had just touched down from

New York. While usually happy with the airline’s service, he felt that an agent at the Admirals Club had misguided him regarding availability on an earlier fl ight. ! is was the second time it had happened in just a few weeks and as an active tweeter, he broadcast his annoyance.

American Airlines had no idea that Freyer was upset because he had not called to tell them about it. In fact, the airline had hardly any information about Freyer at all, other than his personal particulars, his sectors fl own, miles

earned and redeemed, and the address to which to send his frequent-fl yer promotions.

Ironic, considering that anyone with an internet connection could trip across Freyer’s Twitter profi le and learn that not only is he an Executive Platinum American Airlines fl yer but that he reached 100,000 miles for the year in just seven weeks; that he almost always travels in fi rst or business class and uses the Admirals Club lounge; that he frequents Miami, Los Angeles and New York; and, most importantly, that he is quick to share his travel experiences – good and bad – with the connected world via Twitter.

Had Freyer called the AAdvantage hotline, he would surely have been catered to in a ji" y. But any airline loyalty executive who believes

that the frequent fl yer of today will call or write to them when he has a problem, is living in the dinosaur age.

! ere’s an age-old loyalty-marketing maxim that states, “It is much harder to acquire a new customer than it is to retain one.” As we celebrate the 30th anniversary of loyalty programmes – American Airlines launched AAdvantage in 1981 – this is just as relevant as ever. ! e irony is that today there are more airlines on Twitter (185 as of August 2011) than there are running loyalty programmes (approximately 179). So not only are travellers taking to social media rapidly, airlines are responding by proactively engaging them through this medium. What does this mean for loyalty programmes, since airlines have traditionally been only good at driving buzz through social media?

A recent study conducted by SimpliFlying and Cranfi eld University, of social-media use by people who fl y at least fi ve times a year, concluded that frequent fl yers are twice as likely to post comments and critiques on social media than regular American adults. Moreover, over 80 per cent of frequent fl yers are on Facebook and over 60 per cent regularly share photos and videos online, often of their travels.

! ese are trends that airline loyalty programmes need to tap into in order to be of value to today’s socially connected frequent fl yer.

DRIVING LOYALTY THROUGH SOCIAL MEDIAEven before Virgin America cut the ribbon of its gleaming new Terminal 2 (T2) at San Francisco International Airport, days before it began operating fl ights from it, there was plenty of “checking-in” going on during the Terminal’s grand opening celebration.

! at’s because Virgin cleverly set up a social scavenger hunt for guests to discover T2’s innovative features, guided by Foursquare “check-ins”. By virtually “checking in” at di" erent locations set up throughout the Terminal, and announcing their presence on social networking sites like Facebook and Twitter, participants earned badges

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SOCIAL MEDIA

* Figures for 2007, ladder and descriptions adapted from Forrester’s NACTAS Q4 2006 Devices and Access Online Survey

THE FREQUENT FLYER PARTICIPATION LADDER*

33%

19%15%19%13% 18%

38%

27%

28%

54%

US adult online consumers

Frequent fl yers

Creators(publish content)

Critics(comment and post)

Collectors(use RSS or feed readers)

Joiners(publish, comment, share)

Spectators(read, watch

but don’t interact)

A MAJORITY OF FREQUENT FLYERS LIKE AT LEAST ONE AIRLINE ON FACEBOOK

38% None

53% 1 to 5

4% + 11 5% 6 to 10

A LARGE MINORITY OF FREQUENT FLYERS FOLLOW SEVERAL OF THEIR FAVOURITE AIRLINES ON TWITTER

66% None

24% 1 to 5

6.3% + 113.7% 6 to 10

redeemable for prizes. Grown women and men were literally running around the terminal hoping to see their names on the leader board set up in the main hall.

Around the same time, low-cost UK-based carrier bmibaby announced a partnership with Gowalla, a location-based network similar to Foursquare, that introduced gold, silver and bronze “pins”, not for actually logging miles on bmibaby, but for checking in virtually at any of the carrier’s 39 airports. Check-ins earned entry into a lucky draw to win free tickets on the airline.

JetBlue began awarding actual TrueBlue points (good for free fl ights) and partner discounts for virtual check-ins at its airports via its “Go Places” application on Facebook. Meanwhile, Air New Zealand started granting Foursquare “mayors” (those who have checked in more than any others) free access to its Koru Lounge, regardless of the cabin class they were fl ying.

However, to achieve major goals for the loyalty programmes, social initiatives cannot be ad hoc, as has been the case with most of the airlines mentioned above. ! ere needs to be a clearly defi ned social loyalty strategy that is profi t-oriented, not just buzz-focussed.

CAN SOCIAL LOYALTY DRIVE PROFITS?One of the readers at SimpliFlying.com asked recently, “How can airlines monetise social media? ! ings like brand advocates are all well and nice but how do they add to the bottom line?”

! ere is a strong potential for monetisation. On average, 85 per cent of frequent-fl yer programme (FFP) members have fewer than 25,000 miles in their accounts. ! at means they can hardly ever use them for redeeming fl ights. ! at also means they see no value in FFPs. Giving even 100 miles for sharing trip photos on Facebook can activate a “sleeping frequent fl yer”.

Not only will the person’s activity go up without even fl ying, but his earn-burn ratio

is likely to increase. Ultimately, these social actions might also earn him real-world rewards such as free lounge access.

! ese are just initial steps in what might signal a new evolution in loyalty programmes. ! e ultimate goal is to drive loyalty, which requires reciprocation from the customers. ! e good news is that there are potentially infi nite ways (if you’re imaginative enough) of creating a successful initiative. What airlines need to keep in mind is that most customers

will become more loyal based on two things: rewards or recognition (or both).

Eventually, airlines can be creating a whole new tier of frequent fl yers, who need not earn or burn miles by fl ying, but through virtual incentives. ! is would attract new partners for the airlines, which then drives revenue. Having such an incentive system creates a di" erentiating factor for the FFP with regard to other programmes, which is revenue driving in itself.


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QUARTER 4 / 2011

SOCIAL MEDIA

THREE STEPS TO GET STARTED WITH A SOCIAL LOYALTY PROGRAMMEIn the SimpliFlying-Cranfi eld survey, 72 per cent of frequent fl yers said that they would join a social loyalty programme given the chance. If airlines do this right, there are substantial benefi ts to be derived for both parties.

FREQUENT FLYERS SEEK MULTIPLE BENEFITS BY FOLLOWING AIRLINES ON SOCIAL NETWORKS

To get the latest info about deals and

competitions

43.8%

To stay updated with latest news from

the airline

50%

To get real-time fl ight updates and announcements

22.2%

To contact the airline

14.2%

To affi rm loyalty to the airline

37%

1THE FIRST STEP is a paradigm shift in which airlines reward actions taken online – just like Virgin America rewarding check-ins at Terminal 2 with virtual badges. Such virtual rewards come at hardly any cost to the airline, and can be used to

incentivise the frequent traveller to take actions favourable to the airline.

Fifty-three per cent of the SimpliFlying-Cranfi eld survey participants said that they preferred to check in at locations where they get virtual rewards from airlines. In fact, 61 per cent are willing to share their positive experience with an airline online in return for virtual goodies. ! is ties in well with the fact that a majority of travellers would pay more to fl y an airline based on a positive review by a friend, rather than picking the cheapest fare.

2 THE SECOND STEP is to give real-world rewards for virtual actions. Fans can redeem points earned from virtual actions, like sharing photos and videos from their trips, with Amazon gift cards, priority check-in

on the next fl ight or even lounge access for the “most liked” photos. At a point of development,

there should be the option to convert virtual points into real frequent-fl yer miles.

Pluna Airlines of Uruguay has put in place a system, called Flip.to, which allows passengers to share their booking details with friends on Facebook, Twitter or LinkedIn, while they are still in the booking path, after they have made the payment, in return for 100 frequent-fl yer points. ! at’s a good way to reward virtual actions.

3 THE THIRD STEP to creating a successful social loyalty programme is social breakage. Loyalty-programme managers have long obsessed about breakage, which in simple terms is the difference

between the real value of a frequent-flyer benefit, and the perceived value of a benefit. A social loyalty tier would make a lot more business sense, once the concept of breakage applies. Very simply, this would mean a benefit like a virtual badge costs the airline much less than its perceived value by the traveller.

FREQUENT FLYERS WHO WOULD JOIN A SOCIAL LOYALTY PROGRAMME

Yes72%

No28%


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QUARTER 4 / 2011

Very strongDEGREE OF INFLUENCE

Moderately strongSomewhat strongNot muchNot at all

FACTORS THAT ENCOURAGE FREQUENT FLYERS TO FLY A PARTICULAR AIRLINE

26.3% 25.6% 2

1.9%

15

.6%

10.6%

Reading about friends’

experiences

27.7% 23.9% 21.4%

14.5%

12.6%

Deals and promotions on Facebook and

Twitter

38.1%

20% 18

.1%

15%

8.8%

34.2% 22.4% 16.8%

16.1

% 10.6%

Ability to earn points/vouchers

through social media sites

34.2% 29.2%

2

1.1%

11.2% 4%

Airline’s social media presence

(viral, videos, games, etc.)

FACTORS THAT MAKE FREQUENT FLYERS LOYALTO A PARTICULAR AIRLINE

Chea

pest

fare

Good

custo

mer

servi

ce

Earn

frequ

ent fl

yer p

oints

Good

safet

y rec

ord

Onbo

ard ex

perie

nce

Othe

r

15%

26.5%

2%

23% 23%

11%

ASSESSING THE FUTURE OF LOYALTY

4 years old

Airlines on TwitterAirlines with loyalty programmes

30 years old

191 179

The ability to sit next to a friend

or someone with similar interests


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APEX | AIRLINE PASSENGER EXPERIENCE

A successfully executed social loyalty tier would have a number of benefi ts, which may be hard to envision with traditional loyalty programmes:

1. A brand advocate with a strong social network could act as a huge multiplier for the airline’s loyalty e! orts by getting members from his network involved with the brand.

2. " ere is very little lag between implementation and measurement. " e results can be seen very quickly indeed.

3. " ere is a sizable opportunity to move away from traditional loyalty programmes and o! er something disruptive and innovative.

4. Low-cost and regional airlines that often do not have a loyalty programme to begin with would fi nd a social loyalty programme a good one to start with.

" e biggest paradigm shift airlines will need to come to terms with while building a social loyalty programme is to reward non-customers as well as those who fl y often. A person who fl ies only once a year and then with a cheaper competitor, but jumps to the airline’s rescue during a snowstorm to answer questions on Facebook may just turn out to be as valuable as a top-tier frequent fl yer.

But the former may not even be in the airline’s customer relationship management (CRM) system. Hence, in order to reward non-customers as well as keep track of them, CRM needs to be redefi ned as “cult relationship management”.

" e passengers actually fl ying, along with those voluntarily engaging with airlines, contain within them the most valuable marketing

GET IT OFF YOUR CHEST.Frequent fl yer – and even more frequent tweeter – Tim Freyer’s comments on his experience with American

are an example of the potential wealth of passenger feedback airlines can engage with via social media

EVERYONE’S A WINNER.bmibaby used social media to offer points for checking in virtually at the carrier’s airports. Check-ins earned entry into a lucky draw to win free tickets on the airline

CULT RELATIONSHIP MANAGEMENT

information – more than any gurus or expensive studies can provide. It is simply a matter of unlocking it, and with the resources with which social media has armed airlines, there is simply no longer an excuse for failing to deliver the right marketing messages to the right customers all the time, every time.

While hundreds of airlines have scrambled to

create a social media presence, whether they will use social tools to engage with customers e! ectively or merely as another channel to push the same behaviour becomes a question of culture.

Talking may create sales, but listening creates relationships, which sustain an airline in the long run. A one-way email

SOCIAL MEDIA

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QUARTER 4 / 2011

PREFERRED WAYS OF EARNING LOYALTY POINTS VIA SOCIAL MEDIA

Strongly preferred Moderately preferred Somewhat preferred Slightly preferred Not at all

25% 25% 18%

17

%

15%

Contribute to ideas on the airline’s social media page

33% 28%

19

%

12

% 8%

Provide positive

feedback about an

airline

Check in to locations

36% 22.4 %

17%

15%

10% 38% 19% 1

7%

17%

9%Become the

airline’s brand ambassador

on social media sites

40% 18%

16%

13

% 13%

Tweet about the airline

40% 27%

1

7%

10% 7%

Recommend the airline to a friend

BOOKING BEHAVIOURS

Twitter

Facebook

Travel agent

Airline’s web

Travel web

0%1%

2.5%

Where do you go BEFORE you book a fl ight?

Airline’s web

Facebook

Travel agent

Travel web

Phone

0%81%

2.5%

14%1%

Where do you actually book a fl ight?

list is not a CRM solution, since it doesn’t engage customers, speaking at rather than corresponding with them. But neither is simply having a Twitter account, if the proper communications infrastructure is not established to enable pertinent and useful information to be exchanged in a timely fashion.

! e social era may be frightening for an industry that has traditionally held fi rm control over marketing and operations, but it has also given airlines the unique opportunity to understand what drives customer actions better than ever before. ! is requires airlines to prioritise social media engagement as a strategic marketing priority, rather than the tactical afterthought it often is today.

! e next time Tim Freyer is unhappy, and expresses himself on Twitter, AAdvantage should be able to address his concerns just as if he had called them up on his priority line. All check-in agents, as well as the Admirals Club receptionist would be aware of these interactions, and be able to make up for any misgivings.

! at is the future of loyalty.

“The social era may be frightening for an industry that

has traditionally held firm control over marketing and operations,

but it has also given airlines the unique opportunity to

understand what drives customer actions better than ever before”

43%

45%

SOCIAL MEDIA
