Rethink Customer Loyalty

Rethink Customer Loyalty

Travel is the first to adopt loyalty for a good reason. My theory is it has to do with the nature of the business. 

It is one of the most tumultuous industry you can imagine. Think horse, wheels, cars, steam trains, planes, rockets…all these disruptive technologies has one purpose in mind, that is to shorten the time to travel.  With all these changes happening so quickly, some sort of ‘anchor’ will give both service providers and travelers some comfort.

Also travel is a low purchase frequency product but high expenditure.  But if you compare with other low purchase frequency and high expenditure products such as houses, cars etc, the purchase frequency is ideal to invest more to entice a repurchase.

Last but not least travel industry is difficult to make profit and loyalty program is needed to boost the bottom line.  Allegedly the loyalty program as an auxiliary revenue, can make more money than the core business in some cases, or the loyalty points subsidiary can be worth more than the owning company. 

Both as a marketer and an entrepreneur, this tool is worth a deep dive but lets not look into the past, but its trends and possible new implications.

1. Loyalty goes digital 

The biggest change in loyalty in recent years has been from a card to an app.  The war of the wallet has shifted to the war within a mobile phone. Everything is lighter and easier to use, but  I talked with someone in charge of a big loyalty program for different industries and confirmed that they still use physical coupons to stick on a booklet to redeem a gift as the data showed this has better conversion. I am talking about a 24 hours retail outlet with cute cartoon redeemable items targeting teens and young adults who live their lives by their phones. Statista confirmed in 2023, 43% of coupon users say they favored physical coupons.

Like traditional media going online, it wouldn’t work if we just use online to replace the existing way of service delivery.  Wallet is a scarce resource and a card gives a privileged status when one show it at the queue.  That is why people were willing to sacrifice a slot in their wallet for a card.  When it is in an APP, it is worth noting the APP notification click through rate is very low. How low you may ask? For Asia only 10.9% for Android and 5.1% for IOS

But digitalization is a one-way street and finding a way to make your loyalty APP stand out is a must, and not just nice to have.  Perhaps with so much iOT and wearable tech, instead of an APP in the future the status of a member can be shown on a very recognizable but easy-to-carry small device with personalized messages delivered, received and reacted.  

Tips:  APP is still a good investment despite the challenges, as the alternative instant messaging, emails and telephone calls are ‘heavy communication tools’ in terms of cost to deliver and how recipients consume the content. However the different reach out tools mentioned above should not be redundant but have different push and/or pull dynamics

1. The new loyalty is frequent open engagement 

Loyalty programs have sticked to a closed ecosystem for a long time, earning and burning in the same or affiliated properties only.  People outside of this ecosystem need to pay to get in and whoever has the largest and most engaging members, can name the price.  

This kind of business rules does not encourage competition and thus, improvement was slow. Also loyalty points accumulated (earn) and not burn (redeemed) are seen as liabilities therefore making it more a finance call as it is an asset/loan, and control is the first consideration. With blockchain solutions, decentralized Web 3.0 the key value of a lot of users, the previous solution is limited and boring. 

In a Deloitte report there can be ways to address a ‘tired loyalty program’ and how customers are expecting more. Also check out the Visa Web 3 engagement video for insights 

The most important aspect of a loyalty program in my opinion is not how many points are accumulated or even how many are redeemed, but the activities’ frequency. The loyalty program should be a pull strategy, the more often you ‘called’ on this sales person for something, the more chance you will buy from her/him next time.  The low frequency purchase high price per ticket company owning the loyalty program, should consider to offer other lower priced products that reminded customers of their products and services, and vice versa.  

Engagement is the new loyalty and this can only be achieved via open loyalty programs. This is my favorite example how an Uber Eats alike APP in china, is the largest hotel hotel booking agent

Tip: BCG published a framework for web 3.0 loyalty program and emphasize the importance of communities and not building it  alone

1. Experience driven loyalty 

The traditional loyalty program has more about “money saved” at its core. But saving money using points does not translate to a customer being loyal.

But initially loyalty program is not about giving a discount, but rewarding a small group of loyal customer, who treasure being recognized and given a status only limited to a few,  and not how much can be saved.

Also nowadays we should look loyalty not only in one dimension - number of repeated stays, but also whether that guest is willing to share their other precious intrinsic value, their knowledge and reputation with the property.

I have worked in hotels that pride in who have stayed with them. There are a few old hotels that have rooms that is named after their famous patrons.  However, nowadays we rarely know which property a celebrity stays in when he/she is visiting a country.

 I once suggested to a hotel they could reward guests who is willing to share their talent and knowledge by conducting performances or seminars in the hotel venue.  In self media era, everyone can be an influencer to a certain group and as long as the effort is not sporadic but aggregated and can be stacked, the hotel can build a brand by having a community frequenting their establishment. 

Also the way guests can be rewarded by limited access experiences such as what Bonvoy have show cased . Also in this new digital economy there are numerous online status that can be given to loyal customers in the form of NFTs or social status. 

Tips:  The one-size-fits-all loyalty program offering discounts is the lowest barrier to entry as that is what most people expect.  However, this should only be the first step and how to get loyalty program personalized will be the key to differentiate a successful, or a stagnant loyalty program.

The format and the tools available for the above is abundant, however the key is to first design a loyalty program that will avoid all the common mistakes and get users excited, committed and return to ask for more repeatedly.

By: Colman Ho 何立仁