Turning ancillary revenues into loyal customers
Service providers have an unparalleled opportunity to maximise the potential of their ancillary revenue programmes, to generate increased revenues, and to produce more loyal and satisfied customers, according to Janet Titterton of Collinson Latitude.
Seemingly ubiquitous and often controversial, ancillary revenues are a prominent part of modern business. Nonetheless, although ancillary revenue programmes have rapidly become an essential and established part of many business models, particularly in the travel industry, they have certainly not yet realised their potential. To look closely at these programmes today is to see unfulfilled - and unlimited - possibilities.
Just like Web 2.0, the time has come for ancillary revenues to take the next leap forward, becoming dramatically more effective, widespread and relevant to consumers - and especially to loyal customers.
There are practical steps service providers need to take to ensure ancillary revenue programmes do much more than just produce one-off, short-term boosts in income. Real-world, online solutions can help you achieve the fundamental goals of ancillary revenue. If you want to retain profitable customers for life, you need to add value to their experiences, not costs.
Of course, increasing customer spend whilst also increasing customer satisfaction can be quite a challenge. There are no easy answers here. Each company needs to find unique, sophisticated, tailor-made solutions. That's why data is so important, because each company's customer base is different. A better ancillary revenue programme does not necessarily mean a radical overhaul of a business plan; the first step could simply be better analysis and exploitation of the customer data you already hold, leading to more actionable insight.
Hotels, for example, know when customers want specific services (such as car parking and wireless internet access) because they are already paying for those services as separate items on the bill. Discounts for loyal customers are therefore certain to be appreciated.
Better yet, a subscription-based membership programme allows a service provider to generate ancillary revenues by charging customers for access to a range of discounts, alongside other benefits and products. Targeting and relevance are key to making these programmes appealing and successful. Hotels, again, are a good example, with operators knowing so much about their most loyal customers, from their preferred holiday destinations to their favourite after-dinner drinks, that putting together a customised subscription package of benefits for each customer is a real possibility. And the benefits do not have to be restricted to hotel activities. Knowledge of customer lifestyles - levels of income, careers, hobbies - means the scope of the membership programme can be extended appropriately, adding benefits, products and discounts far beyond the services of the hotel itself. Involving non-competitive, complementary travel, lifestyle, leisure and insurance providers in the programme creates a portfolio of partners targeted at customer interests. Hotels are not alone here, of course; any service provider can adopt these principles, from mobile phone operators and banks to travel agents and airlines. The end result is that customers enjoy regular benefits across many areas of their lives, whilst the service provider enjoys greater ancillary revenues and customer loyalty.
The airline industry is perhaps the sector in which the use, and arguably abuse, of ancillary revenues has seen the highest level of public and media comment. For many years now, passengers have been feeling increasingly annoyed by the 'unbundling' of airline charges - separately pricing each aspect of the overall service - particularly when the results of this strategy seem to be extra costs and misleading pricing. Perhaps the time has come for airlines to execute a classic business coup, turning a problem into an advantage. Airlines might, for example, realise many of their customers will now happily pay for the convenience of a single-price ticket package of otherwise unbundled elements - such as fare, baggage allowance and on-board meal. After the long-term trend for unbundling, we are likely to see a turning of the tide and a re-bundling process. Intelligent, targeted re-bundling encourages travellers to spend more money to achieve a greater sense of value and return on investment.
If you want to offer customers benefits that spread across many areas of their lives, you should find channels of communication that reach across their lives too. Maximise the touch points. Ubiquity of message is needed to ensure the customer is constantly engaged in a relationship with your business, whilst always being reminded of the brand at the centre of the programme. By ensuring multi-channel contact with customers - from their desktop computers in London to their mobile phones in Beijing - you maximise opportunities for customers to earn and redeem loyalty points, for example.
Mining the data you hold is also fundamental. If you know your customer loves golf, having subscribed to one of your membership packages with a golfing theme, why not offer that customer a means to earn loyalty points by buying golf equipment from a partner supplier, through your website? If we follow that process through, we can imagine the customer in a hotel far from home. He makes his purchase online in the morning, earning loyalty points he immediately redeems, choosing a golf-related app downloaded to his mobile phone in time to be used during an afternoon round at the local course. That makes one very satisfied customer, even though nothing he did directly related to the service provider's line of business. The closer you are to your customers all the time, the greater your chance for a long-term profitable relationship.
Sustained ancillary revenues are achievable, by offering added value to loyal customers, not just by adding items to the bill. It's time to move to a world of ancillary revenues where both the company and the customer win.
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