Why Mobile Loyalty is 'Do-or-Die' at the Airport
Consumers, who are increasingly mobile and always connected, have a tendency to behave in a different manner when it comes to loyalty programmes. Today, a major opportunity for to loyalty programmes is to focus on consumer outcomes and to attend to the needs of the mobile consumer, especially for airport retailers, according to Nick Chambers (UK managing director for Stampfeet), Robert Cook (managing director for Blackstone Gates) and Peter Wray (chairman for LoyaltyMatters).
It's been long known that long-term consumer trust and loyalty only comes by building an emotional value exchange with the consumer at all touchpoints in their purchase decision. The mechanics needed for building this trust have changed, since the beginning of points based loyalty programmes. Mobile technology has enabled more interactive and engaging relationships to be developed.
Consequently, the trio argue, it's high time for airports to adapt to the new consumer. Airports can continue with "more of the same" tactics or they make the most of the new opportunities inherent in well-designed and implemented loyalty programs. It is time consumer loyalty programmes embraced the omni-channel complexity and diversity offered via mobile connectivity.
The Problem with Loyalty Programs and Mobile Consumers In a published paper Time to Rethink Airport Loyalty Strategies, it was stated that there has been a seismic shift in consumer demand for more personalised, location based and real time marketing. Without adapting to the mobile, always-connected consumer, there will be few revenue opportunities for airports not in tune with the shift. Consumer spending in airports has been constrained due to consumer perception that they are captive and as a result, the goods are assumed to be over-priced. This demands that airport loyalty or reward programmes must adapt to the new reality. It's been well established that there is a strong link between the way consumers describe their loyalty habits and the way they subsequently buy.
Loyalty programmes have been in place for many industry sectors - airlines, retail and petroleum to name a few. They have created more business for the successful and created problems for the unsuccessful. But, as in any product, the loyalty program as it stands today, is at the maturity stage of its current lifecycle. It is often asked "if you keep doing the same things over and over, why do we expect any different results?" This is exactly the issue in terms of loyalty programs and whether they have become ineffective for their impact on sales. New approaches to customer loyalty are required and this is especially relevant with airlines and airports.
In a 2012 ACI/DKMA study of 110 airports, only 25% of airports surveyed indicated they have a loyalty programme. That translates into just 27 airports which have a loyalty programme in place. It is also apparent from the report, and summarised in the graphic, that the larger the airport, the more likely the airport would be to have a loyalty programme. As shown in the graphic, 30% of airports with over 5 million travellers (PAX) had such a programme, compared to only 12% of airports with less than 5 million travellers. It seems that airports are slow to adopt a loyalty programme, although many plan for one in the near future.
In a 2014 Blackstone Gates study of Airport Loyalty Programmes, it was found that airport loyalty programmes could be categorised in several ways. The first category is based on who would be the operator of the programme and who would own the data:
- Airport operated, airport owns data
- Airport operated, third party owns data
- Third party operated, airport owns data
- Third party operated, third party owns data
The second category is based on the traveller persona and the benefits that would accrue to their participation in the programme:
- Business traveller, who values ease of travel
- Corporate traveller, who values the points/miles, with corporation paying
- Leisure traveller, who values the 'extras' which add-value to a vacation
- Non corporate government funded travellers (often mandated airlines and airport)
- High Net Worth Customers (often at the very high end travelling on private jets)
We need to refresh the rationale for why airports need loyalty programmes. It is customer spend in the airport that drives non-aeronautical revenues. The customer has the money and is only at an airport to travel not to shop. This was reinforced in our Airport Retail Spend Analysis research, that when asked the question "What percentages of customers do not buy anything at your airport?" airports reported that between 30-50% of all travellers do not buy anything in airports shops. The problem, as always, is identifying which travellers do not buy!
In addition, our research of a selected group of European airports demonstrates that over the years 2007-2011, airport retail revenues were generally flat, that is, not growing substantively. Our research analysis shows a clear 'flattening' of the growth in retail spend in airports in general, with only one airport showing any significant growth over the same time period. That one airport accounted for this rise based on opening a large terminal with an exceptional number of new retail outlets in the terminal.
Loyal to What? The fundamental principles of consumer loyalty remain the same, irrespective of any advancement in new technologies or changes in cultural attitudes:
- From a consumer perspective: Consumers seek a unique experience, with appealing benefits and rewards that compel them to further action as part of an on-going engagement with the airport.
- From an airport perspective: Loyalty represents a means to engage individual consumers. A loyalty score helps an airport attribute both current and future value to a consumer. This can include how much a consumer has bought, how often they purchase, how many different items they buy, how long it's been since they last bought or visited.
The primary purpose of any loyalty programme is to utilise the knowledge of the consumer to drive specific behavioural changes. A drop in a consumer's loyalty should trigger an offer with an incentive to make a purchase. A rise in a consumer's loyalty or a special event should produce a 'thank-you' and offers on high-margin products.
The success, however, of the Tesco ClubCard, Nectar and Boots loyalty programmes, alongside the airline loyalty programmes, such as British Airway's Avios or American's Advantage programmes, has meant that 'loyalty', as an outcome of consumer behaviour, has been replaced by a mechanism for 'points collection'. And, as a result, points collection has become entrenched as the only possible mechanic by which to achieve consumer loyalty.
In fact, the limited evidence in the public domain to support the business models of these loyalty programmes and their accurate ability to track and focus on consumer outcomes, to create behaviour change in direct response to consumer trigger points, has led to their shift in focus away from loyalty and to delivering on-going points based discounts.
We have learned that long-term consumer trust and loyalty only comes with building more of an emotional value exchange with consumers at all touchpoints along their travel journey, specifically while they are in the airport.
As airports seek to benefit from the expanded network of purchase influencers, most notably the advent of social media and peer to peer recommendations, the effectiveness of legacy loyalty programmes to change consumer behaviour in response to key events is diminishing.
A more fundamental issue, however, for legacy loyalty programmes is the way in which the traditional loyalty model itself has become increasingly exposed as one dimensional - where the reward of the consumer is based solely on their purchase behaviour.
The only way for legacy loyalty programmes to become more relevant to their members is by returning to the three basic principles of loyalty marketing:
- By using consumer insights, from simple engagement opportunities to sales, to create a deeper understanding of the consumer.
- Finding new and relevant ways to engage with consumers - giving them memorable experiences or value and thereby become an integral part of their travel journey.
- Rejecting the one-size-fits-all-approach of the legacy loyalty programmes and integrating with a new omni-channel approach, so that consumer needs are met at each and every touchpoint on an individual level.
Omni-Channel Loyalty Omni-channel is not just an increase in the number of channels that an airport is able to sell goods through. Rather, omni-channel represents a consumer-centric approach that focusses on the delivery of a highly relevant and personal experience across all consumer touchpoints in their travel journey. Such commitment to relevance and personalisation by an airport typically leads to increased consumer lifetime value.
Before the development of online shopping, a good retail experience was defined by a store assistant's ability to add 'a personal touch'; knowing a consumer's name, likes and dislikes and to make product recommendations. It was these personal connections that created a good retail experience. Airport retailing, with its huge transient customer turnovers, rarely, if ever, focused on more personalised and targeted marketing. Entirely missed has been a 'call to action' with the airport's customer flows.
The rise of the internet and the ability of online retailers, like Amazon, to capture and utilise vast amounts of online data created a shift to 'personalisation'. This is the process where a database contains your purchasing history and uses that, along with the purchase histories of other, similar, shoppers, to recommend you products and discover great deals. The term CODB (customer-oriented database) was coined to reflect the change in emphasis from airport-centric to the consumer-centric view of their specific needs and personal preferences.
Now, the growth in aggregated or "Big Data" means, that regardless of where consumers shop - be it online or offline - all of their data and engagement with the airport could now follow them from channel to channel, ensuring a seamless relevant, personal experience. And by channels, we mean, direct and indirect channels.
To make an omni-channel strategy work, however, a connected infrastructure of technology, operations, data and marketing is needed. Just as important, is the airport's own willingness to keep focus on the delivery of connected content across multiple channels. However, perhaps the key to success for an omni-channel approach is the human element of discovering what the consumers actually want to make their experience relevant, timely, significant, and authentic.
Given such complexity and impact on technical, operational and marketing processes, omni-channel loyalty remains an aspiration rather than a reality. Crucially, however, omni-channel loyalty seeks to move the requirement for consumer engagement much higher up the priority list of the airport. This is where legacy loyalty programmes can best reinvent themselves providing the platform on which such personalisation and relevance can be delivered.
Consumer Attitudes Changing Towards Loyalty Since the introduction of large scale points based grocery and airline loyalty programmes, consumer attitudes towards loyalty have shifted in three key ways:
- As a direct result of their online shopping experiences, consumers have become conditioned to receiving tailored and relevant messages and content to help influence their purchasing decisions. It is the delivery of this content, served up in a timely and highly personalised manner, rather than loyalty rewards, which drives consumer behaviour online.
- There is the growing need for loyalty programmes to reflect the lives of their members and be available for consumers where they "live" and transact - mobile and always-connected.
- There is greater awareness by consumers of the value of their own personal data. By providing personal information, and granting permission for its use, consumers understand the intrinsic value of their own information. For example, consumers participating in the Yelp programme have recently started a civil action demanding payment for their user generated content . Plaintiffs are seeking "just compensation of wages, benefits, and reimbursement for the reviews they created", arguing that Yelp "could not exist, nor make its enormous returns, without its domination and control over non-wage writers". On a more basic level, once trust between the consumer and the airport, implicit by this permission, is broken by irrelevant messages, consumers will quickly stop engaging.
The Future of Loyalty in Airport Retailing Following advancements in mobile and online technologies and a change in cultural attitudes towards personal information, airport loyalty programmes will need to respond in five key ways:
- Mobile first service & content Consumers are mobile and always connected. They use their mobile phones everywhere, to check product availability, post pictures of products to social media, compare prices of in-store goods to those online or look for reviews. Mobile is an enabling technology that creates the opportunity for airports and their retailers to better understand the consumer decision-making process and, more importantly, influence some of those purchase decisions at every point of consideration.
Location-based mobile messaging services now allow airport loyalty programmes to send relevant and timely marketing messages that can help drive engagement, long before a consumer has even considered making a purchase.
Mobile technology allows retailers to create offers and deals for consumers they know are in their store. Consumers are then able to browse available offers while in-store. We do not advocate 'push' messaging of offers to consumers - usually considered as 'spam' by the consumer . The integration of mobile with social media lets users see what their friends are buying and recommend products to their communities.
It is this unique ability of mobile to combine both digital and real-world marketing aspects that makes it critical in shaping the new omni-channel loyalty picture.
Further advances in mobile technology, most notably, in accessing transactional information from cash tills (EPoS) and the targeting of offers will greatly help to increase the adoption of mobile within a loyalty context - making the most of mobile marketing's unique attributes for loyalty marketers: intimacy, immediacy, and context.
- Rewarding consumer interactions rather than only the purchase item Rather than simply being used as a tool to sell products, loyalty programmes will focus on engagement, retention and consumer advocacy. The only way to accomplish this effectively is not only by providing rewards for purchases, but also about providing those added value services need to create on-going engagements. Loyalty programmes will become channel-optimized loyalty with 'right-timed' messaging and rewards to deliver engagement at each and every consumer touchpoint.
- Loyalty will be seen as an opportunity to invest in the in-airport experience Consumers are increasingly seeking a tailored and personalised service from retailers. Airports and their retailers can use their loyalty programmes as an opportunity to invest in the in-airport and in-store experience. They should be focused on price/value, consumer service and fulfilment options, rather than points collection opportunities.
The loyalty programme will provide consumer insight that enables in-store staff to focus on the consumer rather than the operational requirements of processing transactions or shelf stackin. For example; make recommendations based on the consumer's choice of goods to offer complementary products and services.
- Make better use of consumer data points Even now, most small to mid-size retailers do not have even a single data point for their consumers. And the ones who do typically struggle to take advantage of it. In these cases, the collection of more data points, even via a mobile loyalty programme, will not make any positive difference to an airport and their retailers, quite the opposite, because it complicates those business processes needed to take advantage of it.
For an airport mobile loyalty programme to be a success, it's healthier to first find the formula that takes advantage of a light data set and increased member engagement. Only then, should they look at adding more data points. After all, the fundamental purpose of consumer loyalty is to drive more business and not to collect data.
- Wider use of loyalty programmes Loyalty programmes have moved into other sectors other than retail, airlines and airports. Led by Costa (UK) and Starbucks (USA), coffee stores are now using loyalty programmes to capture consumer data and thereby drive more value from their consumers. Given their lack of an on-line presence by which to acquire information on consumers, the Food & Beverage sector represents an ideal market for the introduction of new and innovative loyalty programmes. Airports are an ideal provider of Food & Beverage services and can gain substantially from a mobile loyalty programme. Airports and their retailers should focus on loyalty as a way to create direct engagement with consumers, rather than just relying on standard in-airport retail stores and Food & Beverage courts.
Key Barriers Faced by Airport Programmes Economic conditions and the resulting shift in consumer attitudes, has seen a change in business priorities away from making investments in longer term consumer engagement strategies and replaced by a reliance on discounting and short term sales promotion. When it comes to the types of promotional campaigns offered, airports are currently less likely to implement an experience-based campaign versus a strictly discount-based one. The impact of this change of focus is that it significantly reduced the ability of legacy loyalty programmes to obtain the necessary level of 'buy in' and investment required to improve their processes and services need to deliver against this new omni-channel approach.
As a communication channel, airports need to be wary of the use of mobile 'push' notifications . When consumers opt-in to receive push notifications, it means they trust you to the point of giving you permission to contact them on their most personal devices. If the airport's messages are not relevant, the airport has the potential to lose your best consumers. This is critical to understand. In the case where an airport may have developed a mobile app, irrelevant messages usually result in the consumer off-loading the airport app.
Airport mobile apps tend to be airport or airport retailer-specific, and are certainly not as accepted as the retail-wide acceptance of payment cards and some other industry loyalty cards, such as, Air Miles. Until the infrastructure is universally in place to process mobile loyalty transactions right across merchants, plastic cards and paper coupons will continue to be an attractive solution for consumers.
It is, however, highly unlikely that retailers and airports will collaborate to develop a uniform, industry-wide infrastructure for mobile loyalty. The mobile movement therefore will be led by individual airports or airport retailers, some of which have already invested in the development of loyalty programmes to engage with their members. Without access to real time transactional information from the cash tills (EPoS), it is difficult for a loyalty programme, mobile or otherwise, to deliver the real time issuance and redemption services now required by consumers.
Likewise, when it comes to speeding up retail cash till queues, it might be natural to assume that a mobile loyalty card would be faster for the consumer to locate quickly. However, market research shows otherwise as 46% of consumers say they would find it harder to locate digital coupons on their mobile phone at the point of sale. Only 18% believe that paper coupons would present a greater challenge. This not only has an impact on the consumer experience, but it is also has implications for retailers who are understandably keen not to slow down progress at the checkout.
By making the loyalty programme mobile, the actual loyalty scheme becomes far more than simply a function of the marketing department. It is now very much a way to support the brand proposition, touching all areas of the organization.
It is these changes to existing operational and marketing functions that are preventing uptake, as organizations struggle with finding the ways to make the necessary internal changes to their current processes.
So What's Next for Airport Loyalty? The mobile phone is perfectly suited to delivering the core aspect for any successful airport loyalty programme - on-going member engagement.
Using the mobile device as the point of delivery for loyalty services - member identification, balance updates, location based rewards and promotions - allows the entire member experience to become far more engaging and interactive than the legacy card based programs. Crucially, the mobile allows the digital and in-airport shop to meet at the same point of delivery - a fundamental requirement for an omni-channel approach to loyalty.
In addition, the mobile device itself affords the Airport Loyalty Program Manager an ability to capture additional data points on their consumers, both behavioural and transactional, thereby gaining valuable additional insight.
When the airport's consumer engagement strategy is mobile-centred, the focus is on instant consumer communications and response to consumer feedback. Then the airport can align their social media, increased staff interaction and location-based offers earlier in the consumer's purchase decision process. However, these new ways of working always come with their own operational and marketing challenges for an airport. Changing business processes, as a result of new technology, is not unique and, as with any new technology, consumer interaction with staff is vital for any success transition.
For airport loyalty programmes to remain relevant within the overall marketing mix, they have to both reinvent themselves, be able to lead the way in this new omni-channel approach. They also need to find ways to better integrate with the airport's current business processes and practices which are already struggling with the pace of change.
New approaches to customer loyalty are required and this is especially relevant with airlines and airports. Mobile technology has enabled more interactive and engaging relationships to be developed. It's time for airports to adapt to the new consumer. Airports can continue with "more of the same" tactics or they make the most of the new opportunities inherent in well-designed and implemented loyalty programs. It is time consumer loyalty programmes embraced the omni-channel complexity and diversity offered via mobile connectivity.
For more information or to contact the authors: · Visit Stampfeet at http://www.stampfeet.com · Visit Blackstone Gates at http://www.blackstonegates.com · Visit LoyaltyMatters at http://www.loyaltymatters.com