1^st session – The Evolution of Loyalty Currency

Key Points:

• Some programs are giving away rewards, consciously loosing money in order to reward their best customers providing no restrictions, no black out dates, with simple programs and no drawn out matrix.
• Question was asked to a panel: Have frequent guest programs come out of the shadows of frequent flyer programs? Airlines have different set of problems such as rising fuel costs and less traffic as opposed to guest programs which are seeing increased visits and loyalty. Hotels have gained traction and have a better value proposition. Benefits such as ease of checkin, hospitality, flex nights and last room availability make things easier for hotels. Customers also stay longer at hotels and want more benefits and better service. Airlines provide higher value services such as quicker security checks. For hotels the views or upgrades are perks or staying in an exotic location.
• Depending on many factors, hotel stay may be more expensive than flight costs.
• Some airline awards are diluted since elite status is relatively easy to attain so the real perk is only getting miles and not really upgrades since it can be easy to get an upgrade.
• If miles were to be exchanged between programs then it would break the model for the most part. There is some exchange of miles and points but it is very minimum. The cost of miles is much lower than the cost of points so most customers are unlikely to exchange 12,000 miles for a hotel stay.
• What are challenges for hotel programs? Marketing challenges in soft economy are pretty much the same on all verticals. Managing ROI and becoming customer centric and fight globalization.
• Cultivating customer relationships and increasing the value proposition. 3 things, fundamental tension between people and what they want when they want it. Personalization and having the backend to handle requests. 2 transparency is not very good. What do you have to do to get a free night. 3 under radar personalized targeting, having public face for travelers, not too much personalization. there has to be a balance between personalization and having a public persona for the general public as well.
• Marketing materials need to be consistent with promotions. Marketplace may have too much info and it may not be easy to have the correct info or ways to redeem points. Quality of marketing may be different from the size of the program but you should not be able to tell a small from a large program. Rule # 1 is to get them to be loyal to your brand so that they even want to take part in your loyalty program.
• Programs, there are many choices and information with bonuses and program structure. Are programs too complex? If the traveler is engaged in the program they will take the time to figure it out and they will get it. Go out of your way to keep a simple program and make it easier for customer to engage in your program. Not 3 pages of redemption, only handful of items for redemptions, more targeted to your member and keep it simple. Program structures are not very transparent and institutionalized. Bestbuy’s Rewardzone was complicated and couldn’t figure value proposition. They simplified it and enrollments increased. Beak down to simplest form, simplicity is key. Challenge is not necessarily on back end. On front end most programs are pretty much the same and only currency changes from program providers.
• What is irking customers the most? Presentation of the programs should provide the right message in front of the right person at the right time. Dont try to get all information from a customer at one time. Space it out and dont overwhelm your customers or they will not engage or go deeper into your program. Let customer determine how deep they want to go into the program.
• How do you measure program success? Key metrics and what is used for justification to CFO? Incremental revenue, driving customer share, understanding research and models and data. Categorizing acquisition, growth, performance and loyalty, engagement cross brand opt in out stickiness, cleanliness of the data how many emails do you have and correct info.
• Traditional yield and revenue management. If you loose the opportunity to sell today you won’t get it back tomorrow. Best scenario, customer comes in through organic means, no 3rd parties or discounts or commissions to pay, this is the best revenue generating channel.
• Technology is your friend, it lowers costs and increases efficiency, makes it easier to digest data and determine lifetime values of your customers. What it comes down to is how many times a customer comes back, member satisfaction is key, do surveys to gauge customer loyalty and satisfaction, this will help with financials and monetizing your efforts. Have a worst case scenario or backup plan for the people who are not going to buy your program/proposition.
• How do the programs work, is it really no blackout dates. Loss leader programs are protected on backend; there are not enough people to abuse the program. Losing money possibly from one member but then they get another member visiting hotels. Getting members to buy directly from you and not from a 3rd party which provides higher profits and less dilution.

2^nd session – Alternative Currencies

Key Points:

• E-Rewards and E-miles. Rewards people for “watching” ads online. Giving miles for viewing an ad and even more miles if a purchase is made. Also on completing surveys. Rewarding them for your time. Offer irresistible offer to opt in, ask how many times customer would like to hear from you to increase amount of emails you can send. Does not really matter if you offer 5 or 20 miles, response is the same.
• Points.com, a program where members can exchange points between different programs. 
• These sessions were more about selling the programs and not really about new technology or how to leverage new technology. May be interesting to advertise on eRewards or eMiles.

3^nd session – Economics of Hidden Assets

Key Points:

• Run a better loyalty program, balancing needs of shareholders, customers and employees.
• One thing to do is be better marketers and increase brand currency through the loyalty program. Industry structure is not good but business is. markets may not be as efficient as previously thought. Separation of loyalty and FF programs as different business entities and sharing cash flows and information.
• Sufficient scale is essential to create valuation, so it is not for everyone. Continental and express jet separation when contracts come through, someone was going to loose. You have to be careful with contract structure.
• Are pilots paid on profit of airline or from other sources such as loyalty programs? There are also tax issues and there is lots of profit loss so airlines would not have to pay taxes by writing off loss. for example if united were to spinoff their FF program how soon would it go under, thinking or consensus is that it would pretty quickly.

4^th session – Beyond the big Picture

Key Points:

• What is the most important question a marketer can ask? What makes the customer happy?
• Happynomics is the ultimate goal. Being a millionare is not what it used to be, they are not as satisfied. 20% no not feel they are wealthy. (Boo hoo).
• Most have reference anxiety, comparing their wealth to others. Middle class is in status despair. Happiness is 50% in your control.
• The goal is to help people achieve higher levels of happiness. Upgrades make customers happy. Expectations are low, getting a passenger on time to destination is considered good service, but it is better to build a positive relationship and listen to your customers. Alaska Airlines has luncheon with top 100 customers to gauge their satisfaction and hear their concerns. They also greet their Gold status customers by name and offer to buy them a drink.
• How can we enable peoples desire to be more engaged? Help them keep in touch with their loved ones. Good feedback from customers is essential and actually caring about their needs and taking a genuine interest in them.
• What goods or services will excite consumers? Trust drives sales. Perform at higher standards and prevent complaints don’t just solve them. Be open and honest. Alaskan was discontinuing a route and decided to let top customers know beforehand and offered other options, this generated good feedback and created credibility and respect. Continental has an exception budget to use and allows reps to solve problems before they get out of hand.
• Stories are important regarding your brand. If told by a consumer it is stronger than if tol by the brand. Make customers look good to their peers and they will reward you.
• UNFIXED, using is better than owning, owning means more hassle, the more you own the more you have to worry about.
• TIME – People are time starved. 70% of Americans do not have time to take a vacation. 81% of online shoppers do not purchase if the process is too long. Use daily lubricant, greasing the wheels of life, making things easier ie. purchasing online.
• Have a college marketing program. If a college student uses your product or service they are 30% more likely to keep and use you in the future. Example from Continental. Offered college students $129 round trip flights through an Amex co-branded card. Students started earning miles early on and keep using Continental since by the time they graduated they had about 10,000 miles in their account.

Below are some key points from day 1 of the conference. For more info on speakers please see www.ftma.org

Day 1

1^st session – Panel – Paying with Miles

Key Points:

• Redemption transparency is key. Most members do not know the exact value of each mile or point so they are more inclined to use them when they see an offer that is of value to them.
• Innovative reward offers are now aspiration awards such as golden moments in Europe, vocation vacations such as ones that allow you to become a sports announcer for a day or brewmaster for a day, etc.
• Travel awards are more sought after and have a higher value. Other discount programs offer limited redemption options whereas frequent flyer programs offer many different redemption options as well as ways to earn miles such as through co-branded credit card purchases.
• Most retail programs make it easy to redeem even though there are less options. Keeping redemption easy will make it that much easier for the user, as opposed to having a complicated redemption matrix that requires an expert to figure out.
• People don’t often think of the value of miles when they are redeeming so it is not really thought of as a discount off flights, therefore the perceived value is higher when redeeming miles. For example, people would rather spend $1000 and get 1000 miles rather than spending $1000 and getting $10 cash back. Aspiration of travel is more enticing than getting money back or discounts.
• Other partnerships besides credit cards that can be used to make miles programs successful are gas and grocery cards and health industry or lifestyle transactions.
• Other innovative programs are ones that include trips to the moon for miles redemption, participating in an auction for miles where you bid for cool items such as art or meeting celebrities.

2^nd session – Social Media Strategies

Key Points:

• Main concern for FF program directors if someone badmouthing them on a forum or blog. Randy stressed that these forum/blog posters are the members of their FF programs and they are not Randy’s customers, so don’t try and sue him for something someone posted because you won’t win. Comments are property of the person who posted them and not of the site/person hosting the forum/blog.
• Social Media is not about protecting your brand. You cannot stop people from saying what they want to say on the Internet. The best you can do is try and solve their issue and turn them into a satisfied customer and usually they become great posters and advocates of your company and will tell others how well you treated them the same way they told them of any bad service or experience.
• The behavior of members has not changed just the environment has changed. Instead of the members just telling family and friends of their good or bad experience with you, now they can tell the whole world. If you use this to your advantage and simply provide great customer service online and offline then most of your members will be good advocates for you. Members will say what they want whether you are involved or not, so it is better to be involved and positively influence the situation.
• Where information is obtained for FF programs? 21% newsletters 10% word of mouth, 62% internet sites, 4% from online news, 2% from magazines with FF content.
• Which resource influences participation? 15% program newsletters, 23% newsletters, 53% internet sites, 5% online news, 2% magazines.
• Members measure you for lifetime value also.
• If you do not participate in social media you will be irrelevant. Before, if you did not participate online you became irrelevant, and later on if you did not participate in e-commerce you became irrelevant, the same will happen in you do not participate in social media.
• Social media enables co-creation of your brand, your members can become your biggest allies and brand advocates.
• As an example, Randy talked about how a poster of Flyertalk forum said that they were going to give 100% of their business to a company based on the customer service they received from an online rep. It would be impossible to run an advertising campaign to get 100% of the business from your members or potential members but through Social media and using it to provide the best service possible you can gain 100% of your members business, which is worth a lot, it is a great way to monetize your participation in social media.
• Social media is customer service uninterrupted. It is going straight to the customer instead of waiting for the customer to come to you with their issues and concerns. You should be helpful and not hypeful when communicating with your members online, especially on forums or blogs that you do not host.
• Forget about the long tail when confronting any customer and know when to diffuse a comment and when to just wait until the storm passes.
• There is great value in being authentic; the online truth detector is out. Encourage members to add or interrupt your conversation.

3^nd session – Hits & Misses

Key Points:

• Loyalty saturation is here. There are lots of programs in every vertical. Why do programs fail?
• Flaw #1, No bonusing, 85% of programs have a flat funding rate. No currency bonus to drive behavioral change. However, do not over bonus. Use tiers and targeted bonuses to differentiate. Require registration for bonus benefits vs rewarding cannibalizers.
• Flaw # 2, No soft benefits. Offer extra perks, vip status, etc. The average household signs up for 12 programs. 71% want extra perks, 15% feel they actually get perks.
• Flaw # 3, Single tender systems, fails to capture all transactions. Limits accrual velocity. When multiple payments were accepted large growth almost always happens in terms of higher enrollments and issue rates. Enroll the customer in a reward program then they have a vested interest and are more likely to apply for a co-branded credit card, not the other way around.
• Flaw #4, No dialogue, no surveys, auctions, or collection of data such as email addresses, contact info, etc. Collect preferences of members and listen to what they are saying, don’t just hear. Do not overbear customers with too much information at one time. Maybe ask one question at sign up, then another during a monthly newsletter, then another after yearly renewal to start building customer profile. Major error is not acting on the data you have already collected.
• Some bad reward programs (misses) include the following: A soft drink company required a large amount of points for a reward effectively making their customers having to buy tons of product in order to get prize, was not realistic. Another company had points or coupons on containers made to be thrown in the trash so the customer had to search in the trash, and a Canadian coffee company when they say their punch card reward system was not profitable they literally took the customers punch cards away and threw them in the trash in front of their best customers and did not offer them anything else.