Focusing on “less committed” customers
Published: 21 Dec 2009
A study has indicated that airlines and hotels are struggling to strike a balance between maximising revenue and ensuring long-term customer loyalty.
According to a study initiated by loyalty marketing agency ICLP, almost a quarter (24 percent) of those surveyed revealed that increasing the profit of their loyalty programme was their main objective for the next 12 months, yet 70 percent of respondents are potentially focusing their efforts on the wrong customer group.
Programme managers need to be clear on their goals. Those seeking to increase revenue from the loyalty programme were split between increasing membership numbers (31 percent) and increasing spend from existing members (36 percent). It was also mentioned that 21 percent of respondents quoted new acquisition of members as being their top objective, demonstrating the strategic value of creating a direct and ongoing customer relationship and communications channel. Only 13 percent of the responses highlighted improving programme ROI as the overarching goal, showing that the value of a loyalty programme cannot be measured in profitability alone.
The survey reveals that 52 percent of respondents are wrongly focusing their efforts, either on top-tier customers (31 percent) or base-tier members (21 percent). Neither of these sets of customers provide a significant opportunity to increase revenue – middle-tier members or non-loyalty programme members provide much greater opportunity to increase revenue and it is these who should be the key targets.
Focus
Top-tier customers are the most valuable but it is difficult to provide new incentives to them which will drive more revenue due to their saturation with rewards, said Stuart Evans, general manager, ICLP.
The focus should be on less committed customers further down the programme who present a real opportunity to generate significant incremental revenues.
It is difficult to know through which streams revenue can come without risking customer loyalty.
Evans said, “For example, airlines could easily sell lounge-access as an add-on to travellers, but this would run the serious risk of alienating loyalty programme members who in many cases have travelled the world for the privilege of using an airport lounge.”
The company recommended that customer behaviour needs to be evaluated to gain invaluable insight, which can in turn be used to create relevant propositions which address individual needs without the risk of alienating other customer groups.
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