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Loyalty is on the verge of major disruption. Technology, such as mobile and blockchain, are forcing traditional loyalty models to adapt and become dynamic to remain relevant in an ever-saturated market.
The travel industry has a long tradition of loyalty schemes thanks to hotel reward nights, frequent flyer airline programs, and co-branded credit cards. There are several different types of loyalty program structures with a wide range of benefits, such as points, free gifts, discounts, free shipping, exclusive events, tiers, and the like. However, the average consumer is suffering from loyalty fatigue.
According to the 2017 Colloquy Loyalty Census, the average U.S. household has 30 loyalty schemes, but 54 percent of them are inactive. To optimize every single scheme seems unachievable to many, bar those that thrive on the challenge of points collection and redemption.
According to Euromonitor International’s Global Consumer Trends Survey, only 28 percent of consumers globally said that they shopped more often at stores or websites where they have a loyalty card or membership in 2016, with the influence of loyalty declining, down from 34 percent in 2013.
The UK and China have both seen a sharp drop-off in consumers shopping at stores where they have a loyalty card, which can be attributed to recovery after the global economic crisis in the case of the UK and the shift to mobile sales. The relatively low level of mobile readiness of loyalty programs especially in such a mobile-first market like China represents a real challenge for travel brands in terms of consumer retention.
The traditional business model for loyalty is distinctly flawed and clunky, with each loyalty scheme tending to exist in silo or within the confines of a coalition. To help reverse loyalty’s dwindling impact, it is increasingly vital to view loyalty as a fundamental pillar of the “Experience More” framework – key to building a long-lasting consumer-brand relationship. This means brands need to strive for a seamless customer experience that is delivered in real time and is context specific that will enhance the consumer’s experience and ultimately drive loyalty and repeat purchases.
“Experience More” is one of the top-eight megatrends that Euromonitor International has identified as having a high impact over the long term, whereby consumers are choosing to spend more on experiences over things, which has led to the rise of the “experience” economy.
Brands should consider their consumer relationships through this “Experience More” lens, where loyalty is but one part of the matrix, and should not be seen as a means to an end, or in isolation.
Mobile as the path to redemption
The shift to mobile will continue to be a game-changer for consumer industries, in line with growing smartphone penetration, and the future move to 5G mobile networks that will deliver ubiquitous internet coverage, making it increasingly difficult to keep up with the sheer volume of consumer or brand interactions and data generated.
The travel industry is already well on the road to mobile sales adoption. In 2017, total travel products generated sales of $2.3 trillion, of which $935 billion was spent online, and $280 billion of that was spent on mobile devices, including smartphones and wearables. Mobile travel sales have enjoyed phenomenal growth, growing from a 2 percent share of total travel sales in 2012 to currently 12 percent in 2017, with a projected share of 20 percent by 2022.
Mobile wallets, as pioneered by the likes of Starbucks, give us an insight of what the future face of loyalty will look like, where brand mobile apps will integrate bookings, payment and loyalty. Apple Wallet (formerly Passbook) and Android Pay built into mobile devices also help consumers manage multiple payment cards and loyalty programs. Mobile proximity payments will work hand-in-hand with real-time, location-based offers pushed to consumers’ devices, and offers will be increasingly personalized thanks to big data leading to a more seamless user experience.
Mobile loyalty programs are already having a positive influence on consumers, according to 3C’s State of Mobile Loyalty Progress report, with 62 percent of U.S. consumers stating that they had made more store visits or purchases over 2017, compared to 59 percent in 2016.
However, there is still a long way to go for countries in terms of the adoption of proximity payments. Euromonitor International’s Digital Consumer research shows that the U.S. leads the way with 8 percent of digital purchases being proximity payments through mobile and wearable devices in 2017, compared to China at 5 percent, Australia at 3 percent, and the UK at 1.7 percent.
Future to the power of one
Technology, such as voice through digital assistants like Alexa, Cortana, and Siri, virtual or augmented reality, and emotion recognition software, will further speed up the shift towards personalized and truly targeted brand loyalty interactions. Using artificial intelligence to measure and analyze consumers’ reactions, travel brands will be able to personalize offers, rewards and experiences based on emotional responses and natural language, thanks to advances in cognitive technology.
Travel brands and advertisers will increasingly move towards reading consumers’ emotional and physical responses in real time, at the different stages of the customer journey – at the inspiration stage, receiving rewards at the point of sale, and enjoying brand benefits during the trip. Fine-tuning brand interactions will help remove pain points for consumers when dealing with brands and navigating loyalty, while maximizing the consumer’s brand engagement.
With Apple buying Emotient in 2016, emotional recognition software could be introduced to the mainstream smartphone market in the future. All these advances in artificial intelligence will vastly improve the ability of brands to meet consumers’ needs and expectations to reduce the disconnect that currently exists.
Dynamically packaged loyalty
A new dawn of dynamic loyalty will be brought about by new technology, such as blockchain, where data will be portable, allowing unique interactions with any brand and breaking down traditional silos. Consumers will be able to receive benefits across different loyalty schemes and verticals, to receive rewards that are delivered in real time and are context specific.
The beauty of blockchain is that each transaction is unique and data portable, the loyalty process can be made dynamically and go beyond the standard limits of partner/coalition loyalty. Blockchain eliminates the need for a middle man, simplifying the payment process and reducing the potential for charges, and payments can be completed in minutes, rather than days.
In the future, the unthinkable may even happen, where a Marriott Rewards/SPG member will also be able to redeem rewards from Marriott through competitor brands, such as IHG or Hyatt.
One startup, Loyyal, is at the forefront of this exciting era of disruption. Such disruption will happen outside of the travel industry in the financial technology space, and this is why it is important for travel brands to work closely with consumer finance companies, keeping an eye on funding to keep ahead of the curve.
New technology like blockchain will help liberate consumers from the confines of traditional loyalty programs, allowing them to take back control of their brand interactions and data, to engage with brands on their own terms – not the other way around.
Euromonitor International is a leading provider of global strategic intelligence on consumer markets, with offices in London, Chicago, Singapore, Shanghai, Vilnius, Santiago, Dubai, Cape Town, Sao Paulo, Tokyo, Sydney and Bangalore and a network of 800 in-country analysts worldwide. Euromonitor International’s analysis of the global travel industry covers a wide range of categories, including tourist flows and expenditure, lodging, transportation, car rental, cruise, tourist activities, travel intermediaries, online and mobile travel.