Skift Take

Travel brands have a unique opportunity to realize greater potential from their loyalty programs. Through creative merchandising that allows travelers to earn points and miles in different ways, they can grow ancillary revenue, build more meaningful customer relationships, and increase lifetime value.

With demand snapping back for both leisure and business travel, loyalty program members are leading the way. Enriching relationships with these customers is a top priority for travel brands as they become a more valuable revenue source in this critical time for the industry.

As the world has changed in the past two years, so have consumer sentiments, behaviors, and expectations. Loyalty programs are also changing. In addition to earning miles or hotel points in the traditional ways, travelers are clamoring for more personalized opportunities from their loyalty programs.

For example, programs have responded by adding retailers and lifestyle brand partners so that their members can earn and redeem outside of the travel experience. They have invested in their co-brand credit cards to provide members with the opportunity to quickly accelerate their loyalty program balance. Many have even built comprehensive strategies around mileage retailing to build more meaningful relationships with their customers through the sale of points and miles.

“Loyalty currency retailing has become a massive driver of revenue — typically the second or third largest economic generator for these loyalty programs,” said Rob MacLean, CEO of Points, during a recent session at the Skift Travel Loyalty Summit. “It’s exceptionally high-margin revenue and plays a really important role in returning the programs to health.”

New Era, New Opportunities

Loyalty programs aren’t broken by any means. According to a Fall 2021 Points survey of more than 2,000 loyalty members in the U.S. and Europe, a significant majority of hotel program members (nearly three-quarters) and airline program members (about two-thirds) said they are satisfied with the brands to which they’re loyal. Fewer than 5 percent were “very dissatisfied” with either type of travel loyalty program.

That’s great news for travel brands, but it doesn’t mean they can rest on their laurels. Even amidst the huge numbers of satisfied, loyal members out there, the travel business is at an inflection point with significant opportunities to increase engagement and customer lifetime value.

For example, 43 percent of airline loyalty members said they can’t always use their miles in the ways that they want, and 35 percent of highly engaged and younger hotel loyalty program members said they want more ways to earn points.

The stakes are high for brands to meet these diverse expectations from a broad range of customers. And a one-size-fits-all approach is no longer sufficient.

That’s why brands need to consider merchandising loyalty currency to think outside the box and offer their members additional ways to earn and spend points. Merchandising currency has become a key contributor proven to create not only transactional value, but also emotional loyalty. According to MacLean, merchandising has accelerated a lot of the engagement around programs. For example, members have continued to buy loyalty currency throughout the pandemic, even if they did not have a fixed travel date in mind.

“Allowing members to purchase miles or points not only provides immediate revenue upside, but also generates lasting program engagement and higher lifetime value in the program,” said MacLean. ”Data shows that members who buy also become more engaged with the program as a whole, spending more on cobrand, accelerating the earn and burn cycle, and seeking out alternative earning opportunities. Overall, we have found that transactions across the program increase by as much as 31 percent in the 12 months following a currency purchase.”

Data Intelligence Enables a More Personal Touch

The proliferation of digital touchpoints throughout the customer journey has enabled brands to use first-party customer data to develop even more intimate personal relationships with frequent and enthusiastic loyalty members. But collecting, analyzing, and activating that data is harder than it seems.

In a recent survey of U.S. and Canadian travel and hospitality executives, just 24.3 percent said they were “very” confident in accessing the right member data they need to retain loyalty customers. In other words, over 75 percent of companies are hesitant to say how well they know their own loyalty members.

Unfortunately, the “spray and pray” ethos from the halcyon days of analog advertising still applies to many travel marketing programs, and they’re married to a model of sending mass offers to all their members in the hopes that something will stick. That’s easy, and it might push numbers, but it’s neither efficient nor effective in developing the type of deeper relationships customers want and that will build lifetime value for brands.

“If the days of just blasting out communications or offers to tens of millions of members every few days aren’t yet gone, they’re close to being gone,” said MacLean. “A lifestyle program provides the opportunity to open up to get a more holistic member view through being able to analyze data from transactions outside of the core brand.”

For example, advanced data modeling across multiple transactions can pull in input variables from multiple sources, such as recent flight activity, past earnings, redemption patterns, and mileage purchase behaviors. Those inputs produce what MacLean called “propensity-to-transact” scores for each member.

“These scores then allow us to specifically target the members who are ready to transact, relieving pressure on overburdened member databases,” he said. “The pandemic has changed the way loyalty members behave, even as we return to travel. Utilizing the data and optimizing offers and marketing for our partners has allowed us to re-engage their best customers, and connect them with their best new customers. As a result, we’re seeing 40 to 50 percent jumps in engagement metrics or financial results.”

As the travel business enters the next era of its evolution, loyalty programs will have to become more sophisticated, offering multiple ways to earn points. That creates the opportunity for more personalized guest rewards — which means happier, more engaged members.

“Working with 60 different brands across industries, Points is uniquely placed to predict and respond to trends,” MacLean said. “We are capitalizing on both historical insights and new trends through our investments in data and analytics to turn these into actionable opportunities for our partners.”

Watch the recent one-on-one interview session with Rob MacLean from Points from the Skift Travel Loyalty Summit.

This content was created collaboratively by Points and Skift’s branded content studio, SkiftX.

Tags: innovation, loyalty, loyalty programs, merchandising, points, Points.com