We had the pleasure of closing the annual ADV airport conference in Berlin in November with a keynote speech on customer loyalty in airports. But what does loyalty really mean in an airport? What loyalty levers work across industries and what must be customized? What loyalty models work in a captive environment? Lots of great questions – and the answers are not straightforward!We had the pleasure of closing the annual ADV airport conference in Berlin in November with a keynote speech on customer loyalty in airports. But what does loyalty really mean in an airport? What loyalty levers work across industries and what must be customized? What loyalty models work in a captive environment? Lots of great questions – and the answers are not straightforward!
Let us start with a definition: “Customer loyalty is about increasing existing customer life time value instead of attracting new ones”. Why? Because the cost of acquiring new customers is 5-25 times as high as retaining existing and increasing customer retention by 5% will increase profits by 25-95% depending on industry. Pretty compelling reasons – not least if you are in an industry like airports with many loss giving businesses.
In airports there are three ways to improve customer life time value: more travel, higher share of travel or more spend on each travel occasion. Now for many airports the idea of increasing travel is alien – that is the province of airlines and travel agencies, but what about travel share? Many airports compete with cars, trains and alternative air fields – what does it take to beat them? But right now, we believe the easiest play airports can make is to increase spend on each trip, so let us dive in there.
Now, why would anyone be loyal to a brand and spend more money with one company than another? Well, it is often forgotten that it is a two-sided relationship. You may want to better understand your target customer segments, build stronger value propositions and have contact in real time to pull along your sales funnel and increase the spend. Great – customers are fine with that… as long as you deliver something above and beyond in return! The customers want you to exceed their needs, always deliver on promises, take them along for a unique ride, stand for something they also believe in and not least respect them. Sounds like a marriage? Maybe - but the divorce rate is much higher here…
Let us look at how three of the most well-known loyalty models play out in three different industries we all know – jewellery, airlines and furniture. In jewellery they often apply the emotional bond model, where the focus is on building a real relationship by surprising and delighting customers – they tick off many of the boxes that customers require in return for loyalty as discussed above. Airlines typically use the earn & burn model, where points are awarded for purchases and the goal is to lock the customer in the same choice of airline – it pretty much ticks none of the boxes (it is also known as an advanced discounting scheme). Finally, the ambassadorship model – a fairly new innovation – where long lasting consumer goods such as furniture fit, because customers do not buy something again for another ten years. Which one would fit the airports?
Probably none – ironically given one of them is a standard airline loyalty program. What we do know about people across cultures, age groups and gender is that they value scarce things like loyalty benefits, gifts particularly if personalized and unexpected as well as pretty much anything they feel they own, so whatever we do, let us put that in. Additionally, once people commit to something like any subscription, it is difficult to stop – in fact we feel real pain in payment situations, so subscription models are great tools. Finally, we make decisions on a persons likeability, simple value propositions (“those two products cost the same, but number one tastes better – easy!”) and context (“hmmm, if there are three sodas of different sizes, I will probably pick the middle one – but if there was only the middle one, I would wonder whether to have one or not”). So, what does that give us? Well so far four different airport models of very different strengths (yes, someone just could not stop themselves from trying the earn & burn model):
Each of these models are widely different. Each of them – we believe - will prove to have widely varying success rate over the next years. Particularly, right is right, and left is – well – wrong. We know as least five airports massively benefitting from the right ones – and several losing out on the ones to the left. But after this ADV conference workshop we expect to see a lot more on the right side! Let us know what you think and if you have seen any other models out there – or if you just curious to find out, how to build your own loyalty strategy.
Contact Epinion’s aviation experts today (BRKR@epinionglobal.com) to discuss your needs further and learn more about our service portfolio or read more about our aviation solutions at www.epinionglobal.com