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Research on Frequent Flyer Program

Research on Frequent Flyer Program

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Research on Frequent Flyer Program

  1. 1. Research on Frequent Flyer Program
  2. 2. Loyalty Market • Global Market is estimated at more than USD 100 bn • On average, 85% of global consumers reported being members of at least one customer loyalty program in 2015 • Canada and France being the highest (90%), Germany being the lowest (31%) • 2.6 billion loyalty memberships in US • USD 54 bn loyalty market in North America growing at 20% YoY • 90% Americans participate in some type of reward programs • Avg. number of memberships ~ 13 per person • 84% Australians are enrolled in least one Loyalty Program • Avg. number of memberships ~ 4 per person • Coles Flybuys is the fifth largest coalition loyalty program in the world after Travel Club (Spain), Payback (Germany), Nectar (UK) and Air Miles (Canada)
  3. 3. History of Frequent Flyer Programs First FFP by American Airlines (AAdvantage) First FFP Credit Card Partnership (Diners) First FFP Alliance (PanAm-AA) First IPO (Aeroplan) First Airline Alliance (Star Alliance) First FFP Hotel Alliance (Westin Premier) Multiplus buys 28% Stake in TAM GOL buys 27% stake in Smiles 1981 1985 1986 1991 1997 2005 2010 2013 Canada-based Aeroplan, which began as a frequent flyer programme within Air Canada, is the only spin-off anywhere in the world that is not owned in whole or in part by an airline.
  4. 4. Proliferation of Frequent Flyer Programs
  5. 5. Monetization of FFP Rationale behind FFP Separation: Liquidity Factor Dedicated Management Greater Investor Transparency
  6. 6. FFP Monetization ~ $3 billion of liquidity unlocked
  7. 7. Social Loyalty – Latest Trends 1 • Effort towards rewarding not just the high value customers based on the transaction value but rewarding brand advocates as well.
  8. 8. Technology Infrastructure for Social Loyalty • Airlines needs to invest in procuring listening tools and analytics tools like Attensity, Visible, Converseon etc. • These tools take the input as the raw conversation happening on various social forums like FB, Twitter, Youtube, LinkedIn, Flickr etc and filter out the irrelevant information and find the sentiments hidden in the relevant comments. • These tools help an organization listen to those conversations, analyze it and then decide their brand advocates.
  9. 9. Case Studies of Social Loyalty Estonian Air “Air Score” : • First airline in the world to launch a social loyalty program on Facebook in Oct 2011. • In this initiative, the Customer earns scores (Air score) for sharing a review of the airline on their Facebook wall or tweeting offers & deals or sharing any generic information like airfares, information about cultural and sports events happening in Estonia. • The customers or so called “Ambassadors” of the airline are rewarded with discounts for social media advocacy, without even having to fly the airline. Jet Blue “Go Places” : • JetBlue provides loyalty points to its customers when they announce on Facebook that they are at a Jet Blue terminal. • This drives the end goal of engaging the customer and loyalty. Virgin America : • The passengers, who were roaming in the new San Francisco Terminal (T2) home with a Smartphone, were asked to locate the new amenities which were offered and asked to check in via foursquare. • In return of announcing their location on Facebook and Twitter, participants were awarded badges which could be redeemed against prizes.
  10. 10. Fine-tune FPP & Campaign Management – Latest Trends 2 • Simplify the redemption process through automation or call centre support • Send SMS and call alerts to members on miles expiring in the next two months • Web/Mobile-enabled key internal business processes and regular functions for customer interaction • Ensure customer segmentation for data mining and campaign management • Integrate with alliance (partner) airlines and other partners for easy online accrual, redemption, and upgrades • Re-engineer legacy systems with an open source system to ensure more flexibility and rules-based operations • Outsource application, design, and maintenance of IT systems as well as the running of the FFP to cost effective locations to reduce costs
  11. 11. Infrastructure for Campaign Management
  12. 12. Best in Breed : Case Study 1 Non-Monetary Programs: • US-based pharmacy chain Walgreens launched the “Balance Rewards” loyalty program, to encourage its members to adopt healthy lifestyle practices. • The program allows members to connect their digital health trackers with the Walgreens mobile app. • Members are awarded points whenever they engage in a healthy activity. • The success of the Balance Rewards program is evident in its members’ engagement levels ~ 80 million of the program’s 103 million members are active participants
  13. 13. Best in Breed : Case Study 2 Gamification: • With its “Earn Your Wings” campaign, Air Canada awarded badges to flyers when they completed specific ‘challenges’. • For instance, members got the “Pacific Badge” every time they took off or landed at specified airports located on the Pacific coast, such as Sydney. • These badges were then redeemable in air-miles. Top badge winners were showcased on a leaderboard on Air Canada’s website. • Air Canada reported an ROI of 560% for the program and saw registration levels that were double its initial forecast. • Such examples are powerful reminders of how game mechanics can be used to drive customer engagement.
  14. 14. Best in Breed : Case Study 3 Integrated Technology: • Premium department store de Bijenkorf offers Privilege Members a personal welcome on their Apple Watch upon entering a store, showing the actual membership status and point value which can be redeemed directly in-store. • Privilege Members who use this service show a 9.7% higher basket size compared to other Privilege Members. • The technology was implemented within 2 months to over 500k users, supported by iBeacons throughout all stores enabling in-store location positioning. • A feature was added to the mobile app in which guests can choose if they want to be recognised automatically by the cashier without the need to show the Membership Card.
  15. 15. References • For Love or Money 2015 – Directivity • Re-inventing Loyalty Programs for Digital Age – Capgemini Consulting • 2015 Global Loyalty Lens Report – AIMIA • Stats & Facts of Loyalty – Snipp • 2015 Colloquy Loyalty Census – Colloquy • 2016 Bond Loyalty Report – Bond • Loyalty Programs in Airlines – Interglobe Technologies • Rising Above Clouds – Deloitte • Revitalising Airline Loyalty – WNS • Separation Anxiety – L.E.K • FFP Ready to take off – E&Y • Living your Dreams or just Dreaming – Deloitte • Next generation Loyalty Management Systems – Capgemini Consulting

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Research on Frequent Flyer Program

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