Travel loyalty schemes should ‘focus on middle-tier customers’ in 2010

Airlines and hotel operators have been warned they could be planning to target the wrong customer groups as they look to boost the profitability of their loyalty schemes in 2010

Airlines and hotel operators have been warned they could be planning to target the wrong customer groups as they look to boost the profitability of their loyalty schemes in 2010.

They have been advised to concentrate their efforts on boosting loyalty of middle ranking existing members and finding new members.

A survey by ICLP, a global loyalty marketing agency, found just 31% of respondents said they planned to increase revenue by increasing membership while 36% said they would seek to drive more income from existing members.

The survey further found that just over a third were planning to focus on their ‘top tier’ customers while 21% would be concentrating on the ‘bottom tier’.
However, Stuart Evans, ICLP managing director, said the focus should be on less committed middle ranking customers.

He warned against alienating valued members by offering additional incentives to less loyal customers and said firms need to properly assess the value any loyalty programme brings to their business.

“Airline and hotel loyalty programmes need to strike the right balance between maximising revenue and retaining their customers, but more important is to understand their overall contribution to company success,” Evans said.

“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.

“The focus should be on less committed customers further down the programme who present a real opportunity to generate significant incremental revenues.”

A similar proportion of respondents were planning to increase revenue from increasing membership numbers (31%) and increasing spend from existing members (36%).

A further 21% of respondents said new acquisition of members was their top objective and only 13% highlighted improving programme return on investment at the main goal.

Evans added: “Airlines and hotels need to ensure their loyalty programme is well-managed and is aimed at generating long-term benefits to businesses, not just short-term profits.

“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.