The Loylogic Podcast: Navigating New Horizons – the Evolution of Travel Loyalty Programs

The latest episode of the Loylogic Group Podcast brings together two experts to delve into the evolving landscape of airline and hotel loyalty programs.

Mustafa Ozalcin, Director of Global Partnerships at Loylogic, joins Martin Smaerup, Head of Sales at Pointspay, are both seasoned globetrotters and have worked on some of the most successful travel loyalty programs out there.

In this episode, we utilize this extensive knowledge to take a closer look at the ever-evolving landscape of airline and hotel loyalty schemes, especially in the wake of the seismic shifts brought about by Covid-19, and explore how loyalty programs can take advantage of the latest developments to better meet the needs of today’s members.

Topics explored include:

- Shifting generational loyalty and the notable shift in loyalty habits among millennials and Gen Z that indicate a demand for more flexible and relevant rewards programs.

- The impact of COVID-19 and how this has permanently altered travel behavior, with a renewed focus on the relevance of loyalty programs in everyday life, not just during travel. This shift underscores the importance of integrating loyalty rewards into daily activities to maintain engagement and relevance.

- Enhanced member experience that means loyalty programs need to offer more than just transactional benefits, leading to a new focus on creating memorable experiences and seamless interactions that resonate with the individual member's lifestyle and preferences.

- Technological integration and data utilization that enables the leveraging of technology and data analytics to offer real-time, personalized engagement opportunities.

- Expanding redemption opportunities that go beyond traditional travel benefits to include everyday purchases and experiences can significantly enhance the perceived value of loyalty points and increase member engagement.

- How by making loyalty points more integral to members' daily lives, programs can drive additional revenue streams and more effectively manage points liability.

This episode is a must-listen for loyalty program owners and marketing directors seeking to navigate the complexities of modern travel loyalty programs. Listen in full here or check out the full podcast transcript below:

Based on your experiences, have you seen any changes in the way airlines and hotels are trying to enhance their member experience and engagement, particularly since the game changer that was COVID-19?

Mustafa Ozalcin: "We're seeing the desire to take to the skies remain strong, but the shifting generational loyalty habits are sparking a new era for the travel industry. are in a study. Last year OAG did a study of 2,000 travelers, which found that almost 50% of millennials and 40% of Gen Z were more liable to change their loyalty with an airline. This was 15% for the baby boomers. So it's a given nowadays that millennials and Gen Z travelers are becoming increasingly influential in shaping travel trends.

"So what we're seeing is programs looking for partners to be able to provide more rewards relevant to their brand and their members based on their member demographic and geographic, as well as capabilities like seamless brand journey to their platform. And we're seeing this trend across many verticals, not just in the airline space."

Martin Smaerup: "I have to say, because COVID, of course, came as a shock for the majority of us, if not all of us, I would say, and it definitely changed behavior. There's no doubt that people want to be back in the air, but for what reason? Are they back in the air for leisure? Is it for business? And how often are they? So I think one of the core topics that I've spotted is that you kind of want to be more relevant for your audience in their everyday life. And not necessarily when they are in the air, but you have to be part of it on a daily basis to stay relevant. Right now, it's a matter of getting from A to B, it's probably been that for many years, or it has been that for many years, but it's also a question of getting there in the most seamless way at best price. If you want to start and continue collecting your points, or your miles, then it needs to tap into everyday life and not just when you're in the air."

(04:43) With everything you've said there, and as frequent fliers yourselves, are there any memorable experiences you've had as a rewards program member where the program has delighted you? Likewise, are there any bad examples that you can share or any frustrations?

Martin: "That's a good one, Austin. Well, actually, as late as last night, where during the day I was calling into the call center, and they said, 'Listen, you handle that when you get to the airport', and then, when you came into the airport, they said, 'Listen, you need to call the call center'. So that's of course, sometimes where you just get a little annoyed. I just wanted to rebook my seat. And fair enough, there's a price to rebooking a seat. But then it failed, so I needed to take that discussion up with them when I came to the airport. Fair enough, it's technology and can also have a flaw in it once in a while. But then they said, 'well, the flight is fully booked, and you haven't paid for the additional or the seat selection you did, or the change of seat. And so do you want to pay for it?' I said, 'no, not if the flight was full would I pay for the seat? Where would you then put me? Would you put me in another position? And where would that then be?' What a question. And then, of course, it came down to asking a manager to be allowed to release that part, instead of just have that way of thinking by themselves and having that that right to do that change without having to test, but everything worked out, so no harm in that sense. But it's just one where you need that alignment or that between the different departments as such."

(06:27) Did it make any difference that you are a rewards program member with that airline?

Martin: "Not in that situation. Of course, they always ask what level you are, and also this is changing because what is the right tier? Of course they want to nurture their 20% frequent fliers, that goes without saying, but imagine the potential in the remaining 80%!"

(06:52) Mustafa, what are your thoughts on good, bad and indifferent experiences?

Mustafa: "Martin touched on a lot of good points there about your airline operations. Again, loyalty programs rewards programs should absolutely in no way operate as an island within that organization. Everybody needs to be aware of the seamless experience. Program wise, memorable experiences are few and far between, because great airline product and experience does not equal great reward program! I think we need to underline that.

“As far as programs are concerned, you asked about frustrations, and you asked about the lockdowns. During that period, member status was, certainly by some of the programs I deal with, extended for a couple of years. But when it comes to the miles, ever since programs moved to a revenue base mileage accrual, which is pretty much most airlines. those miles have become a lot less valuable. I flew to Dubai a few months ago. And I was credited like 250 miles!

"When it comes to memorable experiences for rewards programs, if everybody's an elite member, nobody's an elite member. What do I mean by this? Points are credited as they should be. I can redeem easily if I can find seats, access lounges, priority lanes, things like that, as it should be. But to this day, I've never received the relevant offer based on my status, based on my demographic, based on my age, which is not too old. I get the same offer as everyone!

"The interesting thing is, hotels do a much better job with experiences. I want to touch on one experience that I had many years ago in Thailand. I flew to have a meeting there and was staying in the Bangkok Sheraton. It was an overnight flight, and when you arrived at the Sheraton, now, obviously Marriott Bonvoy, they offer you, if you're a Gold member, a choice of gifts when you arrive. I decided to have my shirt pressed. When they delivered it back, I realized they had stitched the top button back on, which had been missing for ages. That was a great experience as part of an offer that was made by the rewards program.

"But then, how do we quantify this as a program? How does the program manager even know that's happened? Hotels send out questionnaires. Most of the time, people don't respond, because they're not incentivized to really, but in this instance I did respond, because it was something happened that I was delighted with. But you can incentivize people to respond to questionnaires by offering them entry into like a prize draw for something, an experience somewhere. And then you can also incentivize your staff with a reward program for them an employee recognition program of some sort."

(10:15) So it's all about those golden moments, then isn't it those memorable experiences that actually your rewards are turned into? Following on from that, and taking on board the thinking, what can travel rewards programs do to better meet the expectations of their members for personalized experiences, golden moments, immediate rewards, etc?

Martin: "I would say it's a little bit delight and surprise, and it doesn't necessarily always have to follow a very strict rule setting, because you moved into that part of the program, then you're allowed to do this. So sometimes, just select that person in the plane, because that is something everybody can resonate with. Also, if you are in the back of plane and all of a sudden, somebody's just picked and upgrade, you see it and remember it. So sometimes, it's just surprising people.

"You also now see some of the programs starting to let the traveler decide what benefits fit them the best. And that is, in my view, a very interesting thought, because you start getting much more involvement with the program, instead of just having some predefined buckets that you fit into, because you now move from silver to gold to gold to platinum. But now you need to take a decision when you then move into the next tier level, okay, what benefits is actually the right one? For me, it's not a given because you're a frequent traveler, you love going to a lounge. Now you can decide if you want to add that benefit. It also enables airlines to gain much more knowledge around the user or the member. And in the end, then you all of a sudden have a different approach, and can be much more relevant in your marketing, instead of having segment-based mass marketing, where it's basically what you know, is age, gender, tier level, of course, and perhaps what co-brand card you have as well. So you can start making that much more appealing in your communication to the members as well."

(13:38) Does that apply to both frequent travelers and those who are in the air less often? Do we need to be thinking about rewards programs that cover and engage all members?

Martin: "From my point of view, yes, for sure. Or you need to make the currency, in this case the miles, more relevant for members. And as I mentioned before, it doesn't necessarily have to be in the air. There's many other ways of creating that relevancy. And if you can make it part of the everyday spend, the household budget, if you can start getting your currency into that mix, then for sure you are a step closer to having a more loyal member.

Airlines and hotels have the most aspirational thing you're looking for. Typically, when you get back from a vacation, the next thing your wife starts talking about is where do you want to go next time. And that's for sure is what they can provide. It's that dream, that moment of relaxation, or whatever you're doing when you're traveling, that they can bring. And if you can bring that into your everyday life that you are moving towards that, then for sure you are you're on a good track."

Mustafa: "The engagement touch points, there's many, it's not just in flight. It's before the travel booking. It's during the and then also after. We talked about the surveys and being incentivized to respond to those maybe and I've never received one from an airline ever. Why would they send a survey? I've reached my destination, everything is assumed to be fine. There's a wealth of data that the airlines can use as part of their operational practices. Not just airlines and hotels as well. You're using their Wi-Fi, you're doing a number of things that they can use. And there's a lot of great loyalty platforms out there that can enable programs to use that data, but the airlines themselves are so focused on the airline product, which the premium airlines are obviously very, very good, that the program falls by the wayside. So it's not a great experience in terms of programs, but a great experience in terms of the airline, but the program itself is, yeah, it works!"

(15:20) So how do we get the programs to a place where they do delight? What technologies can airlines and hotel chains leverage to optimize customer engagement?

Mustafa: "With airlines, it's generally a good experience. If you've gone from A to B, it's a good experience, unless you've had something that's not meant to have happened, such as a delay. When's your flights going to be delayed, the airline knows about that. Rather than waiting for the member to complain that there was a flight delay, more often than not, they won't, especially if it's a short delay. Airlines could reach out to all the members and their customers by apologizing for the bad experience that they may have had.

"There is compensation obviously, in various regions, I think in the UK, in Europe, it's like 300 euros if a flight is delayed for more than three hours, but what if it's delayed for an hour? Does that not count? Well it should. An airline knows that's going to happen, rather than waiting for the customer to complain, many won't, which is worse, because when we keep something inside, it's worse. After the flight has landed, they receive a message, apologies for the delay, we'd like to offer you some points which you can use to redeem on these products. Martin mentioned the various range of offers that you could provide. So pre-empting those kinds of things, and delighting customers from a bad experience. And if they're not a program, using that experience, that opportunity to enroll them into the program. There's a lot of things that airlines can do in that respect."

(17:17) How do you see technology playing out in this area?

Martin: "I think seamless technology is key. And that's basically also how I see the ideal travel for me. It's seamless, I'm basically going from A to B, that needs to be a good experience. Technology has to be the same, it should not be an obstacle for the member to utilize it, instead it should be playing alongside them. But also that it gives real time benefits, it gives real time interaction with the user, because that's the life you have today. That's what you live in today."

(18:02) Member demand for digital offerings has seen a sharp rise. I think that that's pretty obvious for all of us to see. And that has prompted the search for immediate opportunities to enhance the member journey and experience. Where can travel rewards programs quickly make improvements to enhance the digital member engagement experience?

Mustafa: "Again, it's an interesting one. As mentioned earlier, with Gen Z and Millennials being the most likely to change their loyalty programs, it's a given that they're becoming increasingly more influential in shaping travel trends.

"If we look at the technology that they're using, I may not be using it, but my daughter is on TikTok. The platforms that they're using, the social media platforms, what can we do from a marketing standpoint, from a branding perspective, to share information about the airline, gamifying the airline brand without having to fly on the airline? And what do you know about this airline? And then building on that, using that as a funnel to enroll them into the program. And then, going back to the point about after that, like then what? It's continuing that engagement with wherever those members are. And where are they online? Yeah, there are different airlines offering different things in terms of being able to use your miles for different offerings, being able to spend them everywhere, just offering various varying ranges of products and solutions that would resonate with your member base is important. Maintain that engagement throughout."

(19:53) Absolutely. So Martin, this is a topic that I know you're passionate about. What's your view here?

Martin: "Users need that seamless experience in their everyday life. That I think is key, but that also needs to follow through when they then travel. Because if you are starting to focus on one currency, and you want to start collecting that, it also needs to come through in a seamless manner when you need to use it, spend it. And in the end, of course, that goes from everything from your booking, to your check in to your checkout, when you're done with your flight, and you're checking out of the airport as well. And as Mustafa mentioned a couple of times you have an extremely nice value chain you can carry through, because you also know the destination you're flying to. So that could also be providing extra benefits around that destination when you're finally there, based on your potential micro-segmentation, so you're more relevant for the traveler when they arrive."

Mustafa: "Exactly. When you travel, as soon as you land in a particular location, your telco provider will send you information. Generally, for the airlines, I think I've received one from any of the airlines I that I've travelled with or I'm a member of. So you land and they say, these are the services that you can use from us, this is what it costs and they provide you with push messages, and they guide you. You may not always take advantage of those, but at least they're making the effort tell you that they know where you are and offer you whatever may be relevant. With the data that's available right now, it can be laser focused relevant."

Martin: "Mustafa, just to add to that point as well, because no matter where you travel in the world, you always have your currency with you. Of course you have your monetary currency, but you also have your points currency with you, so how can you make that relevant, no matter where you travel? How can you make that instantly available? Is it all about using it for flying? Is it all about using it for an upgrade? Or could it also be as simple as just buying a cup of coffee with your family when you've just arrived and you go to the nearest coffee house, be it in Rio de Janeiro, in London, or in New York, or in Bangkok. That currency, that relevance then for sure, is that small, little moment that also provides you with some loyalty towards the place you've earned it."

Mustafa: "Exactly, that's a great example. Generally the campaigns that are put out there, double miles, extra miles if you stay at this hotel, etc. But using Martin's example, with what's available today, you've landed, you're tired, you're waiting in the passport queue, you receive a message, here's 500 miles or 1000 miles or whatever the agreement may be, as part of that partnership, have a coffee on us at the nearest whatever that location is at the airport. You're very likely to take it up, here's how you can spend it. And if you can't spend it, if you're not a member of the program, you could send that to any passenger, you have their email, they've landed, enroll in this program. You can use the points here right now."

(23:34) We've talked a lot about engaging members. But it strikes me that there's an opportunity here for the programs themselves to use much of what we've talked about to drive revenue to the programs or to reduce points liability, etc. so Martin, what's your thoughts on that?

Martin: "Well, for sure that's not the only reason why the programs exist, but it's one of the reasons for sure, the ability to sell miles or sell points to partners and make sure that can be an extra revenue stream coming in. And especially the more engaged you get your members, the more relevant they find the currency, the more they will be chasing it or seeking it, or looking out for it. If you can make sure that you have a seamless way of being part of everyday life and not just credit card spend as we've known for many years, then all of a sudden you have a possibility of driving significant revenues to the program as well.

"On the flip side, also giving them the ability to redeem miles where it's relevant for them as well so you become much more a natural part a member's day to day way of interacting when you're outside of the of the airline as well.

"So there is a huge potential sitting in there. Going back to what I mentioned earlier, you have the 20%. Yes, they are important for you, I get it. I'm not going to argue against that. But 80% is more than 20%. And if you can start just activating a little bit of that part of your member base as well, there is a significant upside out there. I just think we have only seen the beginning."

Mustafa: "Martin summed it up pretty concisely there, and there's definitely a lot more that can be done in terms of what's offered. And depending on again, your region and certain regions, we're seeing that non air rewards make up half of the actual redemptions for certain airlines.

"Going back to the first question, post lockdowns people are looking into their wallets. Whether it's an airline loyalty wallet, hotel loyalty wallet, retail program, what have I got, where have I got value that I can use? So being able to reach those, or you can reach them and help them with their choices, and offering them that power of choice is something that is very important and should be a central component of any reward program."

(26:10) So, wrapping up the conversation, what are the key moves in the world of airline loyalty that you think program owners need to prioritize?

Martin: "In essence, I think that you need to focus on the customer experience. I know that's been a buzzword for many years, but you need to do it and you need to make sure that you're relevant. If you make your currency relevant in as many touch points as possible, also outside of flying, I think you're starting to find gold at the end of the rainbow if you put it that way."

Mustafa: "In a nutshell, we talked about the statistics in the US from OAG, with Gen Z and millennials more likely to switch their travel loyalty programs. So, looking at your member base and non-member base, to see what you can provide them to improve their experience, improve the experience of your program, again, great airline product does not equal great reward program. Reward programs have become commoditized.

“We need to look at who your member is, look at that data, and then decide what you may wish to offer them. Whether it's physical rewards, whether it's digital rewards, whether it's turning a negative experiences into a positive experience. Using the delay experience example I mentioned earlier on, unless you apply for your compensation for your delay, if it's over three hours, you will not receive that. Some people may not do that. So you have the day to day, you know the flight is delayed, give the compensation. If it's a delay of less than three hours, one hour, 45 minutes, which is not insignificant, especially if you've got kids, offer something. What is that something? That can be brainstormed at every stage of the traveler journey. Look at what can be done, and shaping the rewards program loyalty program, from that viewpoint, I think, is something that can definitely be improved for a lot of programs these days.

"So to summarize, it's all about using technology, different solutions to think outside the box to deliver this holistic experience for the program member, based on who that program member is."



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