Driving more revenue from loyalty

Every organisation can drive revenue from its core products and services but there are many ways to generate incremental revenue beyond your main offering. A loyalty programme is a vital tool in enabling this revenue opportunity to be maximized whilst providing added value to your members.

Creating additional revenue from a loyal base is at the heart of product extension given that you have a captive audience of members with a strong affiliation to your brand: being both a receptive and trusting audience. It is then your responsibility to provide relevant offerings to them at the right time.

The idea of maximising revenue outside of your primary product is not a new phenomenon but it is gaining interest from sectors and regions where the concept has not been prevalent before.

With the continuing global economic downturn and competitive environments where differentiation and value is business critical, many companies at global and regional levels are learning from the approaches already being undertaken and exploring new and innovative ways to generate revenue.

The best practice approach

This concept of revenue generation from a broad customer base has been extensively adopted across a wide variety of countries and sectors such as banks, airlines and hotels.

European banks have been generating significant incremental revenue for over a decade by building on the core product relationship they have with their existing current account customers. By enhancing and extending this product into one which provides banking and relevant lifestyle services and benefits, revenue is realised as customers pay a monthly fee for this added value product.

With over 75 million current accounts in the UK, 1 in 8 customers hold an added value account. These monthly fees range from between £5 and £25 per month and have proven extremely successful in generating significant recurring revenue streams for the banks.

Many airlines have adopted an unbundled strategy whereby they separate the central fare product from additional flight products and services, for example by charging a fee for checked luggage or on-board meals. This unbundling approach enables them to reduce the price of their main product and offer the customer choice for the remaining needs.

This provides the opportunity of securing additional revenue by offering products and services which are complementary to their fundamental proposition. For airlines, this includes travel related products such as travel insurance, car hire and hotel accommodation to meet the needs of the traveller beyond the flight itself. They do this by partnering with brands that are specialists in providing these services and in so doing earn commissions from the partner.

Loyalty programmes, and more importantly the data they capture can deliver deep customer insight offering an accessible and immediate potential source of additional revenue. Recognising customer needs and behaviour allows a brand to identify and build robust offerings that are relevant, add value, and meet wider lifestyle needs, beyond their main product requirement.

So how can you add value to your loyalty programme, and generate incremental revenue? Let's take an airline frequent flyer programme as an example - you will know Mr. Jones, a top tier member is travelling frequently from Melbourne to Sydney on business and is also a keen golfer. Why not offer him a great deal on a golfing weekend at a top resort during his trip?

Mr. Jones gets the opportunity to enjoy his favourite activity and you earn a commission from the golf resort partner. A win-win situation for all parties which creates a new touchpoint to engage Mr. Jones, and extends the value of your loyalty programme relationship with him.

Top tips for driving revenue and enhanced value

1. Partner with trusted specialists

In the current climate, customers more than ever are seeking brands they can trust and whose products and services provide real value. Loyalty programme members have already identified themselves as committed to your brand by seeking reward, recognition and value from the relationship.

By responding to member needs and partnering with trusted providers, the loyalty relationship can be further reinforced whilst simultaneously providing additional revenue opportunities for you.

To determine what products and services your members would value, and therefore identify potential partners, it is important to analyse and profile your member data to identify their behaviour and interests.

For example, it is known that wine is a leading interest of male British Airways (BA) Executive Club members. For years BA has leveraged this insight by offering access to a wine club in association with Laithwaites, a specialist wine merchant and well-known brand. This offers the additional benefit of being able to earn miles for purchases made, positively reinforcing that behaviour and enhancing the value proposition of being a member.

The recommendation is to ensure that you partner with trusted brands that match your brand promise and complement your audience profile. In this way you can ensure the delivery of a customer experience that is rewarding and in line with your quality standards.

2. Enhance member choice

Many airlines take a different approach to partner selection and choice. Some prefer to sell on the strength of just one partner whilst others offer a wide range of partners in the same category to enhance choice for customers. United Airlines have over 100 Mileage Plus partners worldwide across all its categories providing members with a plethora of choice.

Providing more choice can drive a higher sales conversion rate. Hawaiian Airlines found that increasing the car hire range from 1 to 5 has successfully increased conversions by 300%, driving significantly improved revenues.

3. Maximizing upsell and cross sell opportunities

Offering a range of additional services allows you to identify and create more reasons to engage with a member. This provides a greater opportunity to optimise the value of each customer touchpoint by upselling and cross selling throughout their wider experience.

The retail sector provides a benchmark for this strategy. Customers accept merchandising as a key part of the retail environment and expect to see point of sale offers and upselling during their shopping experience.

This can add real value to customers if the offers are targeted to meet their needs. Amazon is an excellent example and through smart profiling, they target customers with relevant product recommendations based on their needs and purchase behaviour. Other sectors should look to emulate this and implement strategies which are appropriate for their customers in order to increase revenues.

Take a strategic approach

If you do not feel you are maximizing the value of your loyalty programme members, it's time to evaluate the potential benefits an effective strategy can provide. It's not just about driving additional revenue and share of wallet but also how to increase the value of your loyalty programme to your members.

A sound strategy represents an enhanced opportunity to you if you already have a captive audience of loyalty programme members with unserved additional needs. The trick is to identify those needs and put your strategy in place to lock in your customers' loyalty and further lock out your competitors.