Are Your Customers Profitably Loyal?

Are Your Customers Profitably Loyal?

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Airlines & Hotels going opposite direction in Loyalty!

In this tough economy.. the two major pillars in the Travel industry are going two different directions...

COLLOQUY Article

A travel article in the New York Times asks: "Given that both
airlines and hotels have been hit by the slowing economy, why the
disparity between their approaches to serving their best customers, the
frequent travelers?" The answer has a lot to do with competition. The
article states: "As hotel chains have proliferated, the industry has
become increasingly competitive."

If hotels ran on jet fuel would they, could they be as generous?

Here is a NewYorkTimes article on this topic.

My Views

I think the primary reason being the mix of Fix and Variable Costs and also the competition.

Fixed Cost for entering into Airline sector is so huge that you hardly find any new players entering in the established markets. On the other hand, in the Hotel industry, the Fixed costs are not as astronomical as in Airline industry.

The sheer number of available hotels and rooms make them competitive even for survival.

Airlines know that even if they jack-up prices, new competition is not going to enter the market and for all the existing ones, all are sailing in the same broken boat... so who cares?

On the other hand, though the variable cost in airline industry is considered a small portion (i mean the incremental cost of putting new passenger on a flight is almost nil). But that is true when you have empty seats. And when the jet fuel going through the roof one day and dropping in the sea within 3 months, there is too much uncertainty to keep empty seats. That's why we see so many airlines consolidating flights.. which means no empty seats anymore.

For Hotels, they don't have this problem and their daily running cost is far too less as compared to Airlines.

So given all this, you will see the two industries going completely different direction anyway.

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When Frequent Flyer points come to rescue in tough economic times

Post from Frequent flyers redeem miles to beat higher fares

"Airline
customers are cashing in more frequent-flyer awards this year, looking
to avoid higher fares and believing that miles just aren’t worth the
same anymore," reports Business Week. "With so many new ways
to earn miles—on everything from car rentals to groceries—savvy
travelers fear it’ll soon become harder to go where they want, when
they want for free."

"The glamour of the frequent-flyer award has faded," says Jay Sorensen, who ran the loyalty program at Midwest Airlines
and is now an airline consultant. "People are realizing that using
miles to go to Hawaii is a difficult objective," a thought reflected by
InsideFlyer publisher Randy Petersen: "They’re going to Boise,
Decatur and Bakersfield. They’re spending miles on family emergencies
or visiting grandma."

Business Week reports: "Continental Airlines
reports that through July, customers had cashed in 1.34 million awards
this year, up 21 percent from the same period last year."

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US Airlines Market looking down a hole

Some latest research suggest that there are lot of people who are refraining from even thinking to travel.. leave aside actual travel :D

Here is some research done by MarketingChartsTwo-thirds (66%) of Americans are concerned about high costs when
planning air travel - including ticket prices and baggage fees, and
more than half are also concerned about delays (56%) and the
possibility of terrorism (53%), according to a national survey conducted by Ipsos on behalf of Access America.

• Two-thirds (66%) of Americans are concerned about high costs when
  planning air travel - including ticket prices and baggage fees, and
  
• more than half are also concerned about delays (56%) and the
  possibility of terrorism (53%), according to a national survey conducted by Ipsos on behalf of Access America.
• Women (70%) are more likely than men (57%) to be concerned with costs, including ticket prices, baggage fees, and related fees.
• Women (58%) have a higher propensity than men (51%) to be concerned
  with delays resulting in missed connections and lost vacation time.
• Women (61%) are much more likely than men (47%) to be concerned about terrorism.
• Women (56%) are more likely than men (49%) to be concerned with baggage issues, including loss and delay.
• 45% of women, vs. 39% of men are more inclined to be worry about
  fewer flights to choose from and the onboard comfort and amenities that
  airlines are currently offering.
• Women (45%) are also more likely than men (36%) to be concerned about airline bankruptcies.

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Phskar Lele: Hindustani Classical Singer

One of my favorite classical singers with a gifted voice. Fortunately got a chance to interact with him on emails today... so thought of putting together a small placemark with some of his work..
Some links:

• Pushkar Lele - Underscore Records India Artiste

• Pushkar Lele’s much applauded Australian Tour

---

YouTube - Some more videos

Worth of FFP Credit Card : Good Article

Good article.. copying from
August 16, 2008

Your Money

Gauging the Worth of a Frequent-Flier Credit Card

By RON LIEBER

One after the other in recent weeks, airlines have altered their frequent-flier mile programs, adding fees, taking away bonuses and raising the number of miles you need for some free tickets.

But lost in fliers’ frustration over the changes is this: It may make more sense to change the credit card you use, not the airline you fly.

Consumers are currently holding about 45 million credit cards issued by United States banks that reward their users with frequent-flier miles, according to The Nilson Report, a payments systems newsletter. That number has held steady for three years.

This may be the year that number starts dropping. After a certain point, it will no longer make sense for many people to pay the annual fees that mileage cards usually charge and pay new fees to book tickets or upgrades. Will they also want to spend tens or hundreds of thousands of dollars on a card just so they can try to redeem miles for a single free plane ticket?

I’ve come up with five questions to ask yourself if you’ve still got a mileage credit card at the top of your wallet, and a number of alternatives for different types of cards. But first, some snippets from the program changes, just in case you’ve missed them:

US Airways has stopped giving bonus miles to members of its Dividend Miles program who have elite status, and the airline also added reward booking fees that range from $25 to $50.

American added a new online booking fee for rewards tickets and is about to raise the number of miles required for many flights. Moreover, its customers will soon have to pay new or increased co-payments much of the time, along with their frequent-flier miles, for upgrades to the front of the plane.

Delta added its own surcharges and also raised the number of miles customers will need to redeem for many free flights. Perhaps most interestingly, it introduced a three-tier price chart. For flights to 49 states (not including Hawaii) and Canada, for example, you could end up trading 25,000, 40,000 or 60,000 miles for a round-trip flight.

That 25,000-mile price for a free ticket has become somewhat sacred. The major airlines have increased the prices in miles for many other tickets, but not this one. How many people will give up on finding available seats at the 25,000 level, then hand over 40,000 or 60,000 miles? It’s hard to say, but Delta probably hopes that it is a lot.

The availability question gets to the heart of the matter. How hard is it to get free seats? And is it getting harder? The frustrating thing about this whole game is that we don’t really know the answers.

We don’t know how often average fliers get their first (or 10th) choice of flight or destination when trying to use their miles or just give up and buy the ticket. The airlines don’t tell us how many seats are available on any given flight or if more will become available later. Joe Brancatelli, proprietor of the business travel site joesentme.com, refers to frequent-flier programs as unregulated lotteries, which gets it about right.

Are fewer seats available for reasonable amounts of miles? Well, most major airlines are reducing the number of seats they fly, often by double-digit percentages. Flights are extremely crowded. But the airlines keep selling their miles to credit card companies and others that want to give them away to their own customers.

That means more miles are chasing fewer seats, even if the airlines aren’t reducing the number of seats on each flight that customers can book with a reasonable amount of miles.

It’s tempting to throw up your hands in despair at the lack of information. But there are several questions that can help you determine whether you want to keep adding miles from credit card spending to the miles you earn on the plane. Start with these:

DO YOU CARRY A BALANCE? If you don’t pay your bill in full each month, you’re excused from this discussion. You’ll do better by using cards with lower interest rates than frequent-flier mile cards, which generally have pretty high rates.

ARE YOUR CHILDREN IN SCHOOL? If they are, you’ll be fighting everyone else who wants to travel at the same time. The airlines, knowing your desperation to get out of town, may make fewer free seats available during school vacations, since the airline will probably sell all the seats on those flights anyway.

DO YOU HAVE ELITE STATUS? Some airlines — like American, Northwest, United and Continental — carve out additional inventory of free seats at their lower mileage levels for some or all customers with elite status. That inventory, plus the bonus miles that most airlines still offer to elite members, make a mileage credit card more attractive.

ARE YOU A BIG SPENDER? If you’re wealthy, or can run business expenses through your card, you can earn six figures in miles from card spending alone each year. A huge mileage balance gives you the ability to exchange those miles for premium-class overseas tickets, which could cost $10,000 or more if you bought them with cash. Miles are worth a lot more if you redeem them for this sort of travel.

DO YOU VALUE UPGRADES? It can be easier to get upgrades from coach using miles than it is to book free seats. Business travelers value the ability to get better seats when employers won’t pay for them, and leisure travelers may be willing to burn piles of miles for upgrades to seats they wouldn’t otherwise be able to afford.

So if you’re a big spending frequent traveler and think the value is still there in trading miles for upgrades, you may want to keep collecting miles via credit card spending. If you’re ready to switch to a new primary credit card, however, here are three other types of rewards cards that will probably be most appealing:

CASHBACK CARDS These cards give you money back based on what you charge. Sometimes the money comes as a credit toward your balance, and sometimes you get a check. You may get the money quickly, or it can take more than a year. The average card gives you 1 percent of everything you spend, but others offer much higher yields.

The American Express Blue Cash card is good for big spenders. Once you’ve spent $6,500 in a year, starting on the date you got the card, you get 5 percent back for purchases at gas stations, drug and grocery stores and 1.5 percent everywhere else. For that first $6,500, you get 1 percent at those three types of stores and 0.5 percent elsewhere. There’s no limit on what you can earn in a year and no annual fee.

If you spend a bit less and patronize merchants who don’t take American Express, the Pentagon Federal Credit Union’s Visa Platinum Gas Cash Reward card is a good choice. You earn 5 percent back for gas purchases you make at the pump, 2 percent back at grocery stores and 1.25 percent everywhere else. There’s no limit on what you can earn in a year.

If you don’t meet the normal eligibility requirements, you can still qualify for PenFed credit union membership by joining the National Military Family Association for $20, a good investment for this otherwise fee-free credit card.

One other footnote here: Issuers of the Delta and United credit cards have made it possible to essentially trade each mile for a penny that can be used to buy seats on a plane. A good cashback card will yield a better return than availing yourself of this particular option, though.

GENERIC POINTS CARDS These cards issue points, usually one for every dollar you spend, that you can trade for travel on many (or any) airlines and for merchandise and other goodies. There are some caveats, though. With many of the cards, there may be a limit on the price of the flight you can redeem your points for, restrictions on the airlines you can use or a Saturday night stay requirement. The points may expire, too.

American Express’s Membership Rewards points program, available on many of its cards, avoids many of these restrictions, and you can also trade the points for real frequent-flier miles on many airlines.

Many frequent-flier programs are creating ways to trade miles for things other than free flights and upgrades, in an effort to make miles resemble these generic points. These new rewards, however, tend not to be as valuable as the traditional freebies.

HOTEL POINTS CARDS The Starwood Preferred Guest American Express card is popular among rewards program aficionados. There tend to be few availability problems when redeeming points at Starwood hotels, like Westin and Sheraton, and you get good value compared with what you’d pay in cash for the same rooms, particularly overseas. You can also exchange your points for miles on many airlines, and you get a 5,000-point bonus when you trade in 20,000 points for miles.

Want to shop more widely for cards based on your own spending patterns? The card selection tool at creditcardtuneup.com takes your data and shows you what you’d earn with a few dozen of the best rewards cards.

Are you keeping your card? Write to rlieber@nytimes.com.

Your Money - Gauging the Worth of a Frequent-Flier Credit Card - NYTimes.com

August 16, 2008
Your Money
Gauging the Worth of a Frequent-Flier Credit Card
By RON LIEBER

One after the other in recent weeks, airlines have altered their frequent-flier mile programs, adding fees, taking away bonuses and raising the number of miles you need for some free tickets.

But lost in fliers’ frustration over the changes is this: It may make more sense to change the credit card you use, not the airline you fly.

Consumers are currently holding about 45 million credit cards issued by United States banks that reward their users with frequent-flier miles, according to The Nilson Report, a payments systems newsletter. That number has held steady for three years.

This may be the year that number starts dropping. After a certain point, it will no longer make sense for many people to pay the annual fees that mileage cards usually charge and pay new fees to book tickets or upgrades. Will they also want to spend tens or hundreds of thousands of dollars on a card just so they can try to redeem miles for a single free plane ticket?

I’ve come up with five questions to ask yourself if you’ve still got a mileage credit card at the top of your wallet, and a number of alternatives for different types of cards. But first, some snippets from the program changes, just in case you’ve missed them:

US Airways has stopped giving bonus miles to members of its Dividend Miles program who have elite status, and the airline also added reward booking fees that range from $25 to $50.

American added a new online booking fee for rewards tickets and is about to raise the number of miles required for many flights. Moreover, its customers will soon have to pay new or increased co-payments much of the time, along with their frequent-flier miles, for upgrades to the front of the plane.

Delta added its own surcharges and also raised the number of miles customers will need to redeem for many free flights. Perhaps most interestingly, it introduced a three-tier price chart. For flights to 49 states (not including Hawaii) and Canada, for example, you could end up trading 25,000, 40,000 or 60,000 miles for a round-trip flight.

That 25,000-mile price for a free ticket has become somewhat sacred. The major airlines have increased the prices in miles for many other tickets, but not this one. How many people will give up on finding available seats at the 25,000 level, then hand over 40,000 or 60,000 miles? It’s hard to say, but Delta probably hopes that it is a lot.

The availability question gets to the heart of the matter. How hard is it to get free seats? And is it getting harder? The frustrating thing about this whole game is that we don’t really know the answers.

We don’t know how often average fliers get their first (or 10th) choice of flight or destination when trying to use their miles or just give up and buy the ticket. The airlines don’t tell us how many seats are available on any given flight or if more will become available later. Joe Brancatelli, proprietor of the business travel site joesentme.com, refers to frequent-flier programs as unregulated lotteries, which gets it about right.

Are fewer seats available for reasonable amounts of miles? Well, most major airlines are reducing the number of seats they fly, often by double-digit percentages. Flights are extremely crowded. But the airlines keep selling their miles to credit card companies and others that want to give them away to their own customers.

That means more miles are chasing fewer seats, even if the airlines aren’t reducing the number of seats on each flight that customers can book with a reasonable amount of miles.

It’s tempting to throw up your hands in despair at the lack of information. But there are several questions that can help you determine whether you want to keep adding miles from credit card spending to the miles you earn on the plane. Start with these:

DO YOU CARRY A BALANCE? If you don’t pay your bill in full each month, you’re excused from this discussion. You’ll do better by using cards with lower interest rates than frequent-flier mile cards, which generally have pretty high rates.

ARE YOUR CHILDREN IN SCHOOL? If they are, you’ll be fighting everyone else who wants to travel at the same time. The airlines, knowing your desperation to get out of town, may make fewer free seats available during school vacations, since the airline will probably sell all the seats on those flights anyway.

DO YOU HAVE ELITE STATUS? Some airlines — like American, Northwest, United and Continental — carve out additional inventory of free seats at their lower mileage levels for some or all customers with elite status. That inventory, plus the bonus miles that most airlines still offer to elite members, make a mileage credit card more attractive.

ARE YOU A BIG SPENDER? If you’re wealthy, or can run business expenses through your card, you can earn six figures in miles from card spending alone each year. A huge mileage balance gives you the ability to exchange those miles for premium-class overseas tickets, which could cost $10,000 or more if you bought them with cash. Miles are worth a lot more if you redeem them for this sort of travel.

DO YOU VALUE UPGRADES? It can be easier to get upgrades from coach using miles than it is to book free seats. Business travelers value the ability to get better seats when employers won’t pay for them, and leisure travelers may be willing to burn piles of miles for upgrades to seats they wouldn’t otherwise be able to afford.

So if you’re a big spending frequent traveler and think the value is still there in trading miles for upgrades, you may want to keep collecting miles via credit card spending. If you’re ready to switch to a new primary credit card, however, here are three other types of rewards cards that will probably be most appealing:

CASHBACK CARDS These cards give you money back based on what you charge. Sometimes the money comes as a credit toward your balance, and sometimes you get a check. You may get the money quickly, or it can take more than a year. The average card gives you 1 percent of everything you spend, but others offer much higher yields.

The American Express Blue Cash card is good for big spenders. Once you’ve spent $6,500 in a year, starting on the date you got the card, you get 5 percent back for purchases at gas stations, drug and grocery stores and 1.5 percent everywhere else. For that first $6,500, you get 1 percent at those three types of stores and 0.5 percent elsewhere. There’s no limit on what you can earn in a year and no annual fee.

If you spend a bit less and patronize merchants who don’t take American Express, the Pentagon Federal Credit Union’s Visa Platinum Gas Cash Reward card is a good choice. You earn 5 percent back for gas purchases you make at the pump, 2 percent back at grocery stores and 1.25 percent everywhere else. There’s no limit on what you can earn in a year.

If you don’t meet the normal eligibility requirements, you can still qualify for PenFed credit union membership by joining the National Military Family Association for $20, a good investment for this otherwise fee-free credit card.

One other footnote here: Issuers of the Delta and United credit cards have made it possible to essentially trade each mile for a penny that can be used to buy seats on a plane. A good cashback card will yield a better return than availing yourself of this particular option, though.

GENERIC POINTS CARDS These cards issue points, usually one for every dollar you spend, that you can trade for travel on many (or any) airlines and for merchandise and other goodies. There are some caveats, though. With many of the cards, there may be a limit on the price of the flight you can redeem your points for, restrictions on the airlines you can use or a Saturday night stay requirement. The points may expire, too.

American Express’s Membership Rewards points program, available on many of its cards, avoids many of these restrictions, and you can also trade the points for real frequent-flier miles on many airlines.

Many frequent-flier programs are creating ways to trade miles for things other than free flights and upgrades, in an effort to make miles resemble these generic points. These new rewards, however, tend not to be as valuable as the traditional freebies.

HOTEL POINTS CARDS The Starwood Preferred Guest American Express card is popular among rewards program aficionados. There tend to be few availability problems when redeeming points at Starwood hotels, like Westin and Sheraton, and you get good value compared with what you’d pay in cash for the same rooms, particularly overseas. You can also exchange your points for miles on many airlines, and you get a 5,000-point bonus when you trade in 20,000 points for miles.

Want to shop more widely for cards based on your own spending patterns? The card selection tool at creditcardtuneup.com takes your data and shows you what you’d earn with a few dozen of the best rewards cards.

Are you keeping your card? Write to rlieber@nytimes.com.

Airline Cost Cutting: The Axe is on Lounges

"United Airlines announced this month that it was
shutting four of its 38 Red Carpet clubs, after closing three others in
the United States and overseas in the last few years," reports the New York Times. "Delta recently closed nine of its 47 Crown Rooms in the United States and abroad, while both American Airlines and US Airways are closing one club each."

Recent and upcoming closures of at least one lounge:

• US Airways (Baltimore-Washington International)
• United (Cleveland; Hartsfield-Jackson Atlanta International;
  Baltimore; Dallas Fort Worth International; Minneapolis St. Paul
  International; Sydney, Australia; and London Heathrow Airport)
• Delta (Boston; Cincinnati; Kansas City, Missouri; Seattle; San
  Juan, Puerto Rico; Phoenix; Denver; Honolulu; and London Gatwick
  Airport)

Source : Click Here
Source : COLLOQUY

When Loyalty Program Saves the Airline: United Story

UAL Corporation, the holding company whose primary subsidiary is United Airlines, has announced that it has reached an agreement in principle with its Mileage Plus co-branded bank card partner, Chase Bank, and Paymentech, one of its credit card processors, to extend the term of their respective agreements.

As part of the transaction, United will receive a payment of $600
million from Chase, which relates to the advance purchase of frequent-flyer miles and the extension of the contract. The company
also expects this transaction will improve cash flow by about $200
million in the next two years.

In addition, the level of reserve or holdback that United is
required to maintain under its credit card processing agreement with
Chase / Paymentech L.L.C. has been reduced to $25 million. This
reduction will result in the release of approximately $350 million in
previously restricted cash.

As a result of its agreement with Chase, the company expects to
increase its cash position by approximately $1.2 billion, including $1
billion in the short term and an additional $200 million over the next
two years. Combined with the previously announced approximately $550
million raised from new transactions in the second and third quarters,
the company will have increased its total cash balance by $1.7 billion
and continues to have more than $3 billion in unencumbered hard assets.

Source: United Airlines

Source: COLLOQUY

Qantas: Another Airline to sell Loyalty?

Qantas To Vote On Spinoff Of Frequent-Flier Program






"The sum of the parts is worth moe than the whole." That maxim may
be particularly applicable in the case of airlines and their
frequent-flier programs.

The strategic thinking behind the announcement made by Qantas,
Australia's dominant airline, of a plan to spin off its customer
loyalty programs conformed to the rationale of finding value through
judicious breakups. In a statement, Chief Executive Officer Geoff Dixon
remarked that improvements to the company's frequent-flier program in
the past year have reinforced Qantas's view of its value as a
stand-alone business after further enhancements are made. The partial
initial public offering plan, along with the future ownership structure
of the programs, will be voted on by the Qantas board at its next
meeting in August, Dixon said. The plan could be completed as soon as
this year.

A floating of the frequent-flier program as an independent entity was pioneered by Air Canada
(other-otc:
AIDIF -

news
-

people
) as part of a radical restructuring under protection from creditors. That resulted in the successful IPO of Groupe Aeroplan
(other-otc:
GAPFF -

news
-

people
) in 2005. Today, Groupe Aeroplan commands a market value of 3.45 billion Canadian dollars ($3.39 billion), more than quadruple Air Canada's 799 million Canadian dollars ($784.54 million).

The Australian newspaper reported last year that Qantas had
planned to offer Groupe Aeroplan a strategic stake of less than 50% in
a domestic listing that could value Qantas's own frequent-flier program
in the billions of dollars.

Also on Tuesday, Qantas unveiled a new program for frequent fliers
on routes operated by it and its budget unit, Jetstar, that would allow
redemption of frequent-flier points for any seat on any flight. That is
similar to the incentive program its smaller competitor Virgin Blue
(other-otc:
VBHLF -

news
-

people
)
launched in November 2005 to popular acclaim. Virgin Blue said that
while its program was free to join online, Qantas's charges a
membership fee of 82.50 Australian dollars ($79.33).

Qantas said the membership of its frequent-flier program has
expanded to more than 5 million over its 21-year history and that it is
currently adding more than 5,000 passengers each week.

In Tuesday trading in Sydney, Qantas
(other-otc:
QUBSF -

news
-

people
) shares surged by 6.6%, to close at 3.24 Australian dollars ($3.12).

Bursting Retail Customer Loyalty Myth

Good Article.... Here is the original

Retail Viewpoint - Churn rates should turn grocers' stomachs

Despite all the talk of customer loyalty among the global
grocers some pretty shocking statistics were dished out the other day
that rubbish the claims made by many supermarkets that they are having
a meaningful relationship with their customers.

by Glynn Davis

A
report by Pitney Bowes Group 1 Software on customer churn found that
the supermarkets had experienced the highest growth in customer
defection rates between 2005 and 2007, compared with other sectors,
with an increase from 19.8 per cent to 27.4 per cent - a massive 38 per
cent jump.

The main reasons it cites for churn are - not being
recognised as a valuable customer, unhelpful staff, and ineffective
call centres. It's my guess that all the UK supermarkets would lay
claim to being good in all these areas but these numbers suggest
otherwise.

And guess which country has the greatest churn rates -
Britain. With 22 per cent churn per annum it has the most promiscuous
shoppers in the West. This is put down to things like its crowded
geography and national wealth per capita. But whichever way you cut it
the report is pretty damning of the UK grocers and their inability to
hang on to their customers.

What makes matters worse is that 2008
will possibly show even higher churn rates because we are in the midst
of a great movement of shoppers between the major grocers. Many are
returning to Morrisons after previously losing them to Tesco following
the troubled acquisition of Safeway, Asda has been shouting about its
continued attraction to more upmarket customers, and Waitrose seems to
be tempting people from a broader demographic as it continues to expand
its estate around the UK.

We await with interest next year's
survey but in the meantime try showing a little bit more loyalty to
your friendly local supermarket - as painful as that might be.

Brand value is increasingly about own-brand

Interbrand
published its first 'Top Performing European Retail Brands' report last
week, which ranked the top 25 companies based on various criteria
defined by the branding specialists. In addition to the surprise of
finding that H&M had topped the table was the fact that own-brand
products play a large part in the businesses of many of the
constituents in the list.

A sizeable 60 per cent of the top 25
have own-brand accounting for over 30 per cent of their total revenues
and even more amazing is that three of the top five brands sell only
private label goods - these being H&M, IKEA (in third place) and
M&S in fifth spot. And the other two retailers in the top five -
Carrefour and Tesco - both continue to develop their own-brand offers
with the latter pushing the Tesco name ever-further into non-food
products and services too.

This indicates just how significant a
contribution own-brand product makes to a retailers' overall brand
value and how they are now regarded as a brand weapon. They are also
able to help a merchant create a much clearer value proposition to
customers.

It will be no surprise whatsoever to find that this
trend continues as own label not only makes its presence increasingly
felt within the European retail market but also spreads further into
the US and Asia where it is much less developed.

http://www.rewardprograms.org/

http://www.rewardprograms.org/

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CRM 2.0: a Loyalty Marketing Benefit of Web 2.0?

Here are several excerpts from a very interesting article: CRM 2.0: a loyalty marketing benefit of Web 2.0? (free registration required):

The
concept of customer-centricity is evolving, and changes in the business
and social world are already forcing businesses to change the way they
approach management and marketing strategies, says Vladimir Dimitroff
of UK-based Prism Consulting,
who suggests that perhaps the advent of 'Web 2.0' technologies should
naturally lead to the reinvention of CRM systems: 'CRM 2.0', in fact.

What
began as awareness of age-old business principles, brought to
modern-day marketing with critical help from technology, has now
reached a stage where the technology-empowered, connected world is
calling for new approaches in marketing and most other management
disciplines.

The story so far:
The notion of customer
focus dates from ancient times when the small businessman, unknowingly,
practiced CRM in a most natural manner. In modern days, concepts like
relationship marketing emerged in the early 80s but it was only in the
mid-90s when technology propelled these practices into the mainstream
and CRM became a recognised (and, for a while, much hyped) business
discipline.

Since then, CRM has evolved considerably, if
gradually. The software industry rapidly embraced it and made CRM a
class of technology solutions, misleading many to believe that "CRM can
be bought and installed".

Changes for the Customer:
'Customer'
in CRM 1.0 meant it was critical to recognise the importance of
customers for any business, and the fact that they are individuals, not
a grey anonymous mass with 'typical' preferences (statistical averages)
and 'common denominator' needs. The fundamental differences between
'the market' and the customers who inhabit it are yet to be understood
by many business managers, including marketers and even academics. But
today seeing them as individuals is not enough - they are intricately
interconnected with each other, and with the business.

Changes for the Relationship:
It
was originally important to recognise that relationships are two-way.
In the pre-CRM model of 'broadcast' relationships (one-to-many) it was
often said that the customer has a relationship with the brand. But
that was not enough. CRM 1.0 did much to change this, not least with
sales-oriented database technology. Today we recognise that not only
our business has relationships with each customer, but they also are
related to each other in multiple and complex ways.

Loyalty was
(and remains) the ultimate mantra of customer-centric business. Almost
separate from CRM, there is an entire 'loyalty industry', not to
mention scholars and entire academic schools devoted to it. They keep
proving that loyal customers are more profitable, while retention
protects a market share that should translate into shareholder value.
But in today's world of choices hardly any business can command the
total devotion and unconditional loyalty of each customer.

Split loyalties:
There
is a new breed of promiscuity, or 'split loyalty' whereby most
customers persistently satisfy parts of their needs from 2 or more
alternative suppliers.

Changes for the Management:
For
the management of customers, CRM 1.0 dictated that they should be
individually identified, their differences understood, and each one (or
group of similar customers) treated differently from other customers or
groups. This brought the discipline of customer segmentation - one
cannot overstate the importance of understanding how this is different
from market segmentation. Whereas in segmenting markets we distinguish
between groups but are not aware of individual members, in customer
segmentation each individual customer is known to belong to a
particular segment - and, furthermore, is known to exhibit a set of
attributes (with a very individual accuracy, usually a score) that
qualifies him as belonging to a segment.

Good CRM dictates that
this differentiated view is used not only for marketing and service
levels, but in every end-to-end customer process, in planning and
managing the operations and financial returns of the company. CRM 2.0
recognises the complexity and dynamism of customer attributes (even the
same customer A may exhibit a different 'score' when interacting with
his related customer B from the one displayed with related customer C).
The streamlined dimensions of strategic segmentation (usually a
value/needs matrix) become a multidimensional maze that, to make things
even more complicated, pulsates in all directions as dimensions change
with each interaction. To operate successfully in a networked
environment, companies are learning and adopting micro-segmentation -
and linking it to dynamic decisioning in their systems. The discipline
of social network analysis (SNA) is also evolving and some amazing
progress is happening as we speak, as always helped by technology.

With
CRM 2.0 every stakeholder has become an intermediary - to continue the
trend of coining 'clever' wording, I might call it poly-intermediation
or multi-intermediation. In a viral or WoM (word-of-mouth) campaign a
company has as many intermediaries as it has been able to reach through
those all-important connected influencers.

Web 2.0 dies without CRM 2.0...
Dimitroff
believes that the much-hyped Web 2.0 is the enabling platform but that
it cannot be a successful model in itself unless it also embraces CRM
2.0 principles. Understanding this will make all the difference in the
imminent shrinking of the 'Web 2.0 industry' at the tail of the hype
cycle (perhaps not a dot-com-like implosion, but some correction is
definitely to be expected soon).

In a press release about a
recent acquisition of a UGC web site, a marketing executive declared
"We enter the social networks arena because it's a powerful way to get
our message across". But communities don't really want powerful
messages. Instead, marketers should be inside the networks to listen,
not to shout... and, just occasionally, to whisper in the right ears.

Dimitroff's
advice to would-be CRM 2.0 practitioners is to keep building the
remaining parts of CRM 1.0. But while they build, there's nothing to
stop them from adopting low-cost (and low-risk) CRM 2.0 methods and
techniques.

For much more detail, check out the complete source article.

Web 2.0 can help you drive Loyalty

(Original Article: By Joe Lichtenberg
Customer engagement drives loyalty and the effective use of Web 2.0 drives customer engagement.

If you're like most marketers, you'll agree that loyalty pays. The statistics that a brand should focus on its most loyal customers are compelling:

• An increase of customer loyalty of 1 percent is equivalent to a 10 percent cost reduction (source: Bain & Co.)
• The probability of selling to a new prospect is only 5 percent to 20 percent while the probability of selling to an existing customer is 60 percent to 70 percent (source: Marketing Metrics)
• Customer loyalty accounts for 38 percent of margin, 40 percent of revenue growth and 38 percent of shareholder value (source: Accenture Research).

Despite these findings, a just released report by Strativity Group found that although respondents declare that customer loyalty strategies are more important than they were three years ago, a full 60 percent of senior executives claim they do not deserve their customers' loyalty! "Respondents honestly admitted that they are selling commodities and that their core value proposition does not merit customer loyalty," says Lior Arussy, company founder.

What should these executives be doing to deserve the loyalty of their customers?

Customer engagement drives loyalty, and effective (and judicious) use of Web 2.0 drives customer engagement. Marketers that embrace these technologies and integrate the new brand/customer dynamic into their strategies will engender the loyalty of the customers. And as Web 2.0 and social networking tools and technologies move even further into the mainstream, marketers that don't go down this road may be left behind, doomed to compete based solely on price.

Here are the four new laws of customer loyalty in today's Web 2.0 world:

Loyalty Law #1: Drive community participation
Loyalty Law #2: Don't just talk to customers … listen.
Loyalty Law #3: Meet customers' expectation of honesty.
Loyalty Law #4: Reward your best users

Loyalty Law #1: Drive community participation

People naturally congregate around common passions or interests.
Connecting and interacting with others who feel the same way and who
share common experiences creates stronger bonds. Savvy marketers use
this level of participation as the foundation of their online
communities and as a cornerstone of their loyalty efforts.
In a report titled "The Social Influence of Brand Community: Evidence from European Car Clubs,"
Paul Dholakia, an assistant professor of management at the Jesse H.
Jones Graduate School of Management, said that it's not a matter of
attempting to directly influence consumers, but of providing them
support in interacting with each other through activities of their
brand community, which, in turn, increases their level of engagement
and loyalty."
Loyal customers already have an affinity for a brand's products or
services, and they will instinctively be drawn to a brand's online
community. Customers who are strongly engaged in the brand community
are more likely to remain attached to the group, participate in group
activities more often, and recommend the brand community to
non-members. What's more, research shows that customers who are engaged
in an online community stay longer and buy more. According to the
Ogilvy Loyalty Index, such customers can be worth up to six times the
value of an average customer.
In addition to driving loyalty, inviting customers to participate in
the brand is an effective marketing research tool. After all, who knows
how to best market to your target market than your target market
itself?

Loyalty Law #2: Don't just talk to customers … listen

Faced with a deluge of marketing messages, increasing resistance and
negativity towards advertising and marketing in general, and a growing
array of communication channels, the conversation between the brand and
customer must change. A one-way, marketing-driven conversation no
longer engages customers. Building trust and earning loyalty is the act
of creating a dialogue with customers: talking, sharing and, above all
else, listening.
Marketers have at their fingertips an array of technologies (such as
blogs, forums, chat rooms and online communities) to facilitate
conversations with their customers. Being able to easily contribute
opinions and ideas connects the customer to the brand, but what
strengthens this relationship is when the brand embraces the customer
as a partner in the dialogue, and truly listens to what he/she has to
say, and acts on it. In fact, experts say that the very act of
listening deepens customer loyalty.
Ducati, the Italian motorcycle company, is putting customer-driven
innovation and participation at the crux of its marketing efforts.
Ducati engages its customer community to provide feedback on design,
performance and general customer experience. Blogs have replaced formal
research methods, and through new media communication tools, Ducati is
embracing its customer community in an ongoing, real-time, informal
feedback loop. In fact, the company now calls itself a tribe of
employees and customers who share emotions and fight together.

Loyalty Law #3: Meet customers' expectation of honesty.

Delivering consistently on the brand promise plays a greater role in
creating loyal customers than any other customer-facing capability,
accounting for one-third of an organization's ability to achieve high
customer loyalty, according to marketing and customer management
research by Accenture. In fact, for all companies in the study,
regardless of their industry or business model (i.e.,
business-to-consumer, business-to-business, et cetera), developing and
delivering a branded customer experience comprises 33 percent of a
company's ability to achieve strong customer loyalty.
How does social media affect customers' expectations of the brand?
In the Web 2.0 world, consumers look for different traits from brands.
While on one hand customers expect that the brand will deliver a
quality product or service, the new brand/customer dynamic also raises
the expectation that brands will behave a certain way online. In the
realm of social and user-generated media, brands must be honest about
their opinions and their identity.
As Max Kalehoff writes in his blog, consumer-generated marketing
means "entering into direct conversations with consumers, where there
is a far greater expectation of humanness, honesty and transparency." I
believe that the best rule of thumb is to follow the WOMMA (Word of
Mouth Marketing Association) Ethics Code Honesty ROI:

• Honesty of Relationship: You say who you're speaking for
• Honesty of Opinion: You say what you believe
• Honesty of Identity: You never obscure your identity

Loyalty Law #4: Reward your best users

Information, how you want it, when you want it: By serving community
members and customers with useful and informative content delivered
regularly, marketers can drive loyalty and enhance brand value at the
same time. Delivering valuable information is an easy way to create a
relationship based on trust. To drive loyalty, optimize content
delivery and discovery, make it easy for customers to find and access
this information, and share it with others. And, this means giving
links and feeds that are relevant to the customer, even if they are not
the brand's content.
Brands can also use content to extend their current loyalty
initiatives: for instance, by offering premium content, special
promotions, or access to exclusive information, chats, and forums to
loyal customers.
While some may believe that customer loyalty is waning in response
to the transparency of the web, Web 2.0 actually gives marketers an
exciting new set of tools to add to their portfolio to help improve it!
And these loyalty laws help marketers do exactly that, and drive bottom
line results.

Frequent flyer programs — cash cow for airlines

An article in the International Herald Tribune (and New York Times)
says that: "Many airlines around the world earn hundreds of millions of
dollars a year by selling miles to partners like credit card companies
and hotel chains. Those companies, in turn, give the miles to customers
as sign-up bonuses or rewards for hotel stays. That revenue is critical
for the airlines in an era of escalating fuel prices, but it has also
changed frequent-flyer programs into more complex businesses, where
flyers are just one of the constituencies carriers are trying to
please."

InsideFlyer’s Randy Peterson, quoted in the article,
says, "The real change over the years has been the evolution from being
a loyalty program for the airline’s best customers to today being
a currency program for anybody’s best customers."

Interesting bits from the article:

• 15-20 percent of miles are being redeemed for non-airline rewards
  (four years ago, that figure was less than 5 percent)
• Miles earned continues to outpace award-seat capacity
• The going price for a mile to outside issuers: 1-3 cents
• Outstanding miles from three major airlines as of EOY 2007: upwards of 1.5 trillion (613 billion at American Airlines’ AAdvantage, 510 billion at Delta’s SkyMiles, 488 billion at United’s MileagePlus)
  
• American’s AAdvantage net in 2007: 50 billion unredeemed miles (200 billion issued, and 150 billion redeemed)

For more frequent-flyer program statistics/facts, see our article.

http://www.iht.com/articles/2008/04/01/business/frequent.php

• What began 27 years ago as a way to win the loyalty of travelers has turned into a lucrative business for the airlines.
• The best snapshot of a loyalty program's performance comes from
  Aeroplan, a business that Air Canada spun off in 2005. It now operates
  as a publicly traded trust, and it reported earnings of $185 million
  last year on revenue of $926 million. The success of the Aeroplan
  spinoff has put pressure on other carriers to consider a similar
  strategy.
• Last year, Qantas, Delta, United, Northwest and American expressed
  interest in exploring that option, although with high oil prices and
  merger talks, the consensus is that no carrier in the United States is
  likely to spin off its frequent-flier program in the near future.
• "We're at a turning point," said Jeff Robertson, managing director for
  Delta's SkyMiles program. He said its members earned 27 percent more
  miles in 2007 than in 2004, yet the capacity allocated for award seats
  remained flat.
• While most carriers have customarily been tight-lipped about how much
  they earn from these programs, more details are starting to emerge.
  United reported revenue of $800 million last year from selling miles,
  while Qantas earned $218 million in the last half of 2007 from mileage
  sales to third parties.

AMR: Retail Loyalty Program Roadmap: Strategy, Best Practices, and Technology Options

The Retail Enhanced Loyalty Program Roadmap: Strategy, Best Practices, and Technology Options Thursday, March 16, 2006 Robert Garf, Janet Suleski, Fenella Sirkisoon

Most retailer loyalty programs are not optimal. Because of this, a majority of retailers with loyalty programs plan to revamp them over the next two years. Whether enhancing an existing program or looking to implement one for the first time, this Report provides a detailed roadmap, highlights field-tested industry best practices, and outlines the software marketplace to guide retailers along their journey. AMR Research clients, please login. This document is available to AMR Research clients only. If you would like further information about how to become a client, please contact info@amrresearch.com.

Nectar Profit £5.4 million on sales of £194 million

The Mail reports that Nectar owner Loyalty Management
UK Limited has reported a profit lift from £1.3 million in 2006
to £5.4 million on sales of £194 million, and that sales
were down from the previous year’s £207 million after
Barclaycard exited the coalition.

Also in the article: Nectar "also sounded a warning note over market
conditions for 2008: ’The principal risks facing the company are
the health of the UK retail environment and the ability of the company
to offer an attractive loyalty proposition to existing and potential
sponsors.’

WebCard Loyalty wins innovation prize 2008

First Loyalty Portal with virtual loyalty cards awarded with innovation prize 2008

The
WebCard Loyalty Portal from fun communications awarded the "Innovation
Prize 2008" by the "Initiative Mittelstand" in the category
CRM. Read article

• The protection of minors on the Internet is on road to success: figures of transactions doubled
• CeBIT 2008: fun SmartLine connects two worlds
• CeBIT 2008: Plastic-free customer loyalty in CardSpace^TM

fun communications at the
2^nd European Identity Conference 2008

• New: fun communications -
  The film!

WebCard Loyalty - Customer loyalty with "virtual loyalty cards"

The WebCard Loyalty Portal brings your customer loyalty card onto the Internet –
simply, securely and conveniently for you and your customers.

Customer and bonus cards have been an important customer loyalty instrument in
the retail trade for a long time now. But how does the customer loyalty card get
onto the Web? The WebCard Loyalty portal enables traders and portal operators to
issue "virtual loyalty cards" to their customers easily and securely.

1...2...3 - ready!

With WebCard Loyalty, "virtual loyalty cards" can be created in just three
steps:

• In the first step, the loyalty cards are created in the desired
  layout and with an individual data structure.
• In the second step, the newly created cards are assigned to the
  different user groups.
• In the third step, the virtual loyalty cards are made available
  to the customers.

The promotion campaign is ready!

The WebCard Loyalty Manager also offers numerous revealing statistics that
can be used for a detailed analysis to measure the success of the individual
promotion campaigns.

Application fields

• Secure authentication
• Bonus programmes
• Voucher promotion campaigns
• Discounts for partner sites
• Partner advertising
• Age verification system

http://www.fun.de/english/Products/WebCardLoyalty/WebCardLoyalty.asp

Customer Loyalty and Customer Lifetime Value | CustomerThink

Customer Loyalty and Customer Lifetime Value | CustomerThink

Customer Loyalty and Customer Lifetime Value

By Bob E. Hayes, Ph.D., Business Over Broadway





Customer loyalty and customer lifetime value are two
different, yet related, areas of study. The purpose of this discussion
is to outline each area and highlight how knowledge in both areas is
necessary to better understand how to grow a company. Companies
are not static entities; they make business decisions in hopes to
increase customer loyalty and grow their business. The key to business
growth is to make decisions that will improve customer loyalty.
Customer loyalty management is the practice of determining how to
maximize customer loyalty. To understand how improvements in customer
loyalty will improve business growth, we need to first understand the
value of customers to the organization.

read the full article...

Key Steps to a Successful Loyalty Program | CustomerThink

Copied and edited from:
Key Steps to a Successful Loyalty Program | CustomerThink

Introduction:

A loyalty and rewards program offers the opportunity to solidify
existing relationships, initiate new ones and convert your one-time
visitors, buyers and prospects into repeat business and long-term
members. Implementing a successful loyalty program is all in the
process.

Key success factors:

For your program to fully capture your customer's loyalty and
convert this into revenue and profitability, keep in mind important
elements that are critical to the success of a loyalty and rewards
program:

Precision Targeting – Many Loyalty programs fail to precisely target
and segment their customers, both in terms of demographics/interest and
in rewards offers. Instead, they may offer “discounts”, which only
erodes margin and does little to build actual loyalty.

An effective Loyalty solution will offer:

- Precise segmentation capabilities of customers, including ability for
customers to voluntarily “opt in” to various groups/clubs

- Precision offers, communication and rewards, targeted at customer interests.

Sanity Test.

The goal of your program should be clear. Customers
need to understand what's expected from them and how they can benefit.
In other words, there can be no "smoke and mirrors." The program must
be simple and easily understandable. You (and your employees in the
field) need to be able to explain the ins and outs of your program to
your customers in a way that is easily understood.

Value, Value and More Value.

The rewards offered to your customer
base must have a perceived value. Rewards offered to your customer base
can be a combination of hard and soft benefits but in theory all should
have a strong value associated with them in order to keep customers
coming back for more. Customers really need to become emotionally
invested in your program and feel as if they are being rewarded, they
are a valued, have access and are being recognized. If not, the rewards
will not become their goal and customers will lose interest in your
program.

Rewards within Reach.

The rewards of any customer loyalty program
must be obtainable. The structure of your points and rewards system
should be established in a tiered fashion in order to provide your
program members with an opportunity to receive the perks and rewards
associated with membership in your loyalty program. Random instant
rewards drive the excitement, interest and momentum in the program.

Knowledge is Power.

One of the most significant pitfalls to
effective loyalty marketing is the use of tactics without the benefit
of reliable customer data analytics. All the tools you need to develop
a comprehensive customer profile are at your fingertips. Use survey
questions to ask your customers what really matters to them. What
giveaways appeal to them most? What offers are the most enticing? What
rewards are most valuable? Using such information can be incredibly
valuable in tweaking your program along the way and useful as a means
of providing your customers with what they really want.

Communication.

Establishing a loyalty and rewards program enables
you to proactively communicate with your existing members, prospects or
members instead of passively waiting for them to return to your web
site or stop by a store to purchase your product. Talk to your customer
base often with information and offers that make sense. A rewards
program enables you to easily and affordably create communications that
are valued by your customer (since they have a vested interest in your
company and your products) and you can make those communications
support and enhance your brand in a way that substantially
differentiates your company from the competition.

Using — and losing — frequent flyer points

Using — and losing — frequent flyer points - Tips- msnbc.com