As a “self-confessed mileage junkie,” Phil Seward knows a thing or two about how to navigate loyalty programs. He also serves as senior vice president of loyalty strategy, Americas, at Collinson, where he oversees loyalty solutions and services across North America and Latin America.
Previously, he led Virgin America’s frequent flyer program as well as fan engagement with Live Nation and Ticketmaster.
Below, Seward explains the evolution of the co-branded credit card, if subscription models in travel are viable and how brands can put the power back in the hands of consumers.
What would you say has been the top innovation in travel loyalty over the past 10 years?
For me, I always think innovations are the ones that really stand the test of time and continue to innovate and grow with customer needs.
One that I find very innovative is the evolution and wide proliferation of the co-brand credit cards and the impact that they've had on those programs. If you go back further than 10 years, airline co-brands really set the standard and were real game-changers, allowing members to suddenly start earning miles exponentially on everyday purchases, back in the day when you could only really earn miles for flying. In more recent years, they've really proliferated across every sector.
Banks have introduced their own bank-branded programs, and they really introduced the concept of this transferable loyalty currency, where you can either transfer into an airline or a hotel or an existing program, or you can in fact use that same currency for a range of rewards. I see the banks have innovated well with driving the appeal of co-brand cards.
Then most recently, one that’s close to our business in the United States, is the innovation in the premium card space - those top-tier cards, the $450-and-up range - especially with the launch of Chase Sapphire Reserve. They changed the landscape and are bringing in a whole new set of benefits into the loyalty space. I think they’ve done an amazing job in understanding the mass affluence in the frequent traveler audience and providing a set of really meaningful benefits to appeal to that audience.
Using Chase as an example, what’s driving them to evolve in the travel loyalty space?
I think there’s a very strong recognition, particularly in Western markets, for the increasing affluence amongst the traveler. That really crosses all demographics - we’re not necessarily talking about the older generations, but younger generations also have placed travel as not really a luxury or a treat anymore, but core to their lifestyle. Banks have done a really good job to recognize that.
And selfishly, they see the value in that space as well. They want to share the loyalty business so they can drive hugely beneficial economics to themselves.
Essentially, payments is absolutely core to pretty much all of the transactions, especially global payments with highly affluent and mobilized traveler demographics.
I think the rise of the middle class essentially is what underpins all of this, and we’re seeing that now in some of the emerging markets as well. In China, Brazil, etc., we’re seeing rising middle classes also looking to travel more and looking for an elevated experience when they travel; these kinds of products are a means to providing that.
For hotels, airlines, etc. in the space, what’s driving them to evolve? Consumer demand, market demand, advancements in technology or…?
I think it’s all of those. A lot of that’s really from the competitive landscape: You have a lot more brands competing for that consumer’s attention, and clearly information is much more readily available through technology to those consumers. They’re all big factors.
Economics is another factor that’s really driving how loyalty programs are evolving - particularly for legacy programs - when we think about the airlines and hotel programs. They’re looking at the economic demands around sustainability of their programs.
In general loyalty programs need to occasionally take a step back and make sure they're not overcomplicating their program.
Phil Seward - Collinson
We’ve seen pretty much all the major frequent fliers move to a revenue model now. They’re putting a much greater emphasis on the purchase of value as opposed to distance because that’s been critical to sustain their operating models.
At the same time, a lot of those programs have had to devalue some of their value propositions and look at if they can be as generous as they used to be. Equally, they’ve increased some of the qualification bars for their elite-level tiers. I definitely think this is a big factor that we’re going to see continuing to effect how loyalty programs evolve.
The programs essentially need to remain economically viable, but at the same time those brands need to think about balancing those program economics with member engagement and value to make sure they don’t start alienating a core set of their customer base in the process.
Do you believe travel brands are doing a good job of using the customer data at their disposal?
I’d sum it up as work as progress, though sometimes that’s being generous depending on the brand. I think travel brands are doing a better job in collecting profile data, but they’re still not doing so good at using it to drive differentiation in the customer experience.
We did some interesting research with Forrester with loyalty program operators themselves and there are a couple stats I wanted to share: 65% of program operators said the strategy to deliver a more personalized customer experience is core for them, but less than a third were actually dynamically personalizing content at that individual customer segment level.
It’s prioritized as a strategy - they’re building the infrastructure - but they’re not necessarily completely delivering on their objectives as yet. And 61% of respondents told us they’re not even using predictive analytics yet. I think everyone recognizes the opportunity, but actually mobilizing the data and using it to deliver on the promise is actually quite difficult for a lot of brands.
How are you seeing loyalty preferences vary across generations?
In general there’s a lot of debate about whether younger generations value loyalty, the classic rewards programs. What we see is they do - they value loyalty rewards; they value the benefits.
But additionally - and this is very distinctive of younger generations, particularly millennials and Gen Z - is they’re also seeking out differentiated experiences. That’s the big change.
They’re seeking out brands that elevate that customer experience over and above providing rewards for purchases, but also looking for travel operators - whether hotel or airline or tour operator or transportation company - to also have a clear sense of brand purpose and responsibility and that respect their own brand value.
An increasing factor in how younger generations choose which brands they’re going to be loyal to is brands not just saying that they have brand values, but ones actually living and breathing those brand values through their engagement with their customers.
Another thing - driven again by generation and the concept of paid loyalty - is it’s an effect of the explosion of the subscription economy. I think for millennials and Gen Z, pretty much everything they consume is available on a subscription or by paying monthly, whether that’s food, clothes or TVs or cars.
That same generation is really prepared to pay [for travel] on a subscription basis - probably monthly - with added perks and elevated service levels and those unique experiences from brands. They’re looking for potentially paying them on a subscription basis as opposed to earning them in the classic loyalty program structure.
Since travel is not as frequent of a purchase as buying things on Amazon, how can travel brands make a subscription model work?
The currency itself can play a part in that. If we look at South America, there are actually big monthly subscription programs. Essentially, your recurring component is buying the currency on a monthly basis, and because you stay with your subscription you get a bonus on top of that.
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The concept is of subscribing to save towards a trip, and then when you do travel, those other benefits kick in - elevated experience benefits can kick in. That’s quite a key factor. There’s new life brought into the currency where people are actually considering buying the currency and using it as a savings mechanism on the subscription rather than just earning it. That’s a really interesting approach.
Others in the airline space have taken the concept of subscription but turned that it into fare families, so when you buy a fare, you buy a bundle of benefits associated with the fare as opposed to earning status in the program. It plays to younger generations because they don’t necessarily want to commit to a program and spend a year earning their elite status before they get the benefit - they’re looking for that instant gratification.
Being able to - either through a subscription or fare bundle - get those benefits straight away means they’re experiencing that elevated experience earlier on in the process and they’re very happy to pay for that.
What are effective strategies to keep consumers engaged when they’re not actively searching or booking travel?
This goes back to currency can often be king - the ability to earn and redeem on everyday purchases. It puts the brand essentially front and center in the customer’s mind between those trips and gives them a value proposition that can be very meaningful to them. That’s where the currency has real appeal to those members.
The other piece is partnerships with likeminded brands - we classify these as more unexpected partnerships rather than typical partnerships with other travel-related brands. There are unexpected brand partnerships that are actually similar lifestyle brands that share the same brand purpose and brand values.
Having a dialogue with consumers, bringing them something incremental that fits their lifestyle but also reflects the brand values that they care about is something we’re starting to see more of. It’s a great way for relatively infrequent brands such as travel to maintain a meaningful dialogue on day-to day-basis.
What can be done to make complex loyalty schemes easier to understand for consumers?
That’s more of a problem with more mature programs; as a program matures it becomes inherently more complex to navigate. There are whole groups online and blogs to navigate the ins and outs, but they don’t really appeal to the general consumer, they appeal to very invested small percentage.
In general loyalty programs need to occasionally take a step back and make sure they’re not overcomplicating their program or making it too burdensome to their members or making it too restrictive. Sometimes simple is the best policy.
Pay-with-points is a great technology. If you can make your currency more fluid and more available in your day-to-day life, suddenly that becomes much more meaningful to the consumer as opposed to saving up for six months, then finding a flight and the right date.
I think making the currency itself more fluid and more available is really in the end consumer’s interest because they get more utility and more value out of that currency.
Essentially, you’re giving them more choice and control. Too many programs hold the control at the program level, and empowering choice and control to the consumer has much more value into that relationship.
What are examples of travel brands that do empower choice to the consumer?
United Airlines, surprisingly, with a couple initiatives recently, and also with their upgrade process.
Obviously for elite travelers, an upgrade certificate is hugely valued benefit. United recently revamped their whole process. The certificate process was quite confusing; now it’s a points-based process.
You use differing amount of points to determine whether you want an upgrade. You now have control. We’re starting to see examples like that where giving more choice to consumer may come at a greater expense, but giving that choice is enabling the consumer to make that value decision in their own mind and say, on this occasion, I really do want that upgrade and I want to confirm it.