CEO Blog

Facing the dilemma of limited resources

Written by Ravindra Bhagwanani on . Posted in CEO Blog

23 October 2020

When companies should do more to secure the future business of members, airlines and hotels start to be faced with a shortage of resources as layoffs across the industry set in. But there is no problem without a solution.

Let’s face it, looking at current or past performance data of your loyalty program provides only limited hints which members will really be the members bringing you business tomorrow. Some elites will return, but not all. And you have no clue, who belongs to which category. A current absence of activity of certain members, although travel is slowly picking up again in the industry, should not let you conclude too early that the member is dead since various reasons may delay his resumption of his travels.

In one word, CRM becomes more important than ever and it definitely needs to become far more intelligent than in the past. And competition will become tougher, including at a micro local level, making it particularly difficult for companies in the travel industry, where most have, by definition, a very international customer basis.

On the other side, resources at companies are limited, both in financial terms, but increasingly also at a level of manpower. This makes it very difficult to justify the business case to invest efforts into a member, who is inactive now. But failing to capture now the clients, which will potentially be at the heart of any future success of your company, will push you into an even more disastrous vicious circle.

Let me take a concrete example as showcase: myself and my credit card strategy. The co-branded credit market in France is pretty poor in terms of choice, dominated by a (reasonable fair) product by Air France KLM/Flying Blue and American Express. While no issue for travellers and in spite of some progress over the last few years, the acceptance of American Express card at a daily level remains challenging in France.

When another opportunity opened a few years ago with a co-branded Visa card, I was hence certainly one of the first ones to jump on that opportunity. Generating 100% of my activity in the program in question with my credit card, the question is justified whether I am a good client for them or not. (When I occasionally fly on that airline, I actually credit the points to a more relevant partner program.) But I certainly generate some good revenue for them. The reason that I stick to that card is the absence of alternatives and the fact that the currency has nevertheless some value to me thanks to the partner network. But it is clearly rather a strategy by default than by conviction.

Now, Accor is announcing the upcoming launch of a co-branded Visa card in France (and other European countries). Details are not yet known, but they promise that the offering will be “generous”. If we have only approximately the same understanding about generosity, I am likely to become an early cardholder and drop my current Visa card since I’ll definitely value the Accor currency more.

So, danger on the horizon for my current credit card. And what is the airline doing? Okay, they’ve recently fired their Head of Loyalty (what might not have been the biggest loss for the company…), but even before that, I have never received a single message from them since I obtained the credit card. Now they stopped serving Toulouse (where I am based) and you should think that they should care at least about their credit card holders? I assume they only have a low 4-digit number of cardmembers in France – if at all. Actually, the airline might have even restarted limited services to Toulouse by now, but again, no direct information from the airline about whatsoever (and they are not the primary airline I need here, so I don’t really follow everything around them).

Being a foreign airline, do they understand now the imminent danger of the Accor initiative? [No, first question: Do they know about it at all?] Accor will clearly put the required resources to make their card a success. While they might do more harm to Air France/American Express, the handful of such lower profile products will suffer from that as well.

This example shows how programs are clearly missing a trick by not moving to a more local and more efficient CRM approach. This is particularly sad since this is not really difficult to realise. It requires a basic understanding of local markets, from a cultural perspective and understanding the relevant competitive loyalty forces – which are now obviously in full flux with some clear winners of the crisis on the horizon and some dinosaurs trembling.

If your organisation belongs to those 98% of organisations without a global loyalty team across key markets, there is definitely a business case for buying in some external expertise. The traditional focus on its home market will not be sufficient anymore for any loyalty program going forward in a shrinking market.

So don’t be afraid to extend your horizon. There are actually some very low-hanging fruits out there for anybody willing to think a bit differently, in spite of – or maybe rather because of – more limited internal resources.

Indeed, the crisis might force us to think differently than what we did in the past in order to continue to be successful in the future. As such, it might be worth recalling the wise words of John F. Kennedy [sorry, not easy to find any wise words with certain more recent US Presidents]: “When written in Chinese, the word ‘crisis’ is composed of two characters. One represents danger and the other represents opportunity.”