20 May 2022 One of the big winners of the Covid crisis are experience awards. They have indeed the potential to add some excitement to members, unrelated to other aspects. But why only few loyalty programs get this right? In the past, travel loyalty programs relied mainly on the aspirational power of travel rewards to be successful. Certainly, some programs offered other awards, from merchandising to experience awards, but without too much conviction or marketing push as these offers addressed only at a small minority of members. The gain of popularity of experience awards Covid has though, at least temporarily, changed things. At worst, travel was not possible anymore, at best, it lost a lot of its appeal. In order to keep members engaged in loyalty programs, many turned towards alternative redemption option, whereby experience awards were most popular. This does make strategic sense for several reasons. First, experience awards might come closest, in terms of excitement, to the old-world travel awards with nice in-flight experiences on the best airlines and hotel stays at dream destinations. Secondly, there is a wide choice available catering for everybody’s taste – from a calm museum visit thanks to skipping lines to an extreme sport activity. Unlike travel awards, there are basically no capacity restrictions to be considered either since the provider gets paid in cash by the program operator, even during peak periods. While convincing on paper (and meeting customers where they are), many partnerships have nevertheless failed to take off as hoped for. And the problem is not related to some conceptual mistakes, but to financial aspects – as Covid has not wiped out some of the industry’s fundamental issues as poor financial set-ups at many programs. Understanding the real objective As such, many programs see any third-party redemptions – from experience awards to donations – primarily as mean of a cheap reduction of liabilities, motivated by the necessity to limit such cash-outs. While some programs manage to hide any real value (on a per point/mile basis) as either the redemption value of core awards is not really transparent to clients or by offering experience awards money can’t buy, the acceptance falls dramatically if it becomes easy for members to understand the underlying value proposition. However, this might not be the correct reasoning from a customer perspective, although the operator’s financial reasoning is understandable. Let me pick, randomly, one easy-to-understand example: Accor’s ALL program offers very flexible in-house redemptions, where points can be used as full replacement of cash, with a (published and hence fully transparent) redemption rate of 2,000 ALL points = 40 EUR. In line with its strategy to position itself as lifestyle program, the program has recently launched a platform for experience awards in major cities around the world, where ALL members can both accrue and redeem points. You might indeed be tempted to invest a low amount of 750 points to get a guided tour of a windmill in Amsterdam in order to dive into that part of Dutch cultural heritage. But if you understand that this only saves you 7.50 EUR, you quickly come to the conclusion that Accor only offers you half of the redemption value compared to in-house redemptions. Why wasting valuable points in such obvious manner? Three success factors The conclusion for all programs is pretty straight forward: The right selection of experience awards can add a lot of excitement for members, what ultimately translates into loyalty and engagement. Success for such strategies will depend on three factors:
- Make the right selection: You may rely on a white label curator and/or enrich the offer by own products in your key markets, especially with some affinity to your core product (travel).
- Offer a fair value: Especially for the vast majority of awards, where a retail price can be determined fairly easily, make sure to offer the right redemption value per point. The objective is not to make money on the transaction as such, but to engage customers through such awards and make them more motivated to collect your currency.
- Exploit CRM opportunities: The right selection of experience awards opens up a wide array of CRM opportunities to engage customers at a different level. Providing them inspirations adapted to their available points balances, including at a fully local level, can have a clearly positive impact.