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New Era Of Building Pre Paid Loyalty And Incremental Revenue For Low Fare Carriers
New Era Of Building Pre Paid Loyalty And Incremental Revenue For Low Fare Carriers
New Era Of Building Pre Paid Loyalty And Incremental Revenue For Low Fare Carriers
New Era Of Building Pre Paid Loyalty And Incremental Revenue For Low Fare Carriers
New Era Of Building Pre Paid Loyalty And Incremental Revenue For Low Fare Carriers
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New Era Of Building Pre Paid Loyalty And Incremental Revenue For Low Fare Carriers

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An alternative loyalty solution to frequency programs for airlines.

An alternative loyalty solution to frequency programs for airlines.

Published in: Technology, Business
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  • 1. 301 Fourth Avenue South Suite 980 Minneapolis, MN 55415 (612) 372-7000 www.AOIMarketing.com THE NEW ERA OF BUILDING PRE-PAID LOYALTY & INCREMENTAL REVENUE FOR LOW FARE CARRIERS How a Regional Airline Captured Many of Its Competitor’s Best Customers and Created Valuable Incremental Revenue in the Process
  • 2. Exclusive access to value™ THE NEW ERA OF BUILDING PRE-PAID LOYALTY & “I cannot thank INCREMENTAL REVENUE FOR LOW FARE CARRIERS you enough for the program you How a Regional Airline Captured Many of Its Competitor’s Best Customers put together. I and Created Valuable Incremental Revenue in the Process used to fly a major competitor The world has changed; people are no longer flying for business and leisure like they years ago and used to. The ease of online meetings, the demands to limit travel expense, the stress of have switched to travel and frankly, travel fatigue have all contributed to the downturn in the travel you.” industry. Travelers have become confused with all the added fees and the ever changing fares, that to some, have begun to look like a black magic formula akin derivative trading. –Arlene P. Member As individual airlines attempt to simultaneously reduce the cost of flying and increase the points of differentiation to, what has become a pure commodity product; it has introduced added complexity into the travel decision process. The addition of multiple fees and fare programs along with the changes in onboard and airport services are further segmenting “The best thing the market into “lovers” and “haters” of à la carte pricing. about being a member is With improvements to information transparency and a whole new breed of middlemen, knowing that customers have also become acute fare shoppers bringing into question the sustainability the price of a of current airline loyalty programs. Online services such as Kayak and Bing ticket will be Travel/Farecast, along with the airlines running consistent and often predictable fare sale known and emails have trained customers to time their bookings at the lowest rates. As a result, understood and customers feel like they are being overwhelmed with additional offers and information consistent no and it becomes more difficult for them to determine if they have found the best available. matter when I book the flight. In this cycle, airlines may see short term gains; however, neither the customer nor the This relieves carrier can win the long run. For customers to win, they want clear choices and a “fair pricing stress price” that correlates with the type of travel they want to buy. For airlines to win, they and allows me need to re-define customer loyalty and re-establish a loyalty driven relationship with their to make travel customers while continuing to compete in a hyper-stimulated, information-overloaded decisions market. without the pressure of What if an airline could create a valuable pre-paid customer loyalty program, add changing new top line and incremental revenue and relieve customer stress in the process? tickets, prices & Enter AOI Marketing Group’s “Incremental Revenue Platform” (IRP). The IRP was availability.” created to develop pre-paid airline programs based upon flat fare pricing, bundled -John C. services and exclusive perks in exchange for a subscription fee. Member Over the past five years, AOI has proven the feasibility of the platform and provides clear results indicating that customers are willing to pay more for fare consistency, bundled services and less stress. ©2009 AOI Marketing Group. All rights protected and reserved. November 2009. Page 2
  • 3. Exclusive access to value™ So what does this all mean? “The Incremental Simply, people are willing to pay for certainty in their travel experience. Revenue Platform is a pure, THE NEW LOYALTY CLUB MODEL-PREPAID pre-paid loyalty model. It’s a The IRP from a Consumer’s Perspective win/win for the airline and the Using the IRP model, consumers can: customer.”  Access set, reasonable fares that can be booked anytime at the same rate -Jennifer Katz  Make limited changes as needed CEO, AOI  Access a high level of customer service Marketing  Access pre-boarding and security screening similar to premium members in free programs  Access pre-set, premium class fares  Access many travel and non-travel benefits including discounts “The first great In exchange, consumers are obligated to purchase a membership for a minimum of one benefit is the ease year and pay a one-time initiation fee. of getting on the The IRP from an Airline’s Perspective website and booking. I love With the IRP model, the airline wins big because: the fact that you can easily change  Members are paying dues whether they fly or not, thereby generating further an itinerary or incremental revenue make a last  Experience has shown that members do not change their advance booking minute booking patterns, even though they know they can book “anytime” without handing  The “unpublished” member fares are rarely matched by competitors over your life  Members purchase premium class seats more often than non members savings.”  Members look to their airline club first and many times, only when booking a flight -Karl G. Member  The IRP average ticket (all in, including member dues) is sixteen percent higher than the airline average  The lifetime value of the customer increases dramatically  The cost to manage the program is a small fraction of a typical frequent flyer program  Member retention is high Why a Program like the IRP Works It’s like a wholesale club model for the airline industry. Let’s examine why wholesale club models are successful (Costco alone has 57 million members). ©2009 AOI Marketing Group. All rights protected and reserved. November 2009. Page 3
  • 4. Exclusive access to value™  Members know they are always going to get a fair price  There is limited inventory, taking the stress out of too many choices “My favorite  Members enjoy services and privileges beyond in-store benefit is that I  It is a consistent purchasing experience can check in  Members feel special, a part of “the club” without waiting in line via the 1st How this relates to a fare club model: class check in line. I was  Members know they are always going to get a fair fare recently on a  There is limited inventory business trip and  Members enjoy services and privileges beyond in-flight we all arrived at  Members are comforted by a consistent experience the same time  Members feel special, a part of “the club” and I looked really great being We’ve taken these core concepts and reformulated them for an airline program. Think of the first one to this—what if your customer always knew what their worst case fare would be? the gate to meet  They could actually budget their company’s travel the president of my company!”  It would take the stress out of fare hunting  They would travel more often -Sarah J.  It would save them time Member  They would be loyal to the airline that offered this service  Most of all, they would be less anxious when booking travel Would customers pay for this? Experience has shown that, for the right price, customers will sign up for a club based on the IRP at a rate higher than most travel programs. People are willing to pay for consistency. The fares must be fair, but they do not need to be deeply discounted to satisfy the customer. If a customer feels like they are getting something special, their loyalty will follow. PROOF POSITIVE  People travel three times more with the airline once they joined the program  Most of the members are new to the airline  The lifetime value of the customer increased dramatically  20% of members regularly book first class tickets  Most of the IRP flyers have enough points to redeem for reward travel showcasing the program’s ability to capture the airline’s best customers  The program has attracted some of the most desired frequent flyers from the competition ©2009 AOI Marketing Group. All rights protected and reserved. November 2009. Page 4
  • 5. Exclusive access to value™ THE BIG TAKEAWAY “The Incremental  People are willing to pay for consistency Revenue Platform  Fares must be fair and don’t need to be deeply discounted to satisfy the customer is an elegant  If a customer perceives they are getting something special, their loyalty and program for any business will follow airline seeking to improve their For a low fare carrier, the IRP is a smart alternative to a traditional mileage-based ancillary revenue frequent flyer program. As a turn-key program, the IRP can be quickly implemented and performance, as deployed without the expense, complexity and demand on resources associated with well as the traditional frequent flyer programs. There are no displacement costs and the IRP is customer who customizable to address future demand or program changes. wishes to purchase services For more information, please contact Jennifer Katz @ Jkatz@aoimarketing.com. once only reserved for long AUTHORS flying elite Jennifer Katz is the founder of AOI Marketing, which developed the IRP. Jennifer is also members.” co-founder of Rovrr, Inc., a marketing company that develops social network -Jim Young applications. Jim Young is a 15 year travel distribution marketing and sales executive from both the airline and hospitality industries. ABOUT AOI MARKETING AOI Marketing (AOI), based in Minneapolis, Minnesota, offers advanced marketing solutions and a proven methodology in designing and delivering successful loyalty and benefit programs with high customer retention for the travel and financial industries. AOI excels at connecting the needs of the individual and the needs of clients to add new sources of revenue. For more information, visit www.AOIMarketing.com. ©2009 AOI Marketing Group. All rights protected and reserved. November 2009. Page 5

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