Loyalty programs, at their core, are data engines. Yes, they are mechanisms for recognizing and rewarding valued customers, and they are designed to facilitate customer acquisition and retention—that is their purpose. What enables them to fulfill that purpose, however, is data. And how loyalty programs approach and optimize their data and analytics capabilities is often a predictor of how successful they will be in achieving their goals.
This is particularly true for travel loyalty programs with booking capabilities, which feature a variety of member touchpoints and offer a comprehensive inventory of redemption and earning opportunities. Each time a member interacts with one of these features, the program generates valuable data and insights. If a loyalty program only leverages this data to populate performance reporting dashboards or other internal metrics (valuable though they may be), it is missing opportunities to boost engagement and spending within the program framework.
By implementing the proper best practices, partnering with the right loyalty technology experts, and implementing the right technology – including cutting-edge tools like predictive and generative AI – travel loyalty programs and their parent brands can fully exploit the advantages offered by customer data.
Data-Powered Personalization Applications: Dynamic Pricing & Targeted Promotions
Perhaps the biggest advantage is the ability to personalize the travel loyalty experience. We have examined this topic before, finding that in addition to being a hallmark of the modern digital experience, personalization leads consumers to perceive the travel loyalty programs they belong to as valuable. In our most recent Tipping Point report series, we found that 50% of travel loyalty program members believe that receiving personalized offers is “extremely” or “very” important to them. Creating a personalized experience is an advantage for travel loyalty programs, and it is only possible through data and analytics.
Dynamic pricing and targeted promotions are the two most effective ways travel loyalty programs can leverage their data to achieve greater personalization. Dynamic pricing uses data to adjust the prices of travel products or the value of a member’s points within a specific session to influence purchasing or booking behavior or increase perceived value. Targeted promotions leverage data and customer insights to deliver tailored offers to loyalty program members based on their browsing history, preferences, points balance, and a variety of other factors.
Dynamic pricing
At its most basic, dynamic pricing responds to supply and demand: when demand exceeds supply, prices rise; when the opposite happens, they fall. Many travel loyalty programs do not have much control over the prices they offer members, but this is the most common modification method when they do. However, integrating customer data such as points bank balance, tier status, and spending history can expand a traditional supply-and-demand-based pricing strategy into a truly dynamic, personalized element of the loyalty program experience. Aligning that data with business rules and objectives, dynamic pricing can raise or lower the price or point value of a specific product or service based on the individual member and individual website or app visit. This could encourage that member to burn points (in full or partially) or make an additional, incremental purchase.
A few new developments, including AI, are augmenting travel loyalty programs’ ability to offer dynamic pricing. Using the data the loyalty program already has at hand, predictive AI can understand if a consumer is more likely to save loyalty points to make a single, bigger purchase or if they prefer partial or even micro-burn opportunities. The loyalty platform can then adjust the pricing presented to that customer accordingly.
On the supply side, New Distribution Capability (NDC) allows travel loyalty programs to take advantage of supply and demand variations and maximize profit by modifying prices (especially airfares and travel bundles) in near-real time. This capability is evolving to become more standard across the commercial aviation industry, enabling all travel providers to enjoy greater margins.
Targeted promotions
Similarly tailored to individual loyalty member preferences and past behaviors, targeted promotions deploy content designed to call attention to a “limited offer” or “deal,” creating a sense of urgency and value. For the customer, curated offerings like this appeal because they make customers feel seen and that their loyalty to the brand matters. For a travel loyalty program, a targeted promotion is more likely to be redeemed, prompting points burn or incremental spending. But more importantly, targeted promotions are another way to leverage data to influence the path of a consumer’s booking journey.
Understanding the customer and what they value based on past behavior patterns allows loyalty programs to meet business objectives more effectively. A data-driven, AI-augmented solution like dynamic pricing could be aligned with business goals to increase loyalty point burn and, in turn, decrease the outstanding liability to the business. Targeted promotions could be used to drive consumption of products that require additional volume to break even or hit a given revenue target. Travel loyalty programs are designed to retain loyal customers, so having offerings that make customers feel valued can help achieve the goal of customer retention and repeat spending.
Best Practices to Optimize Data and Analytics Approaches
What do travel loyalty programs need to achieve these benefits? First, it is necessary to have a clear data strategy. The strategy identifies the data required to drive the program's business objectives. With that focus, brands can collect and manage quality data across all customer touchpoints. That usually means having a robust, integrated loyalty technology platform that tracks and analyzes customer or member activity, preferences, points balance management, prior travel history, and spending patterns. This raw customer data is critical to inform predictive algorithms or generate insights through AI.
Having an architecture that can scale is key to supporting the volume of data needed to be collected and processed in real-time. Data governance is also paramount, which includes security & privacy, data classification, and lifecycle management. Data – especially personally identifiable information (PII) - must be stored securely and treated respectfully, not only as it relates to the consumers but also as a strategic asset of the business. Programs need a process to get data into place to where it needs to be, in the condition it needs to be in, and always be private and secure.
With the capacity to collect and manage data and a viable and tested strategy for using it, travel loyalty programs will have the foundation needed to implement advanced data and analytics functionality.
Challenges with Implementation
The reason many travel loyalty programs have not already established this foundation is that there are significant regulatory, technological, and strategic hurdles to overcome. Take compliance, for example: in today’s regulatory environment, collecting useful first-party data is becoming more challenging. The lack of a unified federal guideline in the U.S. further complicates this because it is left to the individual states to set their standards for data privacy. Currently, 12 U.S. states have active data privacy laws, while 15 others have proposed bills not yet formally adopted. This creates a unique challenge for nationwide businesses navigating a patchwork of state privacy laws. This makes it difficult for travel loyalty programs to discern what they can legally capture from the front end of the user interaction to increase performance and site conversion.
The biggest challenge, however, is implementing a sound data strategy. Many travel loyalty program administrators might think they are just one tech tool or strategic partnership away from maximizing the utility of their data.
However, there are many technology providers, so it is essential to identify a strategy that will work best for a program or business. Knowing whether the right technologies and tools are being applied to the right problem is impossible without a solid plan. A travel loyalty program can only get the most out of its data by identifying best practices and formulating the proper data governance and utilization strategy.
What is on the Horizon? Current and Future Data Trends
Which recent technological advancements best improve programs’ ability to get the most from their data? There are many, but of course, the advancements in AI are front and center right now. AI offers solutions for driving the customer journey through the funnel and can also play critical support roles in user experience through automated member interactions and even serving as a digital travel agent. In both applications, AI can enhance a loyalty member’s experience beyond the booking and planning process, offering value at more points on their journey. And as we already outlined, it can play a significant role in dynamic pricing and targeted promotions.
The adoption of generative and predictive AI and machine learning in travel loyalty programs is only projected to become more widespread, with advanced personalization becoming standard practice sooner rather than later. However, differentiation will be essential for programs in the future, prompting brands to focus on specific capabilities and excel in those areas rather than spreading themselves thin.
This concept of task-tuning could position an organization as a leader in AI within its respective industry. Advancements in edge computing will enable faster response times and real-time applications, offering opportunities for innovation. For instance, in the travel industry, AI digital travel agents in booking flows could evolve into advanced concierges or personal assistants handling intra-trip tasks based on geo-location and itinerary data.
Ultimately, gaining customer trust in data responsibility is crucial. If travel loyalty programs can demonstrate that they use member data responsibly, customers may be more willing to grant access to their data, which can drive innovations that enhance their loyalty experience.
Seizing Opportunities with the Right Data Partner
Tuning the travel loyalty data engine to generate the advantages of personalization, dynamic pricing, and targeted promotions requires both technical capability and know-how. In other words, you need the right tool and the right mechanic.
That is why it is crucial to identify the ideal loyalty technology platform provider for your business. A partner who knows and understands your industry and the travel loyalty space and how to use data to their advantage is the key to unlocking your loyalty program’s potential.
A purpose-built travel loyalty platform (like the one we offer at iSeatz) allows you to make data-driven decisions to optimize your rewards program with targeted content, unique tier-based offers, and personalized communications. It is also designed to leverage first-party data to create high-impact customer experiences at critical moments in the buying journey and to motivate engagement with rule-based, targeted campaigns that reward customers, encourage point redemption, and optimize program ROI. Our platform also features machine learning aspects to automate decisions, harmonize customer data, and drive desirable outcomes.
With a partner like iSeatz, your travel loyalty program can get more out of the customer data at your disposal, differentiate yourself from competitor programs, and set the foundation necessary to take advantage of the newest technological developments. Most importantly, you can seize the opportunities data creates to maximize engagement and profits.
Want to get more insights and updates from iSeatz? Sign up for our newsletter!
You can also learn more about iSeatz by reaching out to marketing@iseatz.com.