Measuring Web Site Quality With Net Promoter Scores

Mike Premo, ARC’s President, gave a presentation during the CTDA conference in Lake Las Vegas last week. Mike showed us how ARC has turned to the Satmetrix Net Promoter Score to measure their performance. It turns out ARC’s score is a 70 – which basically means a lot of their customers are raving fans. See more about other companies’ scores here.

The Satmetrix Net Promoter Score is gaining traction as a way for retailers to measure key performance indicators that lead to increased profitability. I like it because it’s simple and offers powerful insights about your company’s performance. Keeping in mind the profit equation is profit = revenue – costs, then NPS can help.

NPS

Let’s look at the online retail world where site bugs can have an outsized impact on NPS, but are difficult to quantify in other ways. Bugs lower revenue. When they affect a Website’s shopping or check-out paths their impact will show up initially as lower conversion rates and higher bounce rates. Fatal errors and other bugs that annoy customers to the point they shop elsewhere will also reduce visitor numbers to your site over time. Since it’s difficult to measure this effect it’s easy to ignore. Online Travel Agencies (OTA’s) face another problem – interactions across different lines of business. Visitors who start their search for a particular product, flights, may end up purchasing a hotel or package (usually flight plus hotel).

For this discussion the site architecture for flights, hotels, packages and cruises is designed as discrete shopping paths with a bespoke checkout process that ties into consolidated back office accounting and reporting systems. Great online marketers design intuitive paths that minimize customer frustration, but bugs can undermine every designers’ best efforts. Customers will tolerate errors in their own way and may forgive slow response times but bounce when an ad flashes at them. Once the customer chooses a product, an error during checkout, or a price jump (we’re talking about travel here) can drive customers away before the transaction is complete and these problems add up. How much do bugs cost?

Most Web sites track numerous statistics and site performance metrics to uncover friction points or areas to improve, but these reports often miss interactions across paths or temporal changes. I’ll set up an example and describe several assumptions to show you how. For simple math, let’s assume that Hotel and Flights each drive 40% of an Online Travel Agency’s site traffic, while Packages and Cruises account for another 10% apiece. There are many use cases, but most leisure travelers who are flexible about their destination and timing will search for flights fist, and then hotels. This experience suggests that the ratio of flight searches to completed checkouts is higher than it will be for Hotels. Moreover, once a customer settles on a specific flight, they’re able to begin shopping for a hotel. But what if the customer experienced a major bug during checkout? They’ll leave the site and never become a hotel shopper. In this case the poor experience with the flight path caused the customer to search another OTA and they never showed up as a visitor in the hotel path.

Bugs are typically rated by their frequency, severity and location in the purchase path. Frequent, severe bugs that occur during payment have the greatest effect on financial performance since the customer was extremely likely to complete their transaction. Digging deeper you’ll find a second layer that’s often missed too, since the customer has already invested a lot of effort in the process, they are more likely to bolt later in the path to avoid finding the same bug the next time around. Sharp marketers must estimate this behavior to gain better visibility over a particular bug’s impact. Managers who identify a bug that occurs during 1% of visits when typical conversion is 100% would incorrectly assume that the bug will lower conversion by the same amount. That’s wrong from the start if, as most travel sites know, buyers visit to shop many times before they make their purchase, so errors in early parts of the path that frustrate visitors and interfere with shopping will drive shoppers away and site visitors will decline over time, thus conversion rates may decline by 1%, but shoppers may decline 10% too, which would compound the losses and be indistinguishable from other problems.You might spot this by tracking changes in the ratio of new visitors to returning visitors but this metric is affected by new browser and device releases and doesn’t provide the detail you need.

In the previous example as one line of business drives a customer away permanently, than visitor numbers in the other lines of business will experience a steady decline. Once again the bug’s effects are invisible in the conversion rates throughout the checkout path, and it will be unclear why direct visitors and returning visitors have declined. The OTA will need to spend more on paid search to drive ever more new customers to their leaky bucket.

This thought exercise demonstrates that it’s important to measure bugs across the enterprise and the Site’s 1-N list should be discussed widely and in the context of corporate strategies about staffing, and marketing spend. The Net Promoter Score can rescue Travel Agencies from internal bug lists and give you actionable intelligence about the ways you might be preventing sales. NPS is independent from the hidden correlations and mountains of data that overwhelm online marketers and site-health professionals each day. Fix the biggest problems and watch your revenues and profit climb.

For more information about these topics check out Avinash Kaushik on twitter @avinash Author, Web Analytics 2.0 & Web Analytics: An Hour A Day | Digital Marketing Evangelist, Google | Co-Founder, Market Motive; Bryan Eisenberg @TheGrok, Marketing Optimization & use the Data expert (small or big data), keynote speaker & New York Times best selling author. Austin, TX  bryaneisenberg.com; and great dashboard ideas: Juice, Inc. @JuiceAnalytics “We craft applications that help people understand and act on data.” Reston, VA · juiceanalytics.com

Sales & Marketing

Loyalty Programs that Work

Background

Contemporary loyalty programs generate power by transforming dreams into action. The Marina Bay Sands hotel pictured above epitomizes the aspirational destinations customers enjoy through participation in a travel loyalty program. Great loyalty programs inspire customers to choose the host company even when less expensive alternatives exist. So when the search for profitable customers drives you to create a loyalty program, here is how to do it right.

There isn’t a single recipe, but certain ingredients are known to taste better and every compromise you make to the set of principles outlined here will reduce the number of people you can influence. When applied carefully these principles will improve customer engagement and lead to higher profits and lower costs. Exceptional loyalty programs offer meaningful value. That value is accrued seamlessly without obstacles. Great programs are transparent and customers understand them intuitively; they eliminate friction at every turn.

Loyalty is measured by the number of customers you inspire to select you over and over again. Loyal customers spend more than average customers, they do it more frequently, and they’re more likely to stick with you after a bad experience. Your Customer Relationship Management team has segmented your customers thoroughly and you know how much your best customers are worth, and numerous white-papers and empirical research conclude loyal customers are responsible for a disproportionate share of business profits. But how do you inspire customers to remain loyal? More importantly, how do you convert ‘good’ customers to behave more like your most profitable, loyal disciples?

To answer those questions and for a thorough understanding of the loyalty space its worth exploring consumer and business loyalty programs including American Airlines’ AAdvantage program, Delta’s Skymiles, the Citibank AAdvantage credit card, Capital One cards, Starwood Preferred Guest for Business, Starbucks Rewards, and a host of business-to-business programs designed to engineer loyalty or drive customer retention. I’ll focus on travel industry programs and a few non-travel schemes.

History

Loyalty programs have spread to include everything from hotels, rental cars, sandwiches, haircuts, oil changes, and home mortgages. Many of the largest programs allow customers to transact with partners on both sides – earn and burn. Before Capital One credit cards, AAdvantage Miles and AMEX Rewards Points, companies rewarded consumers with “green stamps” from Sperry and Hutchinson (S&H). Greenstamps were literally stamps awarded to customers at the point of sale for a variety of behaviors. They started in 1896 and continued through the mid 1980’s. Retailers, supermarkets and other retailers purchased “Greenstamps” from S&H to issue to their customers and once the customer accumulated enough stamps they would redeem them for products from an S&H catalog. At their peak in the 1960’s S&H’s reward catalogs were the most widely distributed publication in the United States, while they issued more than three times as many stamps as the US Postal Service.

SH-green-stamps

By 1978 competition following deregulation of the airline industry and the widespread use of more powerful computers supported expansions in airlines’ sales and marketing programs. In 1981 American Airlines launched the AAdvantage frequent flyer program (followed closely by United Airlines) and a few years later added a co-branded credit card product with Citibank. The frequent flyer program gave people a chance to accumulate credits quickly, while the Citibank AAdvantage card offered another way for less well-traveled consumers to enjoy the benefits of cheap flights. Throughout its history, American’s AAdvantage program had the highest enrollment and member participation rates among frequent flyer programs and loyalty credit cards. Over the past decade American’s partners have purchased more than $1 billion annually to distribute across 50 million members making AAdvantage one of the most influential contemporary consumer loyalty programs. Mergers have driven Delta’s Skymiles and United’s Mileage Plus programs ahead recently, while global alliances including Oneworld, Skyteam and the Star Alliance expand program reach to customers who may never step foot on a US or European owned aircraft.

Airlines operate ‘anchor’ programs that drive scale and reach that few retailers can match (McDonald’s and Starbucks are notable exceptions). The most successful travel programs have powerful, exclusive relationships with consumer banks. Those banking relationships are driving the next wave of business-to-business loyalty programs and the future looks bright.

Value Proposition

Loyalty programs must be meaningful – the accrued value must be worth managing. Customers must be able to calculate value intuitively. Earning behavior must be easy to describe, easily understood, and programs should give credit for wide-ranging transactions, not just a narrow band of profitable behavior. This is distilled to Simple, Seamless, and Comprehensive.

Global Airlines run the largest programs and typically offer a free domestic coach ticket for 25,000 flown miles. An average round trip is 2,500 miles, so travelers generate 10% of the award value from each trip. That’s a good value trade-off. Travelers who also spend $25,000 on an airline credit card have an easy way to earn two award tickets every year.

Effective loyalty programs drive customer behavior. They reward profitable behavior – they are structured to generate more frequent, higher value business from program participants. So why doesn’t everyone join your program? A look at the airlines reveals that about 50% of all passengers do not belong to the airline’s program. Customers participate in programs that are personally relevant. The public is inundated with offers to join various programs, but they will not participate unless they’re offered enough value to justify wallet-space. Marginal Airline offers end up in the trash while a favorite restaurant makes the cut by offering a free entrée every tenth trip.

Currency

Currency choice matters – it must be intuitive and the average customer should be able to calculate the currency’s value and identify the activity or behavior required to earn common awards. Consumers get it when their barber issues a card that requires ten visits to earn a free haircut. Simple, seamless, comprehensive.

The earliest airline programs called their currency ‘miles.’ Miles are intuitive – when a traveler flies between New York and Los Angeles – they’ll earn one mile of currency for each mile in the air. That’s 2,472 miles each direction in this example. Miles are the basic building block – they’re analogous to a penny. Once you ‘earn’ 25,000 mile you can redeem them for a free coach ticket (treating miles like pennies is equivalent to $250 value). Loyalty credit cards lean towards ‘Points’ and a typical value is one ‘point’ for every dollar spent. The pure credit card programs often offer travel awards as a redemption option so a currency that converts easily to ‘miles’ makes it simple for most consumers to adopt the ‘point’ system and it gives them confidence about an already well-understood earn and burn structure. In the largest programs points and miles are equivalent and fungible – it’s like a foreign exchange system, you can often trade airline miles for the same number of hotel points.

In recent years other airlines, particularly the low cost carriers adopted segment based currencies – Southwest Airlines Rapid Rewards famously offered a free round trip ticket every time a customer flew sixteen segments. It’s easy, but customers could earn a ticket after purchasing just three trips if the routing required double connections (three segments each way). The other end of that spectrum is the customer who bought eight round-trip tickets for non-stop flights before earning the free ticket.

Southwest’s program didn’t seem equitable, so Southwest updated Rapid Rewards to issue ‘points’ based on two variables – the type of ticket and the price. Now customers earn six points for every dollar spent on Southwest’s “wanna get away” leisure fares, while it takes 6,000 points to ‘buy’ the same type of ticket. A quick calculation reveals free tickets are available after spending just $1,000. It’s a good system, but it leaves program players shaking their heads to calculate earn and burn values quickly – members need to read their statements carefully.

Companies that offer separate programs for consumers and businesses should think twice before they create parallel currency and banking systems for each type of customer. Specifically, many domestic airlines offer consumers mileage-based currency through their frequent flyer program, while offering companies a spend-based, point currency in their business rewards program. A review of award menus at United and American reveals similar awards are offered through each program, but the redundant systems increase costs and management workload.

An example on the hotel side can be found in Starwood Preferred Business (SPB) program; SPB is integrated with Starwood’s Preferred Guest program and can be managed in parallel and through the same systems – this arrangement reduces the cost and eliminates currency confusion since both programs payout in similar fashion – the traveler accrues points in their individual program, while their employer accrues points in the Starwood business program. This co-mingling makes it easy on the front-desk staff too and the entire company is aligned with the program messaging.

Companies can manipulate value on both sides of the ‘earn and burn’ equation, so consumers need to be familiar with program rules on both sides – the less fine print the better. And don’t neglect cash controls – management often overlooks the cash value of their awards or loyalty currency. Robust controls must be implemented to ensure employees don’t have the ability to give points or awards away without comprehensive tracking and reporting.

Awards

Give ‘em what they want! If you sell widgets because people value them, it goes without saying that widgets should be on the award menu. In fact, your award menu should include ‘starter’ widgets, widget covers, widget ‘bonus-packs’ all the way to up ‘premium’ widgets. Airline awards begin with highly restricted, long advance purchase, mid-week, domestic, coach tickets, and move up to last-minute, international first-class, around-the-world fares. A collection of ancillary benefits are available too – including lounge passes, upgrades, cash plus program credit, reduced fees and other special awards. All priced in loyalty currency.

Hotel award menu’s include rooms, upgrades, all priced in ‘point-based’ currencies tied to spend and room-nights. Another popular option for larger hotel programs allows point transfers into airline miles.

“Earn and Burn”

Program participation must be simple, seamless, and comprehensive.  Loyalty program members should be able to attach their membership numbers or customer identification to their transactions easily. Their purchases should be tied to online profiles or a barcode or a RFID membership card. Companies should take action so members don’t need to remember their member numbers and, if they do need to remember them, companies should create as many opportunities as possible to add the number throughout the purchase or use process. Effective programs make it easy to claim credit long after the purchase.

Avoid obstacles that reduce participation. Awards must be meaningful to the customer – in its simplest form awards should have the following qualities:

  1. Meaningful
  2. Easy to earn
  3. Easy to burn
  4. Supported by seamless customer service
  5. Common currency
  6. Multiple award levels
  7. Bonus structure with point multipliers
  8. Relevant partners

Customer Service

Same rules – simple, seamless, comprehensive. Most common requests – 1. provide ‘earn’ credit; 2. Reset account access; 3. Merge accounts ; 4. Provide enrollment support; 5. Provide redemption support (complicated program rules will drive these requests up). Companies should acknowledge that customers want to communicate in different ways (phone, email, and text) and should offer customer service through common channels. If your program can’t support a live 24/7 operation, at least provide self-help online and find a way to show customers you appreciate their business.

Promotions and acquisition campaigns 

Collect the low-hanging fruit – that means a laser focus on your existing customers before you move on to new or potential customers. Advertise your unique value proposition, currency and program rules to your existing customers with your existing marketing and communication channels. As enrollments begin to climb study your data to determine characteristics your most profitable customers share and seek out non-customer populations that exhibit the same qualities or behaviors. Future campaigns should target those potential customers and develop creative A-B test groups to hone your marketing skills and test intuition about your customers. Enrollment offers should include ‘seed’ points or miles to jumpstart member participation. Follow-up campaigns should segment customers in meaningful ways including a group that have earned enough points for basic awards, but have never redeemed points or miles. The possibilities are endless, but a careful approach that combines your industry knowledge with insight about your most profitable customers will yield the best results.

Common sense and the desire to limit liability suggest acquisition offers should be richer in competitive markets, and lower  where the host has higher market share. Targeted offers and A-B tests may require you to use a promotion code system (one-time use codes are recommended to prevent wide distribution via the Web). Before you get too far down this path it’s instructive to educate yourself about ways promotions can go wrong so here’s a great Website you should spend some time on to avoid making similar mistakes.

Conclusion

This is just a glimpse into the loyalty cook book – these programs are important tools to manage the relationship between companies and their best customers. Done well,  thoughtful programs can give you an edge and drive bottom-line performance. Use this simple guide to create a solid framework as you invent your own program and embrace ideas from successful programs across multiple industries. Finally, ask yourself why programs and their components work and what conditions exist that drive customers to participate in them? Answer those questions and you’ll understand new ways to achieve better results.

Coaching Sales & Marketing Travel Management

Profit From Foreign Exchange Rates

The value of goods and services may remain steady, but the cost depends on the currency they are priced in. Specifically, a hotel room in Europe listed for €130 would cost an American buyer $165 today, while a European booking a hotel in Chicago for $130 would pay slightly more than €102 at current exchange rates.

Consider that the Euro was designed to lock or peg exchange rates between member countries when it launched on January 1, 1999. The single Euro-area currency eliminated more than a dozen local currencies and provided transparency across Europe as people in many countries were better able to compare the value of their Euro’s in any participating country (the British are noticeably absent and trade between the island nation and the continent must still be converted in or out of British Pounds). The new currency closed at 1.19 Euros to the USD on its launch, but within twelve months had fallen to 1:1. That triggered a crisis that only abated after the Euro reached a low of 82¢ in late 2000. In 21 months the Euro lost a third of its value, a striking decline. I had just started a new job and was tasked with designing exchange rate collars for consumer financial products offered in international markets. That experience replaced the history and theory I’d been taught with a ringside view of the real-world destruction foreign exchange rate fluctuations can have on a business. I’ve paid careful attention ever since and I’m never surprised by how few people understand what these fluctuations can do. Seven years later, in March 2008, the Euro reached a high 1.578USD – almost a 100% gain from the earlier low.

Forex isn’t just for quant’s in the corporate treasurer’s office. Foreign exchange rate observations should be on every international marketing professional’s list of things to pay attention to. Here’s the short version – businesses should promote their products in places where their currency is cheap and pull back where or when their currency is expensive. Specifically, the US airlines should have promoted travel to Europe from January 2000 through 2002 to residents in North America. Leading up to Euro peak in March 2008 and even after a modest decline US and foreign flag carriers should have promoted travel to the US to take advantage of the Euro’s high value against the USD.

So what happens to revenue and profits? Most companies report their earnings in their home country currency – so when the Euro was cheap in 2000-2002 US airlines and hotels would have lost money on sales made in Europe. Hotels offer a good example. Assume Hyatt, based in Chicago, offered rooms in Europe for €130 at the low. That room in Paris, or Frankfurt would have contributed $106 in revenue. Conversely, the same €130 room converted at the Euro high in 2008 would have contributed $205 to Hyatt’s revenue. Same room, same price, very different result – remember the Euro appreciated almost 100% over seven years.

Where are we today? The Euro traded last week at $1.28, an eight percent increase in a few months, but the longer term trend has been down. Pressure from insolvency in Greece, Spain, Ireland, and Italy is mounting. As the European Central Bank implements measures to solve the crisis, it will add downward pressure to the Euro currency value. Barring civil unrest to protest against local austerity measures, travel companies should advertise the relative values in Europe to travelers from the Western Hemisphere. A quick look at the sources of financial tension in many countries, especially youth unemployment rates, leads me to conclude that trip insurance for business or leisure travel is a good idea too. The key takeaway is that Europe is on sale and will remain that way for the foreseeable future.

About the author. Paul Laherty is passionate about problem solving. He led the Americas Air and Hotel consulting teams at Advito, a travel management consulting company. Paul also managed teams in Sales, Marketing and Finance at American Airlines. His work at AA included supervising the global corporate contract team, working closely with large customers in Global Sales, and  managing the Los Angeles sales team where he met some very well-known customers. Paul managed American’s business loyalty program and he launched a loyalty credit card with American Express. He enjoys applying original research (he calls it Phynancial Fisics) to solve problems. Paul lives in Southlake, Texas with his wife and two daughters and flies a Cherokee 140 as often as time allows. He is active on Linkedin where you can view his detailed profile here:http://www.linkedin.com/in/paullaherty, follow him on twitter @Paul_Laherty or send questions to paul.laherty@gmail.com.

Sales & Marketing Travel Management

My Hollywood Debut

Freedom to choose where we spend our time gives us powerful control. Recently a friend invited me to work with him in Beverly Hills on a press junket for Resident Evil 5. This is one of the cooler byproducts of that amazing trip. Click here to see My Hollywood Debut.

About the author. Paul Laherty is passionate about problem solving. Until recently Paul led the Americas Air and Hotel consulting teams at Advito, a travel management consulting company. Prior to Advito he managed teams in Sales, Marketing at Finance at American Airlines. Paul’s work at AA included supervising the global corporate contract team, working closely with large customers in Global Sales, and he managed the Los Angeles sales team where he met some very well-known customers. He also has experience in loyalty marketing, both business-to-business, and consumer. Paul managed American’s business loyalty program and he launched a loyalty credit card with American Express. He enjoys applying original research (he calls it Phynancial Fisics) to solve problems. Paul lives in Southlake, Texas with his wife and two daughters and flies a Cherokee 140 as often as time allows. He is active on Linkedin where you can view his detailed profile here:http://www.linkedin.com/in/paullaherty, follow him on twitter @Paul_Laherty or send questions to paul.laherty@gmail.com.

Coaching Sales & Marketing