This blog post is by ^DH, views my own!

Around the end of December 2016 I was getting a number of messages from people pointing out that Virgin Trains East Coast (VTEC) were looking for a Loyalty Manager. Some people who suggested I apply were joking, some were serious, but after much thought I decided I'd give it a shot.

I thought it was a bit of a long shot as if VTEC were going to seriously consider me it would mean they would have had to employ one of their most vocal critics, also I've never been a loyalty manager and quite frankly wasn't really sure what the job entailed (but that's what an interview would have been for had I got to that stage). I didn't know whether it would have been a genuine opportunity to improve the loyalty offering or whether they just wanted to employ someone to sit in the tedious meetings with Aimia (Nectar) and Virgin Atlantic (Flying Club) so that more senior management didn't have to. I was hoping on the former but suspect the latter.

I still don't know the answer to the question as to what does the loyalty manager do. I know they hired one, but I've not noticed any change. Things are still pretty much the same, there's still Nectar and there's still Flying Club. Nectar sometimes gets bonus offers (but nothing inspiring), Flying Club tends to get forgotten about.

Most of what's here were my notes from the time. I've tweaked them a little, so if somethings sound outdated now and other things don't that's the reason why. Also remember this was me trying to show what I could offer VTEC so I was thinking of options that would improve things from what we have now but aware that not everything I would like to do is feasible so I looked at all options.

Why?

I thought this would be a chance to make a difference. I knew the chance they'd take the application seriously was low, but if you don't take a chance you don't get anywhere. I also knew that it would mean I'd no longer be able to contribute to Save East Coast Rewards as that would be a major conflict of interest. There's other less frequent contributors who could have kept things running and held VTEC to account from an external source. I would have relished the opportunity to improve things from the inside, although of course I'd not be able to publicly comment on how things were going so if things were progressing slowly it could look like no progress was being made (this could be what's happening now).

Most of my experience is with computing, mainly devops with some back end development, so taking on a job like this would be completely different to what my CV says I'm skilled at. I thought differently, after all if you look beyond my CV:

  • An excellent knowledge of loyalty schemes, not just East Coast Rewards and all the previous schemes on the line, but also schemes of competitors such as British Airways and other travel related loyalty schemes such as hotel schemes
  • A good general knowledge of the East Coast Mainline, what things have been tried before, what things have worked, what has failed
  • The ability to process data from various sources to see how sales have been impacted by various loyalty promotions both recently and historically would be useful
  • The determination to gather evidence for and build a case for the approach that I believe is right rather than just taking the path of least resistance

I was aware that things are easier said that done, I knew that I couldn't take the job and on day one announce East Coast Rewards was coming back, I knew that there was a high chance that might not happen. The first thing to do would be to work out what options were available, this would depend on things such as the current contract with Nectar and Flying Club and also look whether they're bringing any value for VTEC. Although they're a poor option for existing customers it's possible these partnerships have encouraged some people to use the train. Any new loyalty offering would have to be costed (implementation and on-going costs) and proven to provide a benefit to the business. I do believe that a decent loyalty offering can grow the business.

In my eyes, a loyalty scheme has to achieve the following things:

  • Attract new business - therefore it has to offer an obvious incentive over competing frequent traveller schemes (the biggest being British Airways Executive Club on the London-Edinburgh/Newcastle routes)
  • Retain existing customers - make it less advantageous to move elsewhere
  • Create positive brand impression - the net promoter score is a popular way to measure satisfaction and a decent loyalty scheme is a tangible way to encourage people to recommend to friends and family
  • A great way to compensate - if it's considered that a passenger should be offered something more than the required compensation (Delay Repay) offering this through the loyalty scheme is a simple way to increase satisfaction while knowing they'll have an incentive to book an additional trip

One key scenario I believe is a current weakness of VTEC is the Edinburgh to London business market. They have a competitive product for the occasional leisure traveller or the business traveller that's always allowed to travel first class. They are missing out on those business travellers that have an economy/standard class travel policy.

British Airways Executive Club gives those who frequently travel this route benefits such as:

  • Progress through the status levels, bronze status gives you access to the business class check-in desks and silver gets you fast track and lounge access
  • Ability to use your Avios points (miles) to upgrade to business class on occasion
  • Ability to use Avios points on reward flights for leisure travel (unless your company insists you use your points for business purposes)
  • Since BA has introduced buy on board in economy you can use your Avios points to buy food and drink on-board, you can't do that with the Foodbar on the train
  • You'll be able to use your BA status (lounge access, fast track, etc) on other flights you make with them whether for business or leisure

On the train you won't get lounge access in standard class regardless of the amount you travel unless you're lucky enough to have been offered a lounge pass, it's clear that British Airways rewards regular travellers on this route better. There's no way to upgrade to first class unless you pay the fare difference yourself, being able to use the points you've earned when flying to treat yourself on-board is a great benefit. Even those allowed to travel first class on the train or business class on the plane may still consider it worth building status and points with British Airways as they can then use these for personal travel.

Without seeing any figures I had thought of these possible options.

Option 1 - new loyalty scheme

The scheme would depend on being able to break out of the contract with Nectar (or modify it). The loyalty scheme could take bits from both East Coast Rewards and tier based schemes such as BA Executive Club. Just like with East Coast Rewards you want to make the VTEC site the default place to go to in order to book rail tickets, but as you want to encourage travel on VTEC rather than a direct competitor like Grand Central then it makes sense that VTEC offers more points on their own services. As well as getting the 5% commission from third party ticket sales encouraging customers to book all their rail travel through the VTEC site also helps you get the bigger pictutre on the passenger. Are they travelling routes with another operator that could be made with VTEC? Are most of their trips leisure travel, etc?

An example earning scheme could be:

  • Base earnings (non VTEC travel) 1 point/£
  • VTEC standard class 1.5 points/£
  • VTEC first class 2 points/£

Rewards could include using points for free travel, upgrades and on-board catering. Consideration would be made in the benefits of offering third party rewards such as beer, wine and gift vouchers. An option to transfer the points to Nectar or Flying Club could also be provided and for those who genuinely preferred those other schemes could also be given the option to continue directly earning in those (if Nectar and Flying Club were willing to continue the arrangement).

A tier system could be based on VTEC spend and unlock additional benefits when a certain level is reached. These benefits would be for the most frequent customers and include things like lounge access and Foodbar discounts. Other benefits could also be possible such as high value customers could be allowed a couple of free cancellations a year on normally non-refundable tickets. Similar schemes like the West Coast Traveller scheme offer priority parking at station car parks. The idea would be to make sure that everyone had the opportunity to earn points so that even those with a relatively small (but frequent) spend would still get the occasional free ticket. Something missing from East Coast Rewards was upgrade rewards, these could be attractive to business travellers in standard class who might want to use their points to treat themselves to first class.

Option 2 - tiers + Nectar (or Flying Club)

If contract issues meant it was not possible to replace Nectar with an in-house loyalty scheme it would make sense to build a tier based loyalty scheme on top of it. You would continue to earn Nectar (or Flying Club) points as normal, ideally points would be offered for all rail travel (to compete with FirstGroup which already does this) but as in option 1 the tier levels would only count VTEC spend. These tier levels would unlock benefits such as lounge access and would also release a number of free tickets when each level is reached. Those who have reached the first tier would also be able to use Nectar points or Flying Club miles to upgrade services subject to availability.

It would also make sense to launch the occasional points sale where passengers would be able to book tickets with a reduced number of points. These sales would be open to all (although those on a tier could get early access) this would be to encourage those who are Nectar or Flying Club members who've not used VTEC before to give them a try. At the moment it seems odd that Nectar points can't be used to book sale tickets (as the rules say only ticket type 'advance' are eligible for spending points).

This solution would ensure that regular customers were rewarded for their travel while ensuring that everyone who books direct gets some benefit, it would also take advantage of the existing schemes potential to attract new customers.

Option 3 - make the best of what we've got

This would hopefully be a transitionary option while the backend systems for a new scheme were implemented (something that I have the experience in implementing!) but even with just Nectar and Flying Club there's potentially more we can do to make the most of these schemes. The first thing to do is to ensure that the VTEC site is the go to place for purchasing rail tickets. So at a minimum offer Nectar points (and Flying Club miles) on all rail tickets this is to match what FirstGroup are doing with Nectar. The cost of providing these points is offset by commission earned. It's important to get people booking everything on the VTEC site because as well as learning more about the individual passengers and their travel habits it means they also get to see any of the latest VTEC promotions when visiting the VTEC site. Nectar would have to be 2 points per pound for all travel in order to match FirstGroup, but it would be worth investigating the possibility of offering more points for VTEC trips. As VTEC would be the only company to offer Flying Club miles on all rail travel this would be a selling point for Virgin Atlantic flyers to take the train. As Virgin Atlantic no longer operate their 'Little Red' domestic flights they could promote the train as the best way to travel for their UK customers or overseas customers visiting the UK. As VTEC journeys earn 2 miles/£ I'd keep that rate but make it 1 mile/£ for non-VTEC (currently earn zero) and 3 miles/£ for first class.

Currently redeeming Nectar points is a painful process as it involves visiting the website to redeem a voucher and as there's no link between Nectar and the VTEC website it means the codes need to be entered manually. The maximum voucher size is £50 and if you want to redeem more points this means entering more voucher codes. A way of linking these together would make the process more simple. As you get the same rate 500 points = £2.50 at Sainsbury's and many other partners I currently advise it being easier if they spend their points they saved on shopping and then put the money they saved towards the train tickets. A better option would be to have some fixed points rewards that could be redeemed towards free travel rather than just money off.

A sample earning chart for Nectar could be:

  • 2000 points (usually worth £10) - standard class single reward (or upgrade a paid ticket to first class*)
  • 3500 points (usually worth £17.50) - first class single reward
  • 7000 points (usually worth £35) - 4x standard class singles
  • 12000 points (usually worth £60) - 4x first class singles

Availability for upgrades would require the availability of rewards seats in 1st class

This would still be a significantly higher spend than required under East Coast Rewards but as Nectar allows points to be collected from so many partners setting the redemption levels too low would mean it would be too easy to get free trips and would make the scheme loss making. It might be worth looking at capping the number of free tickets that can be earned by this method and also (if allowed) to have some qualification criteria to unlock the rewards (such as you need to have purchased a VTEC ticket in the last 3 months) to limit non-customers grabbing the free allocation.

This would initially run as a trial and the redemption levels would be tweaked. This isn't the ideal solution but would allow customers to get some sort of achievable reward and add some real value to the Nectar scheme.

For Flying Club the redemption levels would be based on the number of miles needed for short haul flights.

Virgin Red

Virgin Red has not been mentioned so far, in its current format it's more of a tool to promote other Virgin businesses than a loyalty scheme as such, although registered customers of some Virgin companies get a head start on their offers by gaining additional points. It would be great to use Virgin Red more to promote VTEC to customers of other Virgin companies by offering them discounts or other offers. It may also be worth looking at ways working together with other Virgin companies could improve the customer experience, for example offering frequent travellers a discount on multi-gym access with Virgin Active so they can access gyms when away from home. Work with Virgin Atlantic so that if your flight is delayed and you're travelling onwards with VTEC the guard can check there was a delay and allow you on a later train free of charge maybe even offer our highest spending customers a Virgin Atlantic lounge pass (probably single use).

There's other features of the Virgin Red app which can keep VTEC in people's minds. Run reverse auctions for first class tickets, run some prize draws, ensure that those engaged in the Virgin Red app are also engaging with VTEC.

Other partnerships

It's worth looking to see which other companies would like to become partners and either target VTEC customers as a whole or just the high spenders. For example a hotel chain may want to offer something to our highest spending customers as they know they're away from home a lot. Examples could be offering discounts, status in their loyalty schemes or some additional benefits when staying in the hotel. Some benefits may be negotiated at a local level for example with local restaurants that may want to get some attention.

Surprise and delight

VTEC are keen on a surprise and delight style of reward. These are a good way to to make existing customers feel appreciated and can also be used when things have gone wrong as a means to say sorry. It also provides a way to reward customers who book through the site but aren't actively participating in the loyalty scheme. These in no way replace a loyalty scheme with tangible defined benefits, you're not going to switch from flying because you may get a free prosecco at some random point in the future but they do make existing customers feel more valued. Surprises can be offered in-app, for example lounge passes, upgrade offers, etc or on-board like they are currently.

Implementation

To keep costs down it would need to be similar to East Coast Rewards in that the scheme is administered online. If there's any status benefits offered such as lounge access or Foodbar discounts that require proof of eligibility this could be done with an app that displays eligibility and also features a barcode that would be scanned to verify eligibility. This would minimise the amount of manual administration needed.