Ai Editorial: Changing FFPs is fine, but “elite loyalists” deserve a fair treatment

First published on 3rd February, 2017  

Ai Editorial: When Amtrak last chose to re-launch their rewards program, the team decided to take care of their elite customers. There is plenty to learn from this approach, writes Ai’s Ritesh Gupta

 

The sheer delight of being “valued”, taking family for special trips or the convenience quotient associated with travel are facets that loyal members, especially those belonging to the elite category, associated with travel loyalty programs.

But changes in loyalty programs of established travel organizations in the last year or so, as witnessed in case of Starwood and American following Delta, United etc., have resulted in bad experiences as well as PR.

There are elite “loyalists” with more than a couple of decades of association who have expressed shock, and are peeved with changes, for instance, raising of reward point requirements in case of Starwood. Come to think of airlines’ stickers and tags all over on your luggage, and suddenly you are left with only fond memories of all the perks you enjoyed, sad, isn’t it?

There are few areas that can be looked upon - what could be done to avoid or salvage the precarious situation:

·          Why not leave “elite” members if everything is working well: Vicky Radke, Senior Director, Amtrak Guest Rewards at Amtrak, shared that when the organization last chose to re-launch their rewards program, the team relied on customer insights and “came up with measures regarding on how to base our success”.

Amtrack decided to focus on increment in enrolment, in engagement and making redemption simpler.

At the same time the team felt the need to take care of their elite customers – they know how your program works, what they want etc. So the team didn’t change elite benefits. “We made sure those customers still felt valued. Changes were made to simplify and streamline the program.” The team relied on both quantitative as well as qualitative research for the changes in the program. “Customers indicated that there was lack of understanding about how the program was working, and how they would get enough points to redeem. We used this focus group insight as well as member satisfaction scores to understand the opportunities we had to improve the program, and make the changes that would drive additional engagement,” shared Vicky.

The key KPIs included over 15% in engagement, 25% in enrolment and also increase in redemption.

·          Feel the “sentiments” of a loyalist: One elite business traveller can’t digest the fact that Starwood made changes, and felt “betrayed”. For business travellers, FFP perks tend to be the number two reason just behind schedule that determine which airline the customer chooses (assuming they are not handcuffed by a corporate travel policy).  Besides carrying around their elite status as a badge of honor, customers cherish the perks provided in order to alleviate the stress of business travel and they overall create a much more comfortable travel experience.  At the airport, preferred check-in, expedited security, priority boarding all aim to make travelling more efficient. On board, upgrades to first class and/ or priority seating improve the comfort of the flight and provide more room to work or to relax. Additionally, when things do go wrong, elite customers know they are going to be given priority for customer service and rebooking. When all of this goes away, then it will result in acrimony.

·          Do communicate about the change and the future: I came across a post on LinkedIn that referred to Starwood making changes to their rewards program, but this elite member wasn’t informed in advance and got to know only after implementation happened. This member searched on Google but found no official announcement on the corporate site also. And then he goes on to add that the Marriott-Starwood strategic alliance only added to the woes, as perception around Marriott and their “limited room availability for reward stays” for business travellers wasn’t an exciting development either.

As we explained in one of our articles, the old systems of airlines in the U. S. awarded both more award miles (used for free flights) and more status-earning miles to those who flew in premium cabins compared to those on cheap tickets. The problem with the old systems was that the “spread” or “differential” between cheap-fare earning and high-fare earning was minimal. In many cases as low as 1.5. That meant you really didn’t “much more” for spending more. So – to move to a more “revenue-based” earning system – the imperative was to increase the “spread” or “differential” to better reward high-fare customers relative to low-fare customers. This needs to be explained.

Airlines also need to ease off the transition for erstwhile “high-value” travellers, especially not pushing them to do what all otherwise was part of the services for “elite”. For instance, don’t make your customers bounce from department to department in order to voice their dissatisfaction. Explain them the change when they get in touch.

·          Looking beyond “gaming” and looking at the profile of a traveller: Can airlines look at the way their “elite” customers reach the status and cut down on the possibility of grievances? For instance, a business traveller who ends up travelling from the U. S. to Asia several times a year and manages to achieve the elite status provided he or she is buying full fare or business fare tickets. This is fine. But there could be a traveller in the U. S. who travels domestically every week 1K miles each way, and takes off 4 weeks for vacation and holidays, and is now because of change coming short of the threshold necessary for elite status. So in this case can a certain mileage-run or sheer volume of transactions be considered, finding a way to differentiate between the genuine traveller and one who is finding a nefarious way to reach the status. Can aggregated behavioral spending data help in this case?

FFPs should not react by copying a revenue-based accrual / earning structure of another FFP. Did United and American simply copy Delta’s program? FFPs must fully comprehend their own business model in respect of their revenue and cost structures, as evolving to a fully fledge revenue-based model (accrual and redemption) requires monetizing the value of a mile/ point – a critical success factor to maintain commercial sustainability of the FFP, which by default will impact all rates negotiated with long-standing accrual and redemption programme partners as a result of a previous calculated cost of a mile/ point.

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