Ai Editorial: Can airlines be an ally as a loyalty program operator?

First Published on 24th May, 2017

Ai Editorial: Airlines can improve on 5 counts when it comes to making their loyalty currency more valuable, writes Ai’s Ritesh Gupta

 

Are airline loyalty programs “trustworthy”? Are airlines content with lesser active program members? Do airlines only allocate the “lowest awards to seats they feel would otherwise go unsold”?

Such questions gain credence going by the criticism of FFPs when one tries to assess the trust quotient. According to a study by Brandigo, around 60% of travellers do not feel loyal to any particular airline. The figure shows only marginal increment in loyalty among passengers who fly more than 7 times per year.

If one tries to assess the level of trust via Google (search for “trust in airlines’ frequent flyer programs”), as per the first few links on Google, even without clicking on them, it is apparent that as an industry, airlines aren’t being trusted. A headline reads: Are airline frequent flier miles programs just rip-offs? Another link (from a piece posted by BoardingArea regarding Wyndham Rewards cancelling a promotion) explained the meaning of “trust”.

Airlines acknowledge the problem

“The legacy of being rewarded for distance travelled has set an expectation amongst customers which is difficult to reset,” an airline executive from Asia told me.

Of course, certain markets witness more criticism of the way FFPs function. For instance, certain standalone loyalty programs in the U.S. may be touching a saturation point and the viability of accruing points/ miles in one currency with a particular airline is being questioned. Also, loyalty programs have been gradually evolving – take the case of transitioning to revenue-based model.

“High yield customers will praise you for rewarding them equitably, whereas low yield customers will feel deprived – sometimes through no fault of their own, but rather due to competitive pricing amongst airlines on selected long haul routes. “Taking away” from loyal customers, even if relatively minor, can ignite a firestorm of opinions on social media platforms,” this is what a senior airline executive acknowledged as the airline chose to shift to a revenue-based FFP.

Time to take action

So airlines need to take initiatives on several counts in order to come across as an ally, adviser keen on letting travellers make the most of what they have accrued. As per one of the studies last year, Collinson found that over 50% of survey participants didn’t expect that they would “ever be able to earn enough points to redeem anything of value”. According to 500friends, airlines need to identify gaps that exist in rewards structure. Some of the areas that can be improved upon:

1.     Offering a reward flight for non-travel purchases: Airlines are targeting infrequent passengers, and even introducing coalition loyalty programs. One way that is being attempted is everyday purchases points earning. So even as the lure of a free flight remains intact, the airline ends up remaining in touch, offers more ways to use or redeem a loyalty program’s currency. How do both passengers and airlines benefit? The major appeal of a coalition model is – the overall share of wallet. A person will spend a small proportion of their disposable income on air travel in a year. Adding credit card, supermarket, department store, petrol and other retailers expands the share of disposable income going through the program.  With higher total spend within the program ecosystem more points are earned and so even the most infrequent traveller can attain those reward flights. Of course, the concept for rewards for everyday purchases isn’t for all. Some programs are devised for only frequent fliers. In this model there is less need for more partners as the vast majority of points will come from flying.

2.     Making calculation simple and facilitating rewards: Can airlines understand the spending pattern and simplify calculation for a loyalty program member? If a start-up or a 3rd party FFP review site can explain airlines have a wide range of values even within one redemption category like flights, then why airlines can't do the same? Start-ups today are analyzing credit card spending pattern, sharing details of missed rewards and even offering personalised average reward value based on the rewards preferred by a spender! So, for example, if a user is part of an airline co-brand initiative and tends to use this card on certain categories and is eyeing a free flight, how can airlines assess the spending and come up with an apt recommendation? Can airlines highlight how values earned are calculated for each transaction and the value for what was missed by the member? As Connexions Loyalty recommends, airlines can experiment with varied offerings within various customer segments in order to comprehend who “values your brand, increase redemptions and reward your lost loyal customers”.

3.     Avoid silo approach in a coalition loyalty program: Airlines, as program operators, need to consider the real-time quotient in passenger experience, and for this, all partners needs to deftly manage accrual and redemption of points/ miles in real-time (focus on their value, location, yield etc.) “(As an airline) Try to understand your partner’s (core offering and capabilities) and enable them to build their own loyalty accrual within your loyalty program, using your currency, says Piotr Kozlowski, VP Consulting, Services Sector, Airline/ Travel Loyalty at Comarch. He also asserted that every aspect of the program needs to be relevant, contextual – for instance, targeted promotions from a relevant partner, efficient use of APIs for quick integration to various systems, such as enrolment API, point – status check API etc.

4.     Counting on mobile’s prowess: FFPs or loyalty initiatives should be crafted considering the prowess of mobile devices, and not merely be adapted for the same. For instance, how can loyalty program capitalize on mobile for real-time offers, personalised messaging etc.? How to make the most of Apple Pay and Android Pay, and interweave loyalty-related moves with them – say, the ability to earn and redeem rewards, and pay with a single tap? Can the currency of a loyalty program be used to pay for a transaction via a mobile wallet?

5.     Overcoming loss of interest: Acknowledging that distant rewards can be discouraging and alienating to the program members, Comarch chose to combat such negativity and eventual loss of interest in the program. The company came up with their “Point Loans” option earlier this year, offering members a chance to avail a reward earlier than expected by “loaning them the fixed amount of points that are necessary to complete a specific redemption”. Comarch explained that this service can be “connected with a special fee that can be compensated in a form of money or points and needs to be repaid by the restricted deadline, otherwise either the member’s card will be charged or their account will be blocked”.

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