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Soaring Beyond Frequent Flier Programs: How a New Type of Airline Loyalty Should Take Flight

Sometimes it’s easy to fall into predicable patterns, particularly when ways of doing things have been forged out of comfort and familiarity. This is in part because they feel good and also for the fact they get the proverbial job done – most of the time. And no truer is this dynamic the case when it comes to airline loyalty programs and their need to break beyond the frequent flier loyalty program construct, a construct that airlines helped pioneer some 30 years ago, but one that’s beginning to show its age.

While there’s no doubt that frequent flyer programs will remain vital to the industry – 85% of Alaska Airlines’ Mileage Plan customers report they’re “satisfied” or “very satisfied” with their membership and 76% of respondents in a recent Frequent Business Traveler and Flyer Talk survey felt similarly about American Airlines’ AAdvantage, despite bankruptcy – it’s almost as if FFPs have become airlines’ “cash crop.” But like over farmed soil that produces lower and lower yields, reliance on a single form of loyalty is fraught with just as much performance risk.

The facts speak for themselves: globally, some 9.7 trillion frequent flyer miles go unredeemed, according to a 2011 report by InsideFlyer.com and at 1.5 cents per mile, that’s valued at $145.5 billion. What’s more, in 2007, some 39 billion points expired due to rule changes alone relating to eligibility restrictions mileage expiration dates. Money left on the table in billions and a hefty percentage of unredeemed points are proxies that customers are looking for something beyond the tried and true traditional frequent flier programs.

That’s why, in my opinion, three things need to happen to help airlines broaden their loyalty program offerings.

  1. Airlines should embrace a host of non-mileage-related rewards that drive customer experience and promote brand loyalty;
  2. They should follow the retail and hospitality industries’ leads in bringing these revenue and loyalty-based options online, being mindful of the IT challenges and limitations, but also aware of the required C-level commitment;
  3. And they should consider the ways in which new technology, specifically mobile, can help additional consumer channels work together in a seamless and efficient manner that promotes both omnichannel marketing and its related offshoot – omnichannel loyalty.

I will be discussing these recommendations along with Kobie President, Michael Hemsey and VP of Brand Loyalty, Marc Glazer at the 2012 Airline Information Mega Event in San Diego later this month at Kobie’s a pre-conference workshop on Monday, November 26, 2012. In our workshop, called Loyalty Programs Take Flight Through Omnichannel Loyalty, we’ll examine the current state of loyalty programs, challenges facing loyalty marketers, emerging trends, the case for omnichannel loyalty, along with best practices and how these facets relate to airlines and their loyalty programs.

Even as we prepare to make the omnichannel airline loyalty case, it’s not as if airlines have been left circling. Rather, there’s growing indications the FFP paradigm is beginning to change. Already, according to Airline Business’s 2012 The Airline IT Trends Survey, nearly 8 out of 10 (78%) of airlines are or are planning to “personalize” the communications and services they currently offer their customers, through websites, smartphones, and social media.

And, similar to the retail environment, the customer data gained from these channels encourages a positive feedback, where the more data captured, the better the customer picture emerges. Applied to the airline industry, that in turn leads to more tailored, more specific and more real-time passenger information with which airlines can use to construct newer, more engaging and more relevant loyalty rewards – beyond FFP.

So whether it’s borrowing from retail or hospitality loyalty approaches, airlines have a growing bevy of options to help broaden the traditional “loyalty cash crop” that frequent flyer programs have become. For without that necessary infusion of creativity, of beyond-FFP inspiration, the frequent flyer program loyalty cash crop will continue to see lower and lower yields. More miles risk going unredeemed and loyalty program liability costs are likely to rise.

In this still-struggling economy, with the US fiscal cliff looming and a stubborn European dept crisis that refuses to abate, airlines should do all they can to ensure that travelers have the best experience possible. And an experienced-focused loyalty program is a great way to start.

You can register for our pre-conference workshop (as well as the 2012 Mega Event conference that runs from November 27 to 28, 2012) and learn how to give airline loyalty programs the octane boost they need to soar to ne

Author: Bram Hechtkopf

Bram leads the "marketing of Kobie Marketing". He consults with current and prospective clients on new business opportunities, helping to develop customer retention and loyalty marketing solutions that drive increased retention and spend. Following in the footsteps of his father, Kobie's founder, Bram is eager to continue Kobie's vision of technology and data analytics as enablers of leading-edge marketing executions for world-class customer loyalty initiatives.

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