Airline Loyalty Landscape – Current Global Perspective
Loyalty started in the airline industry and the innovation of these programs spilled out to other verticals. Today, the airline industry is a highly competitive and commoditized marketplace, and its loyalty programs – once a point of differentiation for brands – are now becoming commoditized as well.
Currently, the airline industry is split between full-price/full-service airlines and low-cost providers. Low-cost providers typically don’t have loyalty programs, and if they do, they’re not as all-encompassing as the full-service providers. Or, they may align with a larger carrier to offer an extension of their program. This can be beneficial for travelers who are able to earn-and-burn points through the smaller, regional carriers and be seen as a loyal traveler.
With little differentiation among current programs, typical constructs allow customers to earn miles and status for flights purchased (spend) and miles traveled (distance). Originally, programs were frequency- and mile-driven programs. The market shifted to the current landscape several years ago, where spend now plays a significant role in tiers earned and benefits provided.
The two largest components of these programs are the miles earned (and the potential rewards available once earned) and the benefits available across earned tiers. Many programs offer travelers soft benefits (ex. complimentary beverages/meals, in-flight wi-fi). And the majority of these air carriers have co-branded credit cards, allowing customers to earn faster, and tiering within the credit cards that accelerate earn even more.
Emotional Consumer Loyalty Research
Aimia’s recent emotional loyalty study reviews these trends to uncover what engages consumers (rational) and what consumers expect (emotional) from loyalty programs. Looking at consumer needs and wants helps to uncover opportunities for program improvement and areas where brands can truly differentiate.
Rationally, the ideal airline loyalty program is driven by how easy the program is to use and engage with (Ease & Participation) across the US (31%), UK (35%), Australia (33%) and APAC (32%). Dubai was the only region primarily driven by Rewards (34%).
Emotionally, expectations were high in Preferred Treatment for the US (+59%), UK (+47%), Australia (+40%) and Dubai (+56%). APAC consumers had highest expectations for Rewards (+52%).
Find Your Distinction
This industry is far behind retail in terms of personalization, although there is certainly ample opportunity, given the data exchange within a frequent flier program. Historically, airlines have been unable to make the shift in building out data-rich customer profiles which would enable them to personalize offers and experiences, which would be worth the investment.
It isn’t surprising in this study that expectations for airline loyalty were highest for Preferred Treatment. Benefits such as pre-boarding and automated check-in priorities provide access and convenience for the road warriors, where the idea of miles for a free vacation may be of lower value to this target audience.
According to Darren Murph, former Senior Strategist/Writer with The Points Guy, airline programs are largely offering the same value, particularly in the US, where as soon as one program makes a change – such as bumping the baggage fee or the cost of alcoholic beverages – competitors copycat within the week. Murph is also concerned about the deflating value of points and miles in programs. Each year, each mile earned becomes less valuable in terms of what it can be used for. Nearly all US airlines are moving to increase the ways points can be spent. As a result, there are more ways to use points, but they’re less valuable; requiring travelers to earn more. This can – and is – off-putting to many travelers, however, as airline programs are nearly identical, a customer looks around and must weigh how much it’s worth to jump to another program. “There’s a lot of these nuanced elements of the loyalty program that as a member I’ve been able to let the point valuation go because there are other things in my mind that make up for it, or at least keep it on par,” said Murph. For him, the soft benefits of airline loyalty (complimentary upgrades, airport lounges with complimentary food, etc.) keep him loyal to his favorite airline.
For full-service airlines, the customer is focused on the value of the “extras” they get as they tier up. For road warriors, miles don’t matter. They don’t have enough time to use all their miles. It’s the first-class upgrades, priority boarding and special treatment when things go awry that keep them loyal to their favorite airline.
Customer centricity is key to differentiation among a crowded loyalty landscape. Aimia uses its proprietary SmartJourney® methodology, taking a holistic and personalized customer-centric approach, where each brand interaction is designed to create a meaningful moment and ultimately drive emotional advocacy and long-term customer growth.
The data in this article is derived from Aimia’s emotional loyalty market research report, Global Emotional Loyalty. Download the full report here.
Ease & Participation: Ease of use in joining and participating in the program, and processes within the program such as gamification and recognition Customer Data & Service: How much data is exchanged for program benefits and data security; general care for the customer