Understanding Airline Loyalty Program

Chapter : Loyalty Program Partners

Strategic partnerships for customer loyalty, also known as coalition programs, can be extremely effective for customer retention and company growth. Many types of partnerships add value to the FFP strategy, strengthening the member proposition in terms of accrual and redemption opportunities. These partnerships include Code share airlines, Airline Alliances, Hotels, Car Rental Partners, Fleet Taxicabs, Publishing Houses, Moneychangers, Phone companies and luxury brand partners. Any services used from these partners provide members with flying miles which helps them reach their free flight faster.

Benefits for members: Members have many ways of earning the miles / point so that they reach the reward threshold faster. Also spent on every activity generates some benefits which is a bigger motivation for the member.

Benefits for Partners: Airlines provide its FFP partners, exposure and awareness opportunities since partner’s code is carried on the network of the partner and hence reaches millions of members. It also adds to the status of partner to remain associated with reputed airline thereby increasing the brand value.

Benefits for Airlines: Partners pay good money to airlines to be involved in an FFP because the schemes are such powerful marketing tools. Some of the large FFP programs generate more than $1 billion annually. Also a consideration is the saving airlines make on mass marketing. Accessing partner databases allows sales campaigns to be launched successfully beyond the borders of the airline’s own database. Airlines benefit by expanding the offering of their FFP program to make it more attractive and thereby increasing the members. The targeted advertising of an FFP is far more cost-effective and to an extent negates the need to rely on mass media.

Cost of partnerships: Aside from the opportunity cost of the seat, there is the direct cost of flying an extra passenger in terms of meals and fuel use. There are also costs in running the FFP, including staff salaries, IT implementation and maintenance, and communication costs such as enrolment brochures and loyalty card production. An FFP will also normally pay partners an agreed per mile rate if a customer decides to spend his miles on that partner’s product rather than the host airline.

Then there are programs such as Air Miles, which offers free flights despite having no airline affiliation. Such schemes clearly have implications for the long-term customer relationship. Partners can change and customer loyalty is to the scheme and not an airline. Appropriately recognizing and rewarding customers for their business is the key. A well-run frequent flier program has the ability to reinforce brand loyalty by helping to attract and retain good customers, and increase customer satisfaction.

1) Use a Simple Points System: This is the most common loyalty program methodology. Frequent customers earn points, which translate into some type of reward. Whether it’s a discount, a freebie, or special customer treatment, customers work toward a certain amount of points to redeem their reward. If you opt for a points-based loyalty program, keep the conversions simple and intuitive. Although a points system is perhaps the most common form of loyalty programs, it isn't applicable to all business types -- this type of loyalty program is most appropriate for businesses that encourage frequent, short-term purchases.

3) Charge an Upfront Fee for VIP Benefits: Loyalty programs are meant to break down barriers between customers and your business -- are we seriously telling you to charge them a fee? In some circumstances, a one-time fee that lets customers bypass common purchase blockers is actually quite beneficial for business and customer alike. By identifying the factors that may cause customers to leave, you can customize a fee-based loyalty program to address those specific barriers.

4) Structure Non-Monetary Programs Around Your Customer's Values: Really understanding your customer means understanding their values and sense of worth. And depending on your industry, your customers may find more value in non-monetary or discounted rewards. Every company can offer promotional coupons and discount codes, but businesses that can provide value to the customer in ways other than dollars and cents have an opportunity to really connect with their audience.