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Why airline loyalty is not up in the air

Christopher Elliot, author of the book Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles and Shady Deals, recently wrote a rebuke of airline loyalty programmes in the Huffington Post. Considering Kobie’s work with Hawaiian Airlines and other travel and hospitality brands, I was perturbed by his conclusions and feel others may be wrongly persuaded by his argument.

 

Elliot discussed how airline loyalty programmes are only loyal to one thing – the airline and not the customer. He mainly criticises airlines for turning features that were once considered standard – for example a certain level of seat comfort – into perks that only frequent fliers can access. He also points out that loyalty programmes’ fine print gives carriers carte blanche to make any changes they want if they deem a programme “too generous.”

 

Of course, he’s entitled to his opinion, but here’s mine: Frequent flyer programmes are very much the precursors of modern loyalty campaigns across multiple industry verticals. They are over 30 years old with cross-brand membership in the millions. Some 99% of business travellers, according to a recent study by Frequent Business Traveler and FlyerTalk, are members of an airline loyalty programme. So if something was grossly amiss, don’t you think there would have been a backlash by now? Travellers would have long since cried foul and federal regulators would have stepped in.

 

The reality is that US businesses spend US$50 billion on loyalty programmes, which can generate as much as 20% of their profits, every year.

 

Loyal to loyalty – and to airlines
If designed and executed correctly with the right technology and tools operating across multiple channels seamlessly in real time, loyalty programmes remain a popular way for consumers to realise value. More than that, a truly great loyalty programme rises above the points-for-rewards stereotype and delivers experiences. That’s something that airlines, like other verticals, are striving to achieve. It isn’t always about a discounted flight or extra leg room – although those perks are nice too!

 

Regarding the “too generous” claim? That’s up for debate. Airlines aren’t magicians and loyalty programme benefit changes are a measured response to real economic challenges. There’s a reason why so many airlines, legacy carriers and LCCs alike, have merged, filed for bankruptcy or folded completely in the last decade.

 

Can an airline’s loyalty programme fine print be a transparency nuisance? Sure. But that can be true in any industry. It’s a topic we addressed as it related to Citibank when two customers sued the bank on the grounds that it employed deceptive trade practices by not disclosing that frequent flyer rewards could be taxed.

 

Ultimately travellers remain loyal to airlines because they’re growing more customer-aware by the day. New technologies and expanded advantages are pushing the boundaries of what’s considered a loyalty programme perk. Such innovations were on display last year at Mega Event in San Diego. Virgin America, for instance, offers priority check-in, security clearance and boarding, free checked bag allowances, digital/social rewards and an expanded purchase window for an eight-seat first-class section, and complimentary best seats in the main cabin.

 

With expanded offerings like these, it’s no wonder why airline loyalty programmes are soaring to new success, grounded on driving the ultimate passenger experience. The team at Kobie and I have written about this extensively and will continue sharing insights into best practices and omnichannel approaches for airline and travel brand loyalty programmes in the coming year.

 

About 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 strategies and 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. Bram has consulted with a wide array of leading brands including AMC Entertainment, TGI Friday’s, BJ’s Restaurants, Verizon, Bank of America, RBC, Flagstar Bank, JPMC, Sagicor, Coca Cola, Cox Enterprises, Ruby Tuesday, Hawaiian Airlines, and Royal Caribbean Cruise Lines.

 

Prior to Kobie, Bram worked with the Human Capital Transaction Advisory Services practice for Ernst & Young, LLP, where he developed and presented analyses and recommendations on executive incentive and equity plan design and due diligence findings to senior management and the Board of Directors of Fortune 1000 clients. Prior to Ernst & Young, Bram worked with Towers Perrin in Manhattan as a consultant specialising in incentive plan design for executives and sales forces.

 

Bram received his Bachelor of Business Administration degree with honours from the Goizueta Business School at Emory University, with a focus on Marketing and Information Technology.

 

27 January 2013

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