The Smoke-Filled Room

The Smoke-Filled Room

If there is one constant in the airline industry, it’s change. The various pressures of terrorism, contagious disease, and skyrocketing oil prices have all contributed to a roller-coaster ride for the industry, particularly in the past few years. In the United States, and to some extent in Europe, the legacy carrier behemoths that ruled the skies in the Eighties have gradually lost ground to low-cost carriers with cheaper fares and no-frills tactics.

Why, then, has airline loyalty marketing remained more or less the same for a quarter of a century? How can the anchors of the frequent flyer industry continue to compete?

A consortium of marketing executives from around the world discussed these critical issues recently at the International Air Transport Association Loyalty Management Conference in Lisbon. Not a few recognized that it is time for traditional frequent flyer programs to re-examine themselves to attract and retain the loyalty of the 21st-century traveler.

Randy Petersen, editor and publisher of InsideFlyer, gave the attendees a brief history of the programs since their inception. He said that in the Seventies, they focused on customer satisfaction; in the Eighties they centered around retention; and in the Nineties, they were about economic value, and focused on one-to-one marketing. Now, they are having a “mid-life crisis.” There is a feeling of fatigue, and they have no clear direction.

Petersen claims a lack of dynamism is a factor in this. He argued that “programs are everywhere. But some 19 percent of members forget about them, so clearly they are not engaged in the scheme.”

The title of the presentation by Petersen seems to be a fitting “Frequent Flyer Programs Are From Venus, Members Are From Mars.”

Programs are indeed everywhere. Ten years ago, there were roughly 80 in the market. Today, there are 160. Clearly, they are working, but today their membership seems decidedly non-committal.

That, according to Paul Lacey, manager of loyalty at Qatar Airways, is why programs need to foster an emotional connection with their members. “You need to lock members into your program and stimulate irrational behavior,” he said.

In the wake of the recent explosion of co-branded miles-earning credit cards, programs have a window on to their members’ lives and preferences like never before. They know how and where members spend money, and are thus able to make better decisions about which partnerships to leverage.

It’s important, Lacey said, that programs use those partnerships to create an emotional bond. He cited the “Real Madrid” (a Spanish soccer team) credit card as an example of the right mix of “rational and emotional benefits.”

Rodrigo Cobo, vice-president of marketing products at AeroMexico, explained how his airline was leveraging the value of these kind of collaborations. It offers in-flight wine tastings through a wine merchant it has teamed up with, and sponsors events featuring the national soccer team. During the recent World Cup, AeroMexico offered members miles for every goal scored by the home team.

Beyond driving emotional connections, programs need to become acutely aware of the specific needs of their members. According to Nawal Taneja, professor and chair of the Department of Aviation at Ohio State University, “Leisure travelers want ‘free’ tickets and lounge access; business travelers don’t want to spend more time in lounges, they want to be able to turn up late at the airport, have priority check-in and get straight on the plane.” More miles for even more time on a plane are the last thing a veteran road warrior wants.

“Personalization is important for these members,” said Kashmira Motiwalla, manager of product development and marketing for Skywards at Emirates Group. “They want preferential treatment and hotel stays, or spa treatments and access to sporting events.”

Attendees also discussed the importance of proper data management, pointing out that most airline systems were designed strictly around booking, not customer loyalty. In one case, for example, customer data was kept in over 60 different databases.

There is no sign that the travails of the airline industry will let up, and to survive, carriers need to refocus their efforts on maintaining a loyal customer base. The gratuitous handing-out of miles and points may have worked previously, but emotional ties and targeted benefits may be the wave of the future.

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