Customer loyalty: Learning from frequent flyer programmes
American Airlines launched AAdvantage, the very first frequent flyer programme, in May 1981. Since then, most airlines have adopted their own loyalty scheme, with the strategies around rewards, accrual, redemption and technology continuing to increase in sophistication.
Unquestionably, rewards are the cornerstone of every loyalty programme. Reward schemes are a direct extension of overall CRM planning and their main objective is to strengthen the relationship with the customers through deep dialogue.
Since 56% of consumers say that receiving a personalised incentive would improve consideration of the brand, it is crucial to infuse those practices with a highly customised approach. The most effective method to achieve this is to base it on data that is gathered in the operational process, and constantly adjust it according to the individual circumstances and needs of the programmes’ members. Nevertheless, the components that truly determine the standard and can significantly differentiate the whole loyalty proposition are flexibility of accrual and diversity of redemption.
Taking into consideration the fact that collecting points is necessary to receive the bonus, these two factors are inexorably linked and a variety of options affects the attractiveness of the entire programme.
In case of airlines, point accrual should be available through a multitude of touchpoints including flights, commerce, catering and retail as well as while using airport services, external partners and the online shop.
Research shows that 71% of passengers think that the value of a loyalty programme decreases if it offers a limited range of rewards. 92% of business travellers state that the ease of redemption catches their attention. Therefore, the reward system should mirror the versatility in the opportunities of redemption at all of the stages of the journey. Apart from the physical rewards, it could include additional services – in the instance of airlines they usually encompass: lounge accesses and VIP services, hotel and restaurant reservations, free parking etc.
A perfect example of incorporating all of these factors can be found in Heathrow Airport’s loyalty programme. After joining the programme, the passengers of the busiest airport in Europe can earn points in a number of ways: shopping, buying food and beverages and others. Points can be collected with the card, online or using the virtual card. The list of options of redeeming the points is extensive.
They can be exchanged for shopping vouchers for the airport, Heathrow Express tickets, parking discounts, free gifts from duty free or even free miles. This accessibility and variety automatically translates into the huge success of the Heathrow Rewards Program. There are currently 1,500,000 members, and on average they tend to spend £70 more than the non-members while using the airport.
Despite the diverse nature of the markets and different target audiences, non-airline businesses can follow these analogous step; basic mechanisms that drive loyalty are definitely alike regardless of the circumstances. All commercial endeavours should strive to meet the technological challenges of our world. Knowing that 66% of companies that saw a decrease in customer loyalty over the past year do not have a mobile application, one of the fundamental characteristics of a solid rewarding programme is a convenient and effortless use. It can be achieved through a website or a mobile channel, along with a clear set of well-defined rules of prize distribution.
Mimicking the airline industry in terms of loyalty strategy will not be possible without the vast array of rewards available for the members including the more creative non- physical ones (such as services, vouchers etc). Additionally, the smooth accrual should be one of the priorities of loyalty offers. The entire process should be effortless as, according to research, 54% of consumers claim that one of the two top reasons that makes them stop participating in loyalty programs is the fact that it is too hard to earn points for rewards.
The reward system should mirror the versatility in the opportunities of redemption at all of the stages of the journey
Another aspect that is equally effective, regardless of the character of the industry, is that apart from the easy availability of the accrual opportunities, it is vital that certain events such as members’ birthday, anniversaries, tier upgrades and other occurrences are also connected with gratification.
Therefore, the accrual categories of the data that is collected during this process encompassing transactions, events, customer data and products serves as an indispensable foundation to fully engage the customers through tailored interaction.
Every enterprise with a loyalty programme can be inspired by the way frequent flyer programmes are handling the redemption process. The vast selection of benefits should cater to the assorted preferences, making the programme not only widely appealing but predominantly reinforcing members’ loyalty. Complementary conveniences, like the possibility of sharing the points with other members or taking part in reward lotteries, can furtherly boost the attractiveness of the offer.