Edition 6: September - November 2006
Coalition programs – food for thought Apart from the obvious tie-ins like hotels and car rental, American Airlines AAdvantage programme for example gives members the opportunity to earn points on everything from financial services to telephones. In Europe, Miles & More from Lufthansa has developed partnerships with a wide range of industries allowing customers to earn miles in a variety of sectors that are far removed from the world of travel. However, what of the smaller, regional airlines or airlines with a limited international route network? It is difficult for these airlines to develop their cardholder base sufficiently to warrant the investment in building a network outside the airline, yet at the same time the cost of maintaining a proprietary programme where all but a handful of the most frequent travellers can redeem points is not always easy to justify. One solution is to participate in a coalition programme. Coalition programmes group together companies so that costs are mutualised and customers earn points from a variety of outlets, increasing their redemption possibilities. Nectar in the UK and Payback in Germany are examples of these types of schemes. Information is then returned to the participating companies on customer profiles. In this sort of scheme, the operator of the programme earns revenues (a margin) on each transaction. In effect, he buys and sells the points in his network and – and this is crucial – the customer belongs to the loyalty programme, not the participating outlet or airline. It is no surprise that Nectar for example has no major airline partner in the UK. Another version of coalition programmes, and one which is an excellent compromise between proprietary and ‘outsourced’ loyalty is Mouvango in France. Set up by Accor and the Total oil group, it now has a wide range of partners - including Europcar, a telecom operator, Carlson Wagonlit, restaurant chains – some of whom have their own loyalty programme (like Accor, Total and Europcar) and some of whom accept these loyalty cards but do not issue their own. The key feature of this programme is that the company retains its relationship with its customer, (and gives its own points for spends throughout the Mouvango network). So an Accor cardholder earns points when he goes to an Accor hotel (no surprise there), but also when he fills his car with petrol at a Total service station, has dinner at a Léon de Bruxelles restaurant, or sees a film at a Pathé-Gaumont cinema. And the same is true for Total and Europcar’s customers. Points are invoiced between partners: an Accor cardholder using Total is ‘commissioned’ by Total, and vice versa. The scheme is beneficial for everyone concerned, not just financially but commercially also. Customers get to use their card more often – a real problem with FFPs – and earn more points, and the company gets to multiply its contacts with its customers, enhancing and deepening its relationship through more frequent contact and rewards. So far, smaller airlines have been reluctant to go down the coalition programme road. The airline marketing model relies on garnering personal data on its customers – essential for issuing tickets – and the attractiveness of its rewards – free travel – means that a proprietary programme is often justified. But resolving the conundrum of how to cater the majority of its customer base which travels infrequently requires imagination from airlines. A Mouvango type solution is just one example, but as costs continue to preoccupy airlines everywhere, doubtless others will follow.
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