FFPs are here to stay

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Edition 4: March - May 2006

The State of the Industry and Future Trends: FFPs are Here to Stay

By Iain Webster, Senior Manager Loyalty, Qatar Airways Privilege Club

A quarter of a century after the first one was started, there are still only 3 good reasons why any airline should have an FFP. The original idea, of course, was as a simple sales tool. A marketing promotion that can last for a customer’s lifetime is extremely powerful and cost effective for the business. The theory is simple – any time you need more business on a specific route, just make a targeted double miles offer to the folks that live in and around both destinations….and voila !

Secondly, an FFP can be used as a great way to get over that age old problem that airlines do not actually know who their individual customers are. When we all stay in hotels we meekly register our address and contact details at the front desk. Why ? Well, because they ask us for it ! Airlines have always been shy of doing this so instead the FFP is a great excuse to ask for your customer’s details. Give me your name and address and I will give you some miles. Of course, once you have that data you can then start to do some clever whizzy marketing stuff like upsell, cross sell and develop more tailored products and services to suit your best customers.

The third reason, and one that has definitely gotten a hold of our friends in Dallas for a good couple of decades, is that being in the mileage business can be hugely profitable. Someone down there once described the AAdvantage program as nothing more than ‘selling seats a mile at a time’ which is a great description of what that particular program does so superbly well. Perhaps they should have added ‘and at a huge profit’, because a ticket that is wholly funded from third party mileage sales usually produces the most profitable passenger on the plane.

Sadly, there is a secret fourth reason, which in my experience is usually the most common, and that is simply ‘because the other guy has one’. Too many FFPs were started as a competitive knee jerk.

Whatever the reason, your job as an FFP manager is to get your colleagues in the rest of the airline to realize that ‘miles are money’. And then you have to prove to them that you are getting a great payback, either in terms of partner revenues or else incremental ticket sales from your best customers. Make sure you can continually measure the benefit of your program and communicate that around the company. It’s not easy, but it can be done.

So what of the future ? Let me make four predictions:

I see a consolidation of programs. With over 160 FFPs around the world, and countless thousands of retail and financial loyalty schemes, the consumer has no more room in his wallet or his brain for yet another piece of plastic or another set of award charts. I think that the airline alliances will find ways to consolidate their programs while still letting each carrier manage their own customer data. We will see more coalition programs, especially those that bring airlines and banks together.

The cards themselves will become more multi-functional. The use of smart cards will bring a lot more utility to a single piece of plastic that will be used for transporting value and bringing identification to a range of activities. One card will literally ‘open doors’ throughout the journey process, depending on how loyal you are to the issuer.

I believe that the whole area of mileage liability accounting will come under the microscope. When you consider that in half of the world’s airline market (North America) we are already at the stage where roughly one customer in every 12 pays for the product not with cash but with miles, it is time we stopped pretending that miles are just a piece of marketing frippery.

We will see a huge and accelerated shift to completely online handling of the customer loyalty experience. Don’t kid yourself that some of your customers in even 5 years time will still want paper statements and newsletters in an envelope.

Forget a mere 25 years, it is now more than 130 years since the first basic customer loyalty program was launched through the Cooperative Society ‘dividend’ schemes in the UK. I think FFPs are here to stay!

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