Ai Editorial: Is Loyalty About Superlative Customer Experience?

Ai Editorial: If loyalty is about superlative customer experience, then data holds key to achieving it

A host of factors are changing the face of FFPs. Ai’s Ritesh Gupta finds out how airlines are trying to revitalize their loyalty programs and offer an exceptional customer experience (CX)

The concept of loyalty is evolving as airlines’ FFPs are drifting away from what they used to be. Several factors are driving this change today.

There is a growing awareness of the limitations of the legacy FFP models (mileage-based). There is pressure on the limited award seat inventory of airlines that was initially intended and often priced to fill empty seats. Overall, FFPs continue to face capacity, regulatory, accounting and liability pressures. Also, in today’s age of instant gratification, carriers are now allowing members to accumulate points on groceries, utilities, gasoline etc. and redeem those points for a free flight.

“There is so much pressure on “yield” that many airlines cannot really afford a FFP, with costly administration and perks. Ultimately the biggest loyalty seems to be price and a decent CX,” points out Ursula Silling, founder and CEO, XXL Solutions. “Differentiation is crucial here and often being missed. - Part of the reason is that FFPs in the organisation are often separate departments. If there was one view on CX including ancillaries, they could become a vehicle to improve the customer experience and generate additional revenues and customer satisfaction and differentiation beyond the pure miles business.” 

Change is taking place everywhere – from the U. S. to the U. K. to Africa to Philippines.

For instance, Cebu Pacific this year launched its GetGo lifestyle rewards program for frequent fliers, offering points on everyday spending. easyJet has introduced its Flight Club program, with passengers to be invited to join the loyalty scheme when they meet the qualifying criteria which are based around having booked and flown 20 or more flights and/or making a minimum spend with easyJet over a 12-month period. Among the others, the SAA Voyager programme changed from a mileage-based FFP to a fully fledged revenue-based FFP this year.

As a specialist in this arena, Silling highlighted several trends and developments pertaining to FFPs:

• The traditional loyalty to a brand is diminishing; customers have much more choice and transparency, so ultimately customer satisfaction is a crucial element of true loyalty. This is why many companies focus on CX first.
• Most consumers own at least three or four airline loyalty cards. Are loyalty programs failing to stand out? Innovation is often missing - many programs are just “me to” programs.
• Traditional loyalty programs often do not allow good data mining and personalisation (data mining possibilities are often poor or opportunities missed). And if they do those opportunities are not used, customers are not addressed when changing behaviour. For example, downgrade from Executive Club silver to bronze - the customer just receives a letter and the new card, no question about why she does not fly that much anymore in order to try and keep the customer. Such “ill-informed” changes annoy customers and make them then really change their behaviour and avoid the airline. This will change in the future.
• There is still a gaming element which gives a reason for points and miles programs to continue to exist, but only if done well and if customers are personally addressed.
• Customer lifetime value is finally getting into the mindset, earning of points is finally linked to revenue as well - even Lufthansa adjusted this in the meantime; before, a customer might have paid much more for e.g. a domestic trip in Germany than a flight to New York, but was travelling in economy class and not recognised at all. Airline loyalty programs try to take account of this by gradually linking miles to revenue - and not just to distance (yet many of them only did this step very recently).
• There is a clear trend to coalition programs when looking at the overall landscape of loyalty, and to paid programs adding value and enhancing the customer experience (example Easy Jet Plus, Amazon Prime).
• Airports have also realised the value of direct customer engagement and loyalty, whilst in the past they had only focused on their B2B customers. Some of them have started to create loyalty simply by having the right information on their website (for example, about arrivals and departures real time, about parking and comparing cost of parking versus taxi etc.). Or as a simple form of engagement to offer value added services to buy (e.g. delivery at home such as Heathrow) or fast track or lounge to buy. Others have already gone to a loyalty program, to get contact details of their customers. Examples include Heathrow rewards (customers can use Wi-Fi at the airport longer if they are members, a very easy way to get subscribers) and Lyon airport.

Areas of improvement

Redemption: FFPs today in most cases are very poor in terms of redemption, says Silling. “Airlines focus on flight redemption as the cheapest way for them. Yet they are careful in terms of availability as part of revenue management, to not lose revenue opportunities and dilute business. And taxes are so high now that customers often face the absurd situation that they have to pay almost the same amount in terms of taxes when they buy the flight with miles/ points versus when they buy directly the cheapest fare.”

Silling adds only a few airlines have added value in order to improve the redemption experience. For example Lufthansa are the strongest one in terms of non flight redemption with their Miles & More catalogue, offering anything from electronic goods to furniture, like a real mail order store. British Airways have added the opportunity to use miles to pay part of the flight cost, as part of the buying process. This has significantly improved redemption and also the perception of redemption value for customers.

Customer experience: In terms of CX, as Silling points out, a number of FFPs offer high value when being a top tier member - from pick up service at home, special lounge (example Virgin Atlantic and Etihad, with services such as massage, meal service at the table etc.), and other services to avoid any crowds and improve the airport experience. At many airports some of these become irrelevant: as the retail/ food and beverage experience is improving the quality of staying in a restaurant or cafe can often be better than being in a crowded lounge with poor or mediocre quality. Also airlines try to give additional information to crew, sometimes using iPad technology, with background about specific customers and FFP members, simply allowing to address them by name or to address any specific issues or opportunities. 

Citing a couple of examples, Silling referred to Air New Zealand and Air Baltic. Air NZ has some interesting examples, including bank cards, for their customers, creating engagement with customers and becoming part of their loyalty approach. The other really innovative one is Air Baltic. You can even buy flowers or a meal to surprise someone else (your mother, friend etc.).  

Relying on technology:  Modern technology helps to avoid some of the pitfalls. For example, airlines suffer quite often from inconsistencies in on board service. Air New Zealand integrated an on demand function for the on board service. Similar to a restaurant the customer can order via the IFE. Similarly, an automated check in service as introduced by Lufthansa and Swiss helps to avoid potential pitfalls at check in. Air New Zealand and Lufthansa introduced automated bag drop off at some of their key airports in order to support this further. Human interaction comes in where it is relevant. And here airlines should then just use well trained people - trained in terms of hospitality and customer service, learning also from retailers such as John Lewis, not just the processes and regulations. 

Capitalizing on social networking sites: One example that is worth mentioning is Eindhoven Airport. As part of their strategy for better CX management, they have developed the Facebook VIP program. The program offers customers to be in with a chance of a unique VIP experience including a specially designated parking space, personal guidance through the terminal, Facebook VIP check-in desk, free breakfast, lunch or dinner and fast track at security. All passengers need to do it fill in flight and contact details on the specially created Facebook app. The campaign has massively increased the airport’s Facebook following, marking it as one of the pages with the highest engagement rates in the Netherlands.

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How to deal with disruption as the new normal, especially in the arena of loyalty, is going to be discussed at the Hamburg Aviation Conference 2016, scheduled to take place in Hamburg (Feb 10-11, 2016).