Six trends that spell turbulence for the airline loyalty market

Customer loyalty is integral to the success of any airline and currently the stakes are particularly high. There has never been more choice between airlines and consumers are prepared to scour the internet for the best deals on flights. Many consumers are also more than willing to risk flying with a new airline if the price is right – according to Fly.com only 10% of fliers are loyal to an airline, and half of those would switch if given a $50 incentive from another airline.

Looking ahead it appears that this rate of change is to become a constant. I believe over the next few years, six trends will converge to transform the landscape upon which airline loyalty programmes have been built. These factors threaten existing loyalty strategies and unless airline brands adjust their course they may be in for a bumpy ride. Read on to discover what’s in store.

  1. The points model has to change

The first trend is the commoditisation of points and transactional rewards. My theory is that whilst the transactional elements of schemes certainly attract new entrants (and retain many existing members), in today’s environment schemes need to provide much more in order to keep members actively engaged. I believe that the transactional elements of a programme will continue to be important, but the traditional construct of points as rewards for purchases will change.

This is only going to become more important when you consider the needs of the next generation of customers. In 2013, my company, Karmarama, undertook its own loyalty research that showed tomorrow’s frequent flyers, the 18-24 year olds are least likely to feel they have a relationship with brands: 55% of them have failed to bond with companies. Millennials aren’t fooled by traditional loyalty schemes and consequently tomorrow’s airline loyalty strategies must deliver more engaging, more genuine, and more personal experiences, across multiple channels on the customer’s terms. That will come in part from airline brands that have a genuine purpose that resonates with their target audience. It is no longer sufficient for a brand to have a differentiated position; today’s consumers are attracted to brands that have a point of view and a personality, a brand that they can relate to.

  1. More data, more channels

Then there’s the second important trend: Big Data. It will turbo-charge the airline loyalty fundamentals of recognition, information and reward with highly personalised triggers in relevant places (don’t just think channels), recognising and rewarding previous behaviours and providing nudges to drive future behaviours.

As mentioned earlier, I believe the transactional rewards model must evolve. For example, tomorrow’s frequent flyers will also expect and get rewards for publicly showing their interaction with airline brands in multiple channels. (Imagine an evolution of rewards for Tweets.)

  1. Let the loyal co-create

This leads us to the third relevant trend: co-creation. Loyal consumers will feel closer to selected brands by being offered the chance to participate in the design and development of products and services. This even has its own sub-trend: the Prosumer.; consumers whose expert opinion is so sought after that brand owners are prepared to reward them handsomely. Frequent Flyer programmes must exploit this too.

  1. Tech aggregators can help or hinder

The fourth trend is the speed with which new technologies are providing both intermediation and aggregation opportunities. Those new technological applications will get in the way of airlines’ direct relationships with passengers by taking existing platforms like walla.by and Awardwallet and creating new applications delivering fantastic levels of ease and simplicity for the traveller. Those platforms will own the valuable Big Data and will therefore begin to own the relationship with those customers.

  1. The evolving traveller

Number five on the list is the changing consumer. The burgeoning middle classes from the emerging world economies will soon fly the world in business and first class, and thus create greater demand for premium leisure travel. Meanwhile there will be a general decline in business travel caused by new, sophisticated communications technologies, and the growth in international high-speed rail. New super-fast railways will make European rail travel as far as Russia feasible, alongside rapid coast to coast rail travel in North America. Together this will mean leisure travellers will become increasingly important for premium cabin business and for frequent flyer programmes. Airlines must look to their structures and benefits to prepare for this shift in their customer bases.

  1. Honesty is the best policy

The sixth and final trend is transparency. Successful airline loyalty strategies must also build genuinely transparent relationships with consumers to counteract mistrust and cynicism. Although the price of jet fuel fell last year, air fares didn’t (in the US they actually increased by 3%), leading the press and public alike to ask questions about where their money is going. Airlines need to engender trust with their customers before Bing’s Flight Price Predictor and Skyscanner are superseded by more engaging, more powerful newcomers.

How airlines can stop customers taking flight

Although many of these trends threaten established loyalty programmes and customer relationship strategies, they also present opportunities. Airlines will be able to identify and engage customers more quickly meaning they can build relationships sooner. Savvy, fleet-of-foot brands will be able to steal a march on their competitors and if they combine this advantage with a compelling, unique loyalty package, they may be able to win the battle for a consumer’s loyalty before they have even flown with them.

Whatever the future holds, in the battle for customer loyalty the consumer stands to benefit. While airline brand managers adjust and adapt during this period of turbulence the rest of us may as well buckle up and enjoy the ride.

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