Guest Post: How loyalty schemes should adapt to meet changing customer habits

A new breed of low-cost carriers can create effective engagement programmes which suit their business model, says Julian Bonnett, business development manager, Comarch Airlines traditionally tend to base loyalty programmes on the miles we travel. While this is a great … Continue reading →

A new breed of low-cost carriers can create effective engagement programmes which suit their business model, says Julian Bonnett, business development manager, Comarch

Airlines traditionally tend to base loyalty programmes on the miles we travel. While this is a great way to reward certain customers, such as business travellers who fly long haul and fly often, earning on a mileage based formula doesn’t suit every traveller or every airline.

Low-cost airlines are thriving as many customers are happy to choose their flight based on price alone. Airlines competing in the short haul low cost market are, despite conventional thinking, able to design and benefit from an engaging loyalty programme that rewards their customers as well.

Going beyond travel

In this highly competitive market, where the majority of travellers are budget conscious, airlines need to think about what they are trying to achieve with their programme.
Airlines like British Airways, Emirates and Singapore Air have programmes that work for their business and their customers. Their members are unlikely to be attracted to budget airlines purely due to low-cost offers. Even if a short-haul flight is £20 more with BA, a loyal customer wanting to ensure they hit the next tier status (and wanting to get a flight out of, and into, main hub airports at sensible times) will still choose BA.

So how can the low-cost carriers build loyalty if their business model is all about price? They do it by designing programmes around what motivates and inspires their customers. They do it by giving their customers every opportunity to gain rewards.

While traditional programmes reward us for the distance we travel, this doesn’t have to be the only way to gain status. Airlines can give travellers more opportunities to earn rewards by partnering with related services (and still recognise their biggest spenders for their exceptional custom).

Build rewards around your customers

Norwegian has developed a programme that allows it to engage with customers and deliver value beyond just price. The airline’s customers collect CashPoints. Buy a flight and get 2 to 20% of its value back as CashPoints (with higher-value ticket buyers netting the better rewards).

Travellers can also earn CashPoints when booking hotels, when they use airport lounges and parking, and by booking holiday car rentals. The scheme is engaging to those less frequent customers as it isn’t just about collecting CashPoints to use towards a free flight. Norwegian has introduced other rewards, such as free baggage, free seat reservations or free fast track so that there are rewards for members with lower points balances.

Norwegian also recently introduced the Reward eShop, which lets customers earn CashPoints when buying from various online retailers (in the UK participating retailers include Argos, John Lewis, ASOS, Apple and EE).

Customers who fly economy have extra opportunities to earn points by using the services that are part of the CashPoints scheme.

It’s important for airlines to provide these extra opportunities to earn rewards. All customers want to feel valued, be rewarded and ultimately gain status – even us non-international jet-setters.

Create more valuable customers

Newer, smaller airlines aren’t just competing with the more established airlines on price. They’re creating loyalty programmes that suit their customers lives and habits, just as traditional mileage based programmes suit the customers of those airlines.

Both types of programme are exploring opportunities to give rewards beyond flying. They’re becoming part of coalition schemes that let customers earn points not just for travel-related activities, but from everyday actions like grocery shopping. They’re becoming part of their customer’s lives, rather than something they think about a few times a year.

They’re also trying to ensure that regular customers are more valuable for the airline.

When jetBlue designed its reward scheme, it focused on incentivising customers to spend over and above an economy flight fare. For example, jetBlue customers can choose to fly with their pet or buy extra leg room and get a big boost to their reward points.

Rather than simply following the status quo and mimicking how traditional carriers manage loyalty programmes, airlines like jetBlue create innovative programmes of their own. They’re designing loyalty programmes that resonate with, and benefit, the customer (and gives them more opportunities to earn rewards), and the airline (which gets more value out of customers that don’t buy premium tickets).

Mileage based loyalty programmes have served the established airlines for decades and will continue to do so, but airlines in the new breed of low cost carriers can also create highly effective engagement programmes that suit their business model.