More than miles

Having blazed a trail by setting up successful loyalty schemes in the form of frequent flyer and Airmiles programmes, airlines have since fallen far behind other sectors, writes Suzy Bashford.

More than miles

The airline industry has been under greater pressure than most other sectors recently: staff strikes, volcanic ash, the rise of the 'staycation' and greatly reduced business travel budgets are among the challenges it has faced. In such a tough climate, building loyalty has never been so important.

One might assume, then, that airline loyalty schemes - for many years the leaders in loyalty management - would be coming into their own. Yet, customer satisfaction surveys suggest the majority of these programmes are underperforming.

For example, according to Millward Brown's BrandZ global brand equity study, airlines' average 'brand impact factor' is relatively low - 22%, compared with an average of 34% for all other brands. UK airlines score only 21%.

Loyalty programmes have changed beyond recognition since Airmiles, which operates the British Airways scheme, was launched 22 years ago, and many experts believe that the airline industry has failed to build on early gains. At that time, air travel was still a luxury purchase, which made the scheme highly aspirational, but air 'points' lost their cachet as budget airlines began to offer low-cost fares.

'Through their loyalty programmes, airlines should know who customers affected by various crises are,' says Jon Ingall, managing partner at agency Archibald Ingall Stretton, which recently picked up the bmi account and has previously worked on marketing for Airmiles. 'They should be doing everything in their power to ensure that they remain loyal through these difficult times.'

He argues that many carriers have responded by pressing 'the self-destruct button' through a 'flagrant disregard for customers'. Ingall accuses the companies of 'desperately trying to raise revenue through extra charges, reductions in service and a lack of communication'.

Greater accessibility

Some airlines have sought to broaden the scope of their programmes. Virgin Atlantic has made its Flying Club scheme more accessible by enabling members to earn points through activities other than flying, such as using Virgin Trains.

Similarly, Emirates, launched its High Street programme three years ago to provide more rewards and better targeting. Nonetheless, airlines in general have been slow to adapt their schemes to meet the needs of cash-strapped consumers.

'The travel sector is no longer the industry leader when it comes to loyalty. It has a powerful currency in Airmiles, as these still have a high perceived value, but there is a perception that they are hard to access,' says Janet Titterton, business planning director at loyalty marketing firm Collinson Latitude. 'Retailer loyalty programmes are much more sophisticated in their use of technology and the manner in which they manage interaction with customers.'

According to a report published last month by research company GI Insight on how different industry sectors relate to their customers, supermarkets top the 'intimacy index', with consumers rating them most understanding of their needs and preferences - 26% above the norm.

As Drew Thomson, chairman of digital agency Iris and former chief executive of Airmiles, says: 'Airlines lag behind brands such as Tesco, which has mastered "individual loyalty", where the benefits you receive feel relevant, personal and valuable.'

Hotels, too, have modernised their programmes more effectively than most airlines. With its absence of date restrictions or complex redemption processes the Starwood chain's Preferred Guest loyalty scheme is often cited as a good example. This uses a website as an essential central hub where members can customise their experience by listing their preferences and receiving relevant offers.

As well as aiming to make 'Star points' easily accessible, the hotel group has tried hard to retain the aspirational positioning of the programme; its 'Moments' rewards enable members to redeem their points for exclusive experiences such as VIP tickets for concerts and major sporting events. It also seeks members' feedback at every available opportunity.

The changes in hotel schemes draw on an insight long understood by retailers: consumers expect more from loyalty programmes, including rewards that are tailored to their needs and easy to redeem.

'Customers want to extract value from their relationships with brands. We're seeing a massive increase in redemptions in both business-to-business and business-to-consumer programmes,' says Stuart Evans, general manager at loyalty agency ICLP. 'Thrift is the new bling and using loyalty programmes is now fashionable, even in the City. These are tough times and everyone wants to get real benefits from programmes.'

Loyalty brand Nectar's research tallies with Evans' findings. Of those who joined Nectar in the last year, more than half said the recession was a factor in their decision. Among those who have been with Nectar for some time, two in five said that their Nectar card is more valuable to them now than this time last year.

These insights prompted Nectar to launch its Savvy Shopper Search last year. This uses a dedicated website to allow cardholders to swap shopping tips, with the best entry winning a trip on Eurostar. So far this year there have been more than 5000 entries.

'This is a useful tone of voice to adopt to talk to people, recognising the toughness of their situations. It gives them a way to make their money work harder,' says Nectar marketing director James Frost. 'I'm not sure we are seeing the airlines acknowledge that there's been much change in the way they present their loyalty schemes.'

Nectar subscriptions leapt by 1m last year, which Frost attributes in part to the economic situation and the desire of cardholders to redeem cash or a justifiable treat. Nectar has also responded to cardholders' wish for more regular communications. It now increasingly uses email and mobile messages, and has shifted from quarterly statements to weekly or even daily communications.

Some airlines are realising that open, honest dialogue with customers is essential to instilling loyalty today. One of Julian Carr's first acts when he took up his post as bmibaby managing director in June was to host a Twitter session fielding questions from consumers, bloggers and journalists. The brand has also recently bolstered its focus on email via newsletters, promotions and travel confirmations, created by digital CRM agency Silverpop.

Engaging in conversation

Social media is also proving a useful loyalty tool for some airlines. 'Facebook gives brands immediacy. If passengers were worrying about whether they were going to fly during the ash cloud crisis, they wouldn't have to wait to read a newspaper or hear the next news bulletin,' says John Harvey, sales manager for the social network. 'They could hear it firsthand on Facebook from the brand and find out exactly what was happening with the planes on the runway.'

Engaging customers in conversation during and after a crisis looks set to become one of the most effective ways to engender loyalty in future, catching them at that crucial point when they are likely to be considering a competitor brand. The demand from UK consumers that brands listen and respond to their needs is growing; if the brand fails to do this, the consumers will take their business elsewhere.

The latest American Express Customer Service Barometer suggests that British shoppers have become increasingly hard to please: 44% said they were willing to give a company two chances before turning to a competitor, while, if they receive poor customer service, by way of redress 80% wanted to receive an apology, 62% a discount and 55% a free gift.

The upside is that they are willing to spend an extra 7% for good service and 70% are more likely to give a company repeat custom after receiving outstanding customer care. What this means for all brands, and airlines in particular, is that there is more to gaining loyalty than dishing out points.

As Ingall says: 'There is a clear opportunity for airlines to make their mark by really getting loyalty right, but that means emotional loyalty, not just points-based, rational loyalty. At the moment, no airlines are grabbing this opportunity.'


- ALAN LIAS, head of loyalty, business development and brand alliances, Virgin Atlantic

You can't suddenly create loyalty when times are tough. Loyalty comes from years of getting the basics right every time, and ensuring that, at every touchpoint the customer feels valued, whether it is the first or 100th interaction.

Having very high marketing permissions, as we do with our Flying Club, does not come by luck; it comes after earning the initial trust and then delivering value and communications that support and enhance the brand principles.

We have plans to deepen the relationship we have with our members on the ground and in the air. We will do this against the background of supporting the brand and the products and services we offer. Versus other programmes, the quickest way to earn Virgin Atlantic, other airline and Virgin company rewards will be through Flying Club. This single-minded proposition enables us to clearly position why our members should collect with us.

- DREW THOMSON, former chief executive, Airmiles, and chairman, Iris

With so many schemes, loyalty programmes cannot really enhance loyalty. They are a cost of doing business and, given the chance, every airline in the world would ditch them.

Only two airlines make any real money from these schemes - American Airlines and Qantas - and this is a result of selling significant 'miles' to third parties, that funds the cost of the ones they issue.

If I were the marketing director of BA, I would look to the board to 'back' a fundamental change to the Executive Club to build targeted, meaningful customer propositions. This would mean freeing up airline seats when people want them and finding a broader group of relevant partners to offer real value to customers.

It would also mean an end to the current style of managing important customers; at the moment it feels like anything but an exclusive club. If the board said no, I would recommend simply scrapping the loyalty programme.