Life beyond Frequent Flyer Programmes

There was once a much heralded time when a cheeky smile at check-in was your quickest route to a complimentary upgrade. Sure, it helped if you had flown regularly with the airline or you were on your honeymoon, but the romantic notion that kindness pays held true.

Those days, however, seem to be a distant memory. Those looking to taste the luxuries of upper class travel have to work a little harder these days. The market has become flooded with rewards miles, offering the possibility of upgraded travel at no extra cost. The inevitable result is more people than ever before battling for a limited number of upper class seats.

This is compounded by the fact that the airline industry is cut throat. There are many stories of airlines that collapsed in an industry where it is harder than ever to guarantee margin. This has forced the hand of airlines, who now need to try harder than ever to identify and then reward their most valuable passengers.

Until recently, the way that airlines quantified the value of their passengers had been sold as an extremely simple equation. Fly regularly or spend significant amounts of money with our partners (credit cards, car rentals, hotel chains) and your wish for status shall be granted.

All of this was offered under the premise that those with elite status will be more loyal to that particular airline. Marketing logic would suggest that those who are loyal will spend more money with that airline and even provide more productive feedback on their products and services. That is the value equation. Everyone’s a winner, right?

Well, not exactly. Airmiles have become an economy of their own. Airlines have generated significant amounts of revenue by selling miles. They now represent a billion dollar global currency but balancing the books remains a constant struggle and customer loyalty hasn’t necessarily increased as a result. So, in an effort to maximise the revenue opportunity their most valuable customers represent and foster a new wave of customer loyalty, certain airlines have tried to find new ways to reward their most valuable customers.

Despite this, very few have managed to get beyond the transactional equation that has defined frequent flyer programmes for the past few decades. The problem with this type of programme is that it can only measure previous behaviour and what that demonstrates about a customer’s loyalty. If somebody spends a few thousand on an upper class ticket, whilst they are extremely valuable to the airline in that moment, there is no guarantee they will ever do so again.

The true measure for customer value is a lot more complicated than that. Or at least, it should be. So whilst airlines are awarding status to those who most frequently use their service — or, in some cases, spend the most money — it is rarely a measure of true customer value. If all an airline has the ability to understand is how regularly that customer has flown or how much money they have spent with them, how do they identify and reward those who present the greatest potential value rather than simply past value?

Well, they have gone some way to doing so. The beauty of these increasingly popular frequent flyer programmes isn’t simply the cash that flows in as a result of selling miles to third parties but also the swathes of information that become available through not only the airlines own system but their partners too.

For a while now, access to this information has allowed airlines to provide two core features: firstly, better customer service by tailoring experiences to their needs and secondly, personalised offers to individuals or customer sub-segments based on previous behaviour. But it presents a much bigger opportunity. Rather than building profiles on past behaviour — which online banner adverts will tell you is an unreliable indicator of future behaviour — engaging with the full-spectrum of businesses the customer interacts with gives airlines the ability to track and leverage their customer’s potential influence, contribution and future value in the most definitive way.

Historically, these programme partners have been restricted to fellow hospitality and transit providers but has slowly expanded to include grocers and media outlets. Whilst this is satisfying progress, the opportunity is much bigger than that.

I have read a huge amount of conflicting information about how airlines could — if they don’t already — value their customers more effectively and I am increasingly convinced that if they are looking to truly go after their most valuable customers, then it is vital to understand the mass of information available to them and be utilising it in the decisions their frequent flyer programme is making. But its time to face facts: in today’s age, there is no one-size-fits-all approach to frequent flyer programmes and there doesn’t need to be.

Frequent flyer programmes have become complex webs of partners and coalitions, all bidding to share further layers of information about their customers. This is part of a concerted effort to build a clearer picture of what customers do either side of arriving and leaving the airport. Increasingly, doing so is a vital part of building sustaining relationships with their most valuable customers.

It goes without saying that any partnership of this nature needs to drive new revenues and enhance a customer’s experience. By building relationships with the right partners, sharing data and building complete profiles of their customers, airlines can understand and satisfy the trigger points of their most valuable customers for both their benefit and their customers’.

Say a potential customer receives a promotion at work or gets married, say they have a small windfall or their own business has just picked up its first international account. Whatever happens, their potential value to an airline incrementally increases or decreases with every major life change but how does an airline account for that in a system that simply identifies and rewards its customers on their past behaviour?

Simple. It doesn’t. Even if that customer intends to fly from London to Los Angeles four or five times a year in a business class seat as a result of their new sales account, a particular carrier can’t maximise that opportunity if, historically, they have only made a couple of short-haul flights and failed to even reach the lowest level of status. That presents a significant problem.

So, in the spirit of agitation, my question to the airline industry is this: what does life look like beyond the frequent flyer program you know and love today? The chances are you don’t yet know because its not completely clear.

What does seem clear, however, is that an increased number of ways to earn and redeem awards within existing programmes isn’t it.

What feels more likely is a complete disruption to the way we see and operate these programmes, based on both complex data and in-depth conversations with customers, from which airlines can truly understand their customers’ needs and meet them.

Rather than the programmes of today, that leave customers frustrated by their inability to meet unrealistic rewards targets, it feels like a program where one customer’s rewards are completely different to every other customer in the programme and based entirely on a constantly changing understanding of that customer and their value to the airline. It is here that airlines can begin to deliver truly rewarding experiences for their passengers and themselves.