Blogs - Travel and Leisure Services Outsourcing
| Making customer loyalty a top priority |
| By Todd Dirks on 10/26/2009 8:11:25 AM |
As a regular flyer, I definitely enjoy and take full advantage of all the privileges I receive as a member of multiple frequent flyer programs -- faster check-ins, priority security lanes, easier upgrades, advanced seat selection, increased premium seating availability and on some carriers, access to free TV/Internet – which are some of the important ones to me. As an old ad for Cathay Pacific put it: (I can then) arrive in better shape.
In the US alone, according to frequentflyer.com, the top six frequent flyer programs have an estimated 100 million members. Further, most frequent flyers tend to be enrolled in four to six programs simultaneously. This situation came about in better economic times when travelers did not have to be overly selective about which program to opt for. They knew their mileage volume would earn them “precious metal” status in each of their programs.
Now, the slowdown in the US economy is changing the dynamics of the game. While there are some encouraging signs that business travel volumes are stabilizing – American Express just predicted a modest one per cent growth for business travel in 2010 – volumes are still significantly down from earlier in the decade. Airline consolidation also plays a role here. For example, there is uncertainty with how the Midwest and Frontier programs will shake out with their new ownership by Republic.
Let's take travel first: passenger volumes are down. If you're making fewer trips now, what airline would you choose? Obviously, you’ll choose the one in which you have accumulated the most miles and provides the most privileges. The "multiple" loyalties of the past cannot be sustained due to reduced travel. It is better for the traveler to max out their benefits on one carrier rather than not receive any by traveling a few times on multiple carriers.
This means airlines must continuously analyze data as to what customers want, how they fly, what time of the day do they prefer to fly and what kind of conveniences and perks are important to them. This is the crux of the whole debate around bundled pricing. One passenger may prefer to obtain seating preferences but never check a bag; therefore baggage fee waivers are not important to them. Others may want a free meal, but the TV means nothing to them. Determining what the most valuable travelers actually want is key to retaining their business.
It isn’t easy to analyze this information as it not always tracked. The airport staff and flight crews do not have the capability or time to track which travelers actually use which benefits. That’s where analytics can support the implementation of cost-effective customer retention programs. The challenge for the airline is to ensure the traveler chooses their program because the benefits are tailored and relevant to them. This will also mean taking another look at their marketing campaigns to ensure the message is heard by travelers on the fence about which program to choose.
Airlines must better understand their core customers, track their behaviors more regularly, communicate more effectively and adapt their programs appropriately. Above all, the airline must ensure that it does not alienate a frequent flyer by focusing on benefits they do not care about.
In these tough times, with many airlines deeply in the red, customer retention translates into steady revenue streams. Fares, frequency and route network will always remain key competitive points in travelers’ choice. However, the loyalty program drivers of growth for the airline business have undergone a sea change. Analytics can help them ensure that travelers will award their business to the carriers they know for sure offer the greatest benefits. |
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