My Airline Loyalty Program Doesn’t Fly! – Part 2

Payments Leader

Posted on May 8, 2014

In a previous airline loyalty post, I recounted for you my surprising experience with trying to use my co-branded airline loyalty card’s hard-earned miles for booking a flight. It turned out that the flight and seat options made available through the airline-sponsored loyalty program were actually inferior to those available through other loyalty channels, namely through the rewards program offered by my financial institution. Therefore, I canceled my flight redemption through the direct airline program, got my miles back and redeemed points from a competing program, saving me not only points (miles), but requiring less out-of-pocket expense for travel-related fees. For Part Two of this series, I’ve decided to focus more on the consumer perspective as it relates to airline loyalty.

As stated previously, the main feature of an airline rewards programs is for consumers to earn and burn (redeem) for subsequent airline purchases. In fact, this is the main facet of almost all loyalty programs – the goal being to drive incremental sales purchases. But the model has shifted radically. Airline loyalty members can now not only redeem points for flights but can also redeem them for brand-name merchandise, gift cards, publication subscriptions, car rentals, hotel purchases and so much more. Airlines have created these lower cost options to steer members away from flight purchases, as non-rewards purchases are much more profitable than the historical model.

Despite the many redemption options, it remains to be seen whether airline loyalty programs actually satisfy program participants. Some statistics seem to demonstrate they may be far from it.

Customer Loyalty is in the Numbers

Surprisingly, when it comes to booking flights, loyalty isn’t the consumer’s first consideration, according to Rising above the Clouds: Charting a course for renewed airline consumer loyalty, a survey of 2,500 U.S. air travelers by Deloitte’s Travel, Hospitality, and Leisure division. In fact, those who fly aren’t that loyal to the airlines with which they hold loyalty memberships. Fifty percent of all respondents stated that they belonged to at least two airline loyalty programs. Here is a sampling of the Deloitte report’s other findings:

  • Forty-four percent of business travelers and 72% of high-frequency business travelers participate in more than one airline loyalty program.
  • Only 44% of all travelers and 40% of business travelers fly at least three-quarters of their air miles on their self-identified preferred airline.
  • Nearly one-third of business travelers fly fewer than half of their air miles on their designated airline of preference.
  • Only 38% of respondents stated they would be willing to act as an ambassador for their preferred airline.
  • Participants “overwhelmingly reflected the sentiment that airline loyalty programs were too commoditized.”

If you are at all surprised by these findings, you shouldn’t be. Another finding in the report states that, out of a list of 26 attributes experienced by these frequent flyers, customer loyalty programs ranked 19 overall (loyalty programs fared better among high-frequency business flyers, which account for approximately 4% of the total respondents, who ranked it second). And that’s ahead of some of the trappings and features airlines offer that many of us think are indispensable, things like in-flight technology, access to VIP lounges and even free meals. For edification’s sake, the top five attributes these travelers listed were, in order:

  1. Safety
  2. Value for their money
  3. On-time arrivals and departures
  4. Check-in convenience
  5. Ease and cost of baggage handling

At the root of this apparent disloyalty is the reality that customer service and comfort, two major components on which the airline industry was built, have deteriorated to the point where everything is now fee-based. Even changing seats, something that used to be free, now carries a fee. Add the long lines at security check points, the restrictions enforced at drop-off and pick-up areas and carry-on size and weight restrictions, and the disloyalty from the passenger becomes easier to understand. It’s human nature to seek out a better deal, especially when an existing deal is less than satisfying.

One important thing to note about the survey is that it is primarily focused on business travelers. However, business travelers are also consumers – so what’s not accounted for is how influential airline loyalty programs are on personal travel expenses of this same demographic. Surprisingly, cost and route map weren’t even mentioned in the top 5, which absolutely play into the business traveler’s purchase decision as they may be governed by his or her company’s policies. So the bigger question is did these business travelers respond solely from a business viewpoint, or did they factor into account personal consumer preferences? My bet is the latter. The point is, for airlines interested in improving or repairing their loyalty programs, the focus must be on those program attributes that matter most to consumers.

When asked to rank the top 10 program attributes airline customer retention programs should focus on for improvement, the top five revolved around points. Those attributes and their overall rankings across all consumer segments were:

  1. Ease of redeeming points
  2. Redemption value per point
  3. Ease of earning points
  4. More opportunities to earn points
  5. More opportunities to redeem points

Even when responses were broken down among individual classes of travelers, these remained the top five attributes. What was last? Redeeming points for merchandise. This makes sense when you consider that the major reason most join a customer rewards program is to increase purchasing power with that individual airline.

Ultimately, what this shows is that – like my personal experience trying to redeem points for more convenient flights and better accommodations – airlines are contradicting themselves. They tell consumers it’s all about the points, but then make it hard for the accumulated points to work in the consumer’s favor. While some of the other perks they offer are nice – club rooms and in-flight technology, for instance – those aren’t the things consumers really want.

When these customer reward programs can deliver on the basic concept that is promised – any flight, anytime, anywhere – airlines will truly entice consumers to take part, because they will then offer programs that reward consumers as much as they reward the airline.

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Payments Leader from FIS provides insights on credit, loyalty, fraud and emerging payments strategies through blog posts from our industry experienced authors.