CEO Blog

Loyalty programs, we need you NOW

Written by Ravindra Bhagwanani on . Posted in CEO Blog

19 March 2020

While the hit might be stronger than ever this time, it is certainly not the first shock the travel industry has to endure. But a shockingly repeating pattern can be observed with each such crisis: the dive into invisibility of most loyalty programs.

The COVID-19 crisis is unprecedented by its global scale, even by far outpacing the 9/11 crisis, which mostly impacted the US market only. More recent memories include the MAX grounding, United’s incident on an overbooked flight or the uncertainty about the consequences of the Brexit. All these events have in common that they result in questions, but often fears by customers somebody should reply to.

Loyalty programs are at the heart of the relationship between the company and the individual customers and are hence the logical element of making this connection. But all what is happening now (I don’t actually recall who started this, but everybody seems to copy it now without putting any thoughts into it…) is that members get messages signed by the company’s CEO reassuring customers that the planes and hotels are cleaned properly. And in absence of any viruses, you don’t do that…? [Okay, yes, when getting on a plane with certain companies towards the end of the day, that is definitely the impression you get!] On the other extreme, there are programs/airlines sending out their usual marketing-style messages as if it were business as usual.

I hear these days often from loyalty managers that they are too busy handling the situation and can’t therefore look into things with a more strategic view. Handling what exactly…? You are – luckily for you – not in flight ops, sales or customer service, which are definitely in the first line to handle the consequences and daily evolutions. I am aware of only one rare forward-thinking case saying, hey, I have basically nothing to do, so let me use the time to work on the redesign of the program.

There is no doubt that there is major financial pressure on programs with big parts of revenue streams drying up, but keep in mind that you’ve only managed to build these streams in first place thanks to your members and their engagement with your currency. As you can’t change these things, programs really need to change their focus to the relationship part with their members (and partners, but that is a behind-the-scene activity, which is usually done properly).

As such, loyalty programs should assume a completely different role in such context, mainly working towards three objectives:

1. First hand information

Only factual information can really help to reassure clients. Inform them about any developments first hand and in a transparent manner. Focus on that kind of information clients are really looking for rather than some general PR statements. Ensure that you control the communication and content rather than pushing people to look for half-truth information on the web. How difficult is it to identify the home airport of a member/his main routes and inform him proactively about any service reductions/valid schedules?

2. Engaging customers

It is clear that there are external factors we can’t influence, such as a travel ban by an employer. So, the traditional focus of loyalty programs, which is to secure the highest share of wallet against competitors at the best possible revenue rather than incentivising incremental travel, needs to change if the size of wallet becomes zero. But there are various ways to engage customers even in such exceptional down times: think of credit cards, online partners, gamification elements etc.

3. Preparing for the time after

When people will return to travel, the offer will initially outpace demand as airlines will be eager to bring their metal (and plastic nowadays) back into the skies – additional capacity might even be added in case the MAX was finally cleared to return. Loyalty programs will play a crucial role here to reinstate quickly loyalty and assume (again) their traditional role as revenue drivers. There are obviously regional approaches required here since different markets will get to that point at different times (e.g. China is already there) and timing will be critical to secure an advantage of competitors.

There is little doubt that most programs manage the third point (with the exception of the regional dimension) – but they might be wakening up to a harsh and unexpected reality if they will previously have failed in the first two areas. As things have started with most programs, there is indeed a danger that the real crisis for many loyalty programs is yet to come. People are experiencing now that they can survive without travelling and are left alone by the programs towards which they have showed commitment over many years. It might not be evident for everybody to renew such ties.