{"id":4942,"date":"2020-04-16T15:13:35","date_gmt":"2020-04-16T14:13:35","guid":{"rendered":"http:\/\/www.globalflight.net\/french\/?p=4942"},"modified":"2020-04-16T15:14:30","modified_gmt":"2020-04-16T14:14:30","slug":"the-toughest-is-yet-to-come-for-loyalty-programs","status":"publish","type":"post","link":"https:\/\/www.globalflight.net\/french\/the-toughest-is-yet-to-come-for-loyalty-programs\/","title":{"rendered":"The toughest is yet to come for loyalty programs"},"content":{"rendered":"\n
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16 April 2020<\/span><\/em><\/p>\n\n\n\n

Right now, we all hope that business will return to normal as quickly as possible, meaning planes will be flying again and hotels will be open again. But the tough work for loyalty professionals will only start at that point.<\/p>\n\n\n\n\n\n\n\n

Business worldwide is down for almost anybody in the travel chain. This is most obvious for airlines and hotels, but it has much wider implications, reaching out to suppliers, hotel investors or airplane manufacturers. And this results in plenty of \u00ab\u00a0spare time\u00a0\u00bb for many people in the industry, including notably for consultants.<\/p>\n\n\n\n

Most people\nworking in the loyalty business today were not yet involved with the last major\ndownturn post 9\/11 (in 2001, just for the record), which was though even not\ncomparable to what we are experiencing now. In the end, 9\/11 certainly\nconcerned what was still the most important airline market at that time, but it\nwas more a regional than a global issue for the industry and of fairly short\nduration. The last comparable worldwide grounding of airline fleets probably\noccurred around 1944.<\/p>\n\n\n\n

The last\ndecade at loyalty programs was marked by a continuous strive to maximise\nprofits. Next to maximising the currency game, this was achieved through finding\nthe right point of program devaluations still accepted by members and the\ndeployment of new technologies. The latter usually came in the disguise of\nenhancing the customer experience, but served nevertheless primarily the purpose\nof reducing costs, e.g. by enabling members to conduct certain services by\nthemselves.<\/p>\n\n\n\n

In spite of\nsome disruptors, the market was quite stable over the last decade, growing for\neverybody at reasonable pace. Fleet planning was a long-term exercise and the\nrest of business adjusted accordingly to absorb additional capacity. And the cake\nwas large enough for everybody.<\/p>\n\n\n\n

This means\nthat many loyalty programs have simply no experience at all with the most basic\ntask of a loyalty program – to create loyalty in a highly competitive environment,\nwhere the offer largely outpaces demand. The markets had nothing to do with the\nearly 80ies in the US after the deregulation of the airline market. Price wars\nand overcapacity provided the perfect ground to modern loyalty programs, which\never since then have tried to reinvent themselves in front of much easier market\nconditions, interrupted only by short periods of uncertainties.<\/p>\n\n\n\n

The market\nwe are going to find ourselves in in a very near future will, however, look\nmuch more like the US market after deregulation. Massive overcapacity will be\nthe name of the game. While some airlines like the US majors or Lufthansa might\nhave the \u00ab\u00a0luxury\u00a0\u00bb of still having a large chunk of planes of around\n25-30 years old in their fleet they can easily retire to reduce their individual\ncapacity, there are far more airlines with very young fleets. Think of many low\ncost carriers, but also of the likes of Qatar Airways, Turkish Airlines or\nEthiopian Airlines. Withdrawing planes from such fleets would cost much more\nthan keeping them airborne, even if yields suffer as a result. Add to that the\nlikely additional capacity coming in during the same period in the shape of a recertified\n737MAX and you get the picture. Ryanair has already announced that they’d start\na massive price war starting this summer.<\/p>\n\n\n\n

As a result,\nit basically even doesn’t matter whether you are at an airline reducing your\nown capacity or not – everybody will be confronted with the excess capacity.<\/p>\n\n\n\n

In order to\nsucceed – or at least to stay somewhat relevant -, loyalty programs will need\nto move back to their initial role to win market shares. While the current\ncommon measures such as extending elite statuses are certainly necessary, they\nwill be insufficient on their own to achieve this goal. More fundamentally, programs\nwill need to enhance considerably their value proposition since members will\nexpect that. If the perceived value is too low, passengers will definitely be\nlost to more price aggressive competitors – and be sure they will always be just\naround the corner.<\/p>\n\n\n\n

So, if your\nprogram has devalued over the past 10-15 years, there is a fair chance that you\nneed to revert that. And you’ll be more successful if you do this at the\nstructural level of the program rather than on a promotional basis since\nmembers will well understand the longevity – and underlying honesty – of both approaches.<\/p>\n\n\n\n

To get\nstarted and without the need to engage immediately in further-reaching\nbenchmark studies, you may check your program regarding two simple aspects,\nwhich used to be common market standards ten years ago:<\/p>\n\n\n\n

1) Do base members\naccrue sufficient points\/miles with one long-haul roundtrip in Business Class\nto redeem on a regional roundtrip flight in Economy Class?<\/p>\n\n\n\n

2) Do you\ndeviate by less than 10% for all of the following benchmark parameters for\nTransatlantic redemption flights (on your own or on a partner airline): Roundtrip\nin Economy Class: 50,000 miles & roundtrip in Business Class: 80,000 miles &\ntaxes\/surcharges on redemption tickets in all cabins: 50 USD\/EUR one-way<\/p>\n\n\n\n

If the\nanswer to any of the questions is no, this is a clear indication that you are\nnot ready for the time after and that you are well advised to use the current\nslow time to start to work on a fundamental redesign of the program, without any\ntaboos. Otherwise, you risk facing soon some critical and justified questions\nfrom your management about the value your program still contributes – what\nmight not be the wisest thing to do in times of an increased focus on all kind\nof costs.<\/p>\n\n\n\n

And don’t\nbe afraid that this might look like a return to the roots: It might indeed incorporate\nsome more basic approaches (which proved to be so successful in history), but\nwhich are definitely enriched by all the elements the industry got used to over\nthe last decade and shouldn’t do without anymore. That sounds like the true\nwinning combination to weather the challenges ahead.<\/p>\n","protected":false},"excerpt":{"rendered":"

16 April 2020 Right now, we all hope that business will return to normal as quickly as possible, meaning planes will be flying again and hotels will be open again. But the tough work for loyalty professionals will only start at that point.<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_links_to":"","_links_to_target":""},"categories":[37],"tags":[],"_links":{"self":[{"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/posts\/4942"}],"collection":[{"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/comments?post=4942"}],"version-history":[{"count":1,"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/posts\/4942\/revisions"}],"predecessor-version":[{"id":4943,"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/posts\/4942\/revisions\/4943"}],"wp:attachment":[{"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/media?parent=4942"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/categories?post=4942"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.globalflight.net\/french\/wp-json\/wp\/v2\/tags?post=4942"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}