{"id":5055,"date":"2020-07-07T13:00:55","date_gmt":"2020-07-07T12:00:55","guid":{"rendered":"http:\/\/www.globalflight.net\/german\/?p=5055"},"modified":"2020-07-07T13:01:07","modified_gmt":"2020-07-07T12:01:07","slug":"the-rise-of-the-biggest-enemy-of-loyalty-programs","status":"publish","type":"post","link":"https:\/\/www.globalflight.net\/german\/the-rise-of-the-biggest-enemy-of-loyalty-programs\/","title":{"rendered":"The rise of the biggest enemy of loyalty programs"},"content":{"rendered":"\n
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07 July 2020<\/span><\/em><\/p>\n\n\n\n

Loyalty programs have one common enemy: upfront discounts or cashbacks. In harsh times like these, there is always a drift in favour of discount schemes, putting loyalty programs under pressure to reinvent their value proposition.<\/p>\n\n\n\n\n\n\n\n

While there\nis a surge of offers for double, triple or even tenfold miles for certain\nactivities, loyalty programs are under pressure from suppliers offering upfront\ndiscounts. The other day, I’ve even come across an offer by the Turkish Airlines\nprogram Miles&Smiles<\/a> for a 30% upfront discount at participating Accor properties in Turkey,\nIsrael, Russia and some CIS countries, on top of the regular points earning.\nEven by offering tenfold miles, it would be hard to get such a value out of a\nmileage-based promotion.<\/p>\n\n\n\n

Yet in\nnormal times, there is a permanent fight between the discount camp and the\nloyalty camp, in all sectors. While discounts are more appealing in certain\nmarkets for cultural reasons, you can witness such debate in all markets.\nRyanair’s O’Leary became famous with his remark that Ryanair didn’t need a\nloyalty program since their (low) price was their loyalty program. While other\nlow cost carriers may offer such a scheme, it is often not the key component of\ntheir value proposition either and price remains very much in the centre of the\nmarketing communication. Indigo is a good example here.<\/p>\n\n\n\n

It is also\nfor that reason that a handful of loyalty programs have a network of non-air\npartners – but would not let members accrue points, which they could redeem on\ntheir flights at a later point, but just provide them straight forward\ndiscounts. This is often more appealing to members, but deprives programs from\ngetting a holistic customer view since no transaction data for such partnerships\nis gathered. However, in order to make really a difference at a CRM level as an\nairline or hotel loyalty program, you need to increase the touch-\/datapoints\nwith your members in order to understand what they do in between their\noccasional transactions with your own company.<\/p>\n\n\n\n

Ever since,\nloyalty programs have been engaged in this educational process to convince\nmembers that their currency is more valuable from a long term perspective than\nan upfront discount. This works to a certain degree, depending on markets and\non the level of discounts available.<\/p>\n\n\n\n

But at the\nsame time, programs make it difficult for members to adhere to such long term\nperspective. Let’s assume you are an infrequent Economy Class long-haul\ntraveller, looking closely at the programs. You do the maths and realise that\nit will take you three paid roundtrips to get an upgrade – what can be a real\ninspiration. However, it might take you three years to accomplish these flights\nand by that time, there is a fair risk that the program will have increased the\nmileage requirement for that upgrade to the equivalent of five roundtrips – and\nif you are double unlucky, you are in a program where points expire after three\nyears.<\/p>\n\n\n\n

Such\nmistrust is industry-created, but not really properly addressed. With each\ndevaluation, you lose that bottom of members for whom any further engagement\ndoesn’t make any sense anymore.<\/p>\n\n\n\n

The current\nsituation now adds another problem: Outside of the top 10 carriers, who would\nreally bet on the survival of any carrier? Investing in the currency of such\nairline seems a very risky game – and the temptation to cash in on a direct discount\nmakes simply more sense.<\/p>\n\n\n\n

While\nprograms can only do so much to reassure members about the state of their\ncompany, they need to address the value side. There is no one-fits-all solution\nhere, not for the industry as a whole, but even not within a program. While\nmost programs have addressed the issue of retaining elite members (lower\nrequalification thresholds, more status points), work remains to be done at\nmany other levels. A virtual currency such as loyalty points has always a lower\nperceived value than a real currency.<\/p>\n\n\n\n

With price\nwars appearing everywhere like mushrooms after a rainy autumn day, loyalty\nprograms need to act quickly to remain relevant in the mind of existing and\npotential members. While the industry will come back to a more stable situation\nat one point, there is though a risk that customer perception and preferences\nwill change for a longer time. Just sitting out the current situation and\nwaiting for old behaviour to return might not work anymore for loyalty\nmarketers.<\/p>\n\n\n\n

There is\nthough no need to rewrite the books of loyalty, but it might be time to apply\nall the elements of loyalty theories rather than cherry-picking the low hanging\nfruits only as in the past. Loyalty will still work, but just putting the\ncarrot of a free flight\/upgrade\/hotel stay in front of the member without any\nreal further measures won’t be enough anymore. This is already the daily\nchallenge and reality of loyalty professionals in other industries, but the\ntravel industry could afford, so far, to be too complacent to do what is really\ncalled loyalty marketing since the carrot was appetizing enough.<\/p>\n\n\n\n

These times\nare over. Take it for granted.<\/p>\n","protected":false},"excerpt":{"rendered":"

07 July 2020 Loyalty programs have one common enemy: upfront discounts or cashbacks. In harsh times like these, there is always a drift in favour of discount schemes, putting loyalty programs under pressure to reinvent their value proposition.<\/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\/german\/wp-json\/wp\/v2\/posts\/5055"}],"collection":[{"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/comments?post=5055"}],"version-history":[{"count":1,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/posts\/5055\/revisions"}],"predecessor-version":[{"id":5056,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/posts\/5055\/revisions\/5056"}],"wp:attachment":[{"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/media?parent=5055"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/categories?post=5055"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.globalflight.net\/german\/wp-json\/wp\/v2\/tags?post=5055"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}