Thanks to the booming global economy and growing demand, the airline industry is recovering at an impressive pace after facing a severe recession in the wake of the 9/11 terrorist attacks in the US and the slowdown world economy. To maintain this and retain the edge in the chaotic and highly competitive marketplace, it is essential that the airline industry deliver more customer value than ever before and retain existing customers. Consequently, the airline industry is tied to loyalty programs. The Frequent Flyer Program (FFP) is a very popular model in the context of offering greater incentives to customers.

Frequent Flyer Program: An Overview

Deregulations in the United States dating back to the late 1970s led to the start of frequent flyer programs. European airlines were relatively slow to adopt this paradigm, as the program was inconsistent with their strategy of premium service and premium price. However, some of them now operate the most innovative and competitive programs with the following objectives:

• Repeat business among customers

• Product differentiation
• Collection of new information about customers.

• Creation of additional income channels through the sale of points

With more than 70 FFPs worldwide at the moment, the program has more than 100 million members and offers 10 million prizes per year.

Loyalty management
With ever-increasing levels of competition and shrinking margins, an airline needs to maximize customer retention, especially high-value customers, to increase revenue. The loyalty program could be beneficial for both the airline and the customer, as long as it is managed well. There are many factors that influence loyalty management. It is important that any loyalty management program is customer-oriented.

Strategic Issues in Loyalty Management

frequent flyer program

• Membership Strategy

Any customer can sign up for a program and this can be used to collect information about the customer. This means that the only way to identify our most valuable customers is by their ‘number of flights flown over a period of time’. With this, clients cannot be uniquely identified within the program

•Limited redemption options

The reward is one of the drivers for loyal customers. Customers should have the option to redeem earned points in a variety of ways. Therefore, it is important that the program offer a variety of redemption options to all of its customers.

Customer service

Customer service is an essential part of any service-oriented industry. Customers play an important role in the success of this type of business. To ensure that customers remain loyal to the business, a high level of service and hospitality is essential at every stage of customer contact to enhance the customer experience. It is important to identify the areas in which the client is upset and take the necessary steps to improve.

Communication to members

A single voice for the client, that is, the same vision of the company/organization for the client is important. Categorize communication to high and low value customers separately and send communications carefully. Communication must be properly targeted.

Brand and co-brand

Introducing alternative ways to earn and spend frequent flyer program currency is a great way to increase customer retention and incremental revenue. Co-branded cards are beneficial to all parties involved. Most importantly, customers earn miles for every dollar they spend. If used correctly, a co-branded credit card, in connection with FFP, can be used as a tool for profit. The Aco-branded card will appeal to both high-frequency and low-frequency customers for different reasons.

associations

A detailed understanding of customer behavior is required to engage with partners. With partnerships, an FFP program can generate income. The association can be made with airlines and non-airline companies. Under non-air carriers, reward benefits could be provided in the entertainment, dining, retail, non-air travel, and many other sectors. Reconciling partner invoices, using comprehensive partner management features, can maximize revenue recovery. The partners share any financial risk associated with the program.

Customer relationship management

Customers build loyalty on one or more of four loyalty factors: price, product quality, brand image, and service quality. Determining one or more loyalty drivers they value the most and continually providing that value in a way that exceeds their expectations is customer relationship management (CRM). Finding out which is the most profitable customer is very complicated.

responsibility management

To reduce liability for airline mileage, the introduction of a different mile age credit and a different mileage expiration rule for miles earned may be considered. Future financial liability for unredeemed miles cannot put an airline out of business, because there are no rules/restrictions in frequent flyer programs that allow airlines to increase the number of miles required for a free flight or restrict seat availability . Both are a form of devaluation. Seat availability is lower compared to miles not redeemed. This helps airlines market their seats for more miles (for example, doubling redeemable miles).

Features of a loyalty/frequent flyer program

The main functions of a frequent flyer program would be:

Inscription
Win – Accumulation
Burn-Redemption
level changes
Bells

Administration (Compliance, Account Statements)

The frequency of sending statements to members would depend on the program. Statements can be sent at regular time intervals or can be based on member transactions over a period of time. Compliance consists of the complete membership package including membership card, luggage tags, literature about the program, its products and services, etc.

Interface with the airline’s reservation system, i.e. the PNR repository

The Passenger Name Record (PNR) deposit is the basis for accruals. Any loyalty system would be interconnected with such a repository or PNR data would be available within the loyalty system. This data is primarily used to verify the member’s flight (usually the host airline).

other interfaces

The loyalty system could interface with many other systems, such as interactive voice response (IVR), crew information system, etc.