Like all aspects of the airline industry, customer relationship management and customer loyalty programs are changing dramatically as new technologies become increasingly prevalent. Changes in customer behavior and expectations are also driving airlines to come up with more innovative way to inspire customer loyalty.
For the last 35 years, airlines have tried to promote customer loyalty with a narrow focus on rewarding the number of miles flown. But customer loyalty has remained stubbornly low, particularly in the last several years. Flyers often belong to more than one loyalty program, and report that they are more motivated by factors such as price, traveling experience, and amenities such as WiFi access. As a result, we are seeing carriers experiment with a variety of new tactics in response to the changing market.
Miles Based on Ticket Price
Perhaps one of the biggest developments in customer loyalty programs this year was United’s decision to change the way it awards frequent flyer miles. Starting in March, the airline began allocating miles based on how much money passengers pay for their tickets, rather than the total mileage flown. United said that it made the change based on feedback from customers. United isn’t the only carrier changing the way it apportions miles; Delta also made a similar change to its SkyMiles frequent flyer program this year. Combined, the two carriers’ loyalty programs represent more than 180 million flyers, making their changes one of the most significant developments of the year for the industry. As two of the largest US airlines, Delta and United’s new policies could have an outsized impact on the industry. If the changes are successful, many smaller airlines could soon follow suit.
Miles in Exchange for Feedback
The switch from mileage-based to cost-based frequent flyer miles isn’t the only experiment the industry is playing with this year. Many carriers are also experimenting with using frequent flyer miles as rewards for things like customer feedback. Unlike the switch to cost-based frequent flyer miles, it’s smaller airlines that are leading the way. Spirit Airlines announced that it’s awarding a total of 8,000 miles to passengers who vent their frustrations, either about Spirit or another airline, as part of its “Hate Thousand Miles” initiative.
As airlines broaden their view of loyalty programs beyond a simple “points equals rewards” viewpoint to a wider perspective on encouraging customer engagement with their brands, the sector is likely to see other experiments of this type. For example, airlines can incentivize travelers to engage with their brand on social media by awarding miles in exchange for valuable feedback online.
More Flexible Loyalty Programs
In addition to finding new reasons to award loyalty points, airlines are also making their loyalty programs more flexible for the customer. In some cases, that might mean seeing more airlines merge their loyalty programs together, as American Airlines and US Airways did, allowing passengers to redeem their miles through either program. Southwest Airlines, meanwhile, has made it easier for loyalty members to either gift or transfer their points to other travellers.
This year, airlines may seek to expand their loyalty programs by extending their benefits to other new rewards and partnerships. That could include awarding points for customer behavior other than flying, or awarding points for purchases made from partner organizations. Some loyalty programs are already experimenting with helping international travelers to make purchases by handling issues such as taxes and customs paperwork.
Underlying each of these trends is the evolution of loyalty programs away from a 35-year-old model in which flyers are rewarded for the number of miles they fly with free tickets. Instead, carriers are beginning to see loyalty programs through the lens of the modern day retail market, in which customers interact with brands at a number of points and expect companies to engage them with increased flexibility. Airlines are just now starting to leverage modern technology platforms to deliver on customer expectations. Those trends are likely to persist this year and beyond.