The theory and practice of frequent flyer programmes (FFPs) is the latest subject to be covered in the ongoing revenue and loyalty thought leadership initiative between Cartrawler and IdeaWorks.
"Cash is King: Revenue Now Rules Frequent Flyer Programme Accrual" is the self-explanatory title of the paper. Its topline takeaway is that revenue is front of mind for airlines when thinking about how to allocate miles, points, and rewards to their FFP members.
When FFPs hit the market in the 1980s, points were awarded and redeemed in terms of the miles flown. But this has waned over time, with today's analysis revealing that 22 of the 25 "use the type of fare purchased by the consumer to help determine the final tally of a member’s mileage or points total."
However, the way in which airlines use revenue as the driver for passengers to build up their points balance varies significantly between carriers. Some of the disconnects noted by IdeaWorks include their finding that only American, Delta, and United use a combination of the price paid for a ticket and the member's status to determine the exact number of points credited.
The variety of mechanism used under the revenue umbrella creates complexity for the traveller, and while there are a lot of consumer-facing websites and blogs helping customers to game the system, Idea Works observes:
"if consumers are dedicated to learning the nuances of your program, complexity might be acceptable. However, in practice consumers will simply remove an airline from consideration if great effort is required to understand the value provided by its frequent flyer program."
From the airlines' perspective, FFPs and the accrual/redeem mechanisms can be a way to differentiate from rivals on competitive routes. IdeaWorks also notes that there are some big differences in approach between alliance members or codeshare partners such as Delta and Air France or United and Lufthansa.
However, the paper concludes by advising airlines that the best way to run their FFP is to make sure that it synchs with the overall strategy. It says:
"Design products based upon your strengths, your competitor’s weaknesses, and strong customer need. Regardless of what your competitors may do, your FFP should strive to find its sweet spot."
To read the paper in full, click here for details.
Related reading from Tnooz:Mobile ancillaries gaining traction for airlines (Feb17)
Airline ancillary revenue forecast to hit almost $70 billion this year (Dec16)
NB Image by Tupungato/BigStock