Janet Titterton of Collinson Latitude
Loyalty programmes could benefit both no-frills airlines and their business travellers, says Janet Titterton
Low-cost carriers (LCCs) have traditionally resisted the idea of loyalty programmes.
Our customers’ loyalty is built on our low seat prices, so the argument goes, and any loyalty programme would entail costs that would push our ticket prices up. That approach would kill our business.
The response I would give to this argument is both yes and no. Ryanair is, of course, a leading player in the LCC sector and loudly eschews the notion of a loyalty programme. However, several factors make Ryanair an exceptional case, and many other LCCs, including the latest market entrants, need to take a different tack on loyalty strategies to ensure their profitable growth.
As Ryanair’s latest financial results confirm, the airline has hit on a winning formula for commercial success. CEO Michael O’Leary’s team operates the purest form of the low-cost carrier strategy, 100% devoted to delivering the lowest possible seat price. Ryanair then offers multiple additional ancillary revenue products to create a highly profitable range of add-ons. In this instance, therefore, it is perfectly credible to say a loyalty programme could conflict with the airline’s fundamental lowest-cost strategy.
But not all LCCs are built on the Ryanair blueprint, which is a great thing in a world that respects choice. Some airlines, such as Easyjet, are successfully offering services that straddle the divide between low-cost and legacy carrier, such as bundled services for business travellers.
Other airlines have inherited fleets, networks or business structures that impact their seat pricing. These airlines, for whom rock-bottom pricing may not be the primary objective, clearly have a lot to gain from loyalty strategies that strengthen customer bonds. Indeed, Easyjet, significantly, is currently asking the airline’s customers about interest in the launch of a loyalty programme, prompted by traveller enquiries.
In designing loyalty programmes, LCCs need to consider carefully what works for their particular business and what behavioural change they want to encourage. Simply copying the formula used by legacy carriers has some obvious problems. For example, offering miles for free or discounted air fares to frequent flyers has limited impact when the value of the seat can be as little as £10. Similarly, the prestige that typically accrues to ‘platinum club’ membership is limited when your value proposition is centred on ‘no-frills’.
A smarter move – and LCCs are nothing if not smart – would be to offer more appropriately-themed benefits. For example, free speedy boarding or a waiver on checked bag fees on every third flight could be offered. With many LCCs operating wholly online, they have access to complete customer purchase records on which such targeted offers could easily be built.
The really exciting opportunity for LCCs is to offer membership programmes that deliver relevant benefits to passengers in different aspects of their lives.
Airlines can deepen their customer relationships by offering packaged benefits – both travel and lifestyle – to regular customers and the wider customer base. Our experience with current client travel loyalty programmes indicates special offers, family tickets and iTunes vouchers are some of the benefits which are most appreciated by travellers.
Subscription-based memberships are a proven vehicle for delivering customer benefits and maintaining and growing market share. The information provided by the customer when they sign up is used by the company to offer discounted items or rewards, based on the customer’s selected preferences.
Airline finances are under renewed pressure in 2012, but LCCs have at their fingertips the customer data that can transform occasional passengers into more profitable customers, and a potential membership base for any loyalty programme they may wish to introduce.