This month I was invited to moderate a panel on Frequent Flyer Programs and Loyalty at the 2nd Annual Airline Mega Event Conference in Singapore. I left the discussion and the conference feeling as I did before I went into it – Loyalty Does make sense for Low Cost Carriers (LCC’s).
Then, a few days ago I was reading Skift and saw that Marisa Garcia had reported on a panel discussion that had happened at at different conference held in London about how digital and Low Cost Carriers could pose a threat to loyalty and points programs.
What caught my eye the most about the panel discussion was the comment made by the Ryanair chief which said: “Loyalty is still important, but loyalty schemes are a lot less important in the age of digital”. He went on to say that there were better ways to create loyalty with his passengers, like giving them consistent low fares.
If you are a Low Cost Carrier then your business model already involves making an emphasis on reducing costs so you can give low fares to your passengers. That is a core value proposition and it is how LCC’s have positioned themselves and thus should not be a core differentiating factor for gaining passenger loyalty.
Low Cost Carriers
The LCC model has been disruptive and (welcomed by most of us) it has been well positioned to offer low prices because these airlines have chosen to operate mostly point to point routes (less than 4 hours), at smaller airports or at lower priced terminals. In addition the marketing costs are also lower because most of the transactions are done digitally and bought not normally through a GDS, but directly with the airline.
So what happens if you only compete on price and there is nothing else that differentiates your airline from your competitors airline?
Let’s not also forget that it is not only Low Cost Carriers competing against each other on price – the Full Service Carriers have also understood that the model can be appealing (or have been pushed to converge by the LCC’s) and are moving into the LCC territory by trying to compete on price.
That is where I believe that a loyalty program / Frequent Flyer Program is important and is going to be a differentiating factor for the passenger to choose to fly with an airline – because when all things are equal a well designed program should be the “tie-breaker”.
Loyalty and the Digital Space
So, is a loyalty program right for a Low Cost Carrier in the digital world? Well, let’s look at what the airline would gain by implementing a loyalty program:
- Data that can be actionable
- Increased brand relevance
- Understanding of LTV
- Insights about passenger behavior
- Better targeting options with vast number of digital channels
- Implement advanced segmentation
- Improve the customer experience
- Better deploy cross selling/upselling options
- Know more about the most profitable passengers
- Be less reliant on paid channels for acquisition
- Increase NPS
- Engage in conversations and gain true feedback from passengers
- Reward the right kind of behavior
- Uncover the best customers and develop relationships
- Generate additional revenue from points
- Achieve greater relevance for partners
These are just some of the benefits that Low Cost Carrier can gain from both digital and a loyalty program should they implement one.
Getting The Strategy and Program Right
Deciding on a loyalty program for an LCC and implementing it require a strategic focus on the customer experience, passenger behavior, airline goals, the technology, channels, customer service, and on the value proposition.
In this digital age a loyalty program must have among other things:
- A relevant and engaging value proposition
- Increased options and velocity of both earning and redeeming points
- Program dynamics that are simple to understand
- A well designed user experience / User Journey
- Ease of use on all channels for passengers
- Message relevancy in all digital channels
- A higher level of customer service and support
- An Optimized omni channel experience
What all this tells us it that Loyalty Programs / Frequent Flyer Programs can bring great value and are still very much relevant ( just look at the success that Starbucks is having with their program ), a asset that Low Cost Carriers can use to differentiate, know their customers well, deliver the experiences their passengers want and ultimately increase their own revenues.
LCC’s need to think strategically when implementing a new Loyalty Program or optimizing their current one, so that the passenger gets the best experience, and so the Airline can ultimately gain the passengers long term loyalty and share of wallet.