How Airlines Can Strengthen Loyalty & Ancillary Revenue for FFPs through a Travel Club
What led the airline industry to introduce the original “frequent flyer program” (FFP) concept? Remember, this was long before retailers popularized the “loyalty program” concept. But airlines understood that travel is a unique product that could appeal to a much wider consumer audience, given the right rewards and incentives to travel more frequently and with one airline. It was key for airlines to partner with non-travel brands to leverage those partners’ existing customer relationships (or nowadays, their user base of online shoppers), all of whom are ready and eager for targeted, personalized and discounted travel products.
Airline FFPs have evolved far beyond their original points and miles schemes and today are at the center of a sophisticated travel ecosystem– which includes credit card companies, retailers and so many others using the appeal of travel and lifestyle benefits to help sell their non-travel products and services. Travel is both a necessity and a luxury, which makes it an ideal product to sustain added-value ecosystems such as FFPs.
Travel and lifestyle clubs are a specific and unique added-value offering within the FFP ecosystem, helping airlines attract and engage high-value FFP members – those that value benefits that augment or enhance travel as much as they value points, miles or cashback rewards. Imagine their comfort knowing that as FFP andtravel club members, they have access to exclusive rates for hotels and other amenities, discounted access to travel insurance, emergency medical services, airport lounges and so much more.
Travel clubs greatly enhance an airline’s brand image, help keep existing FFP members engaged, and best of all, attract new FFP members whose first priority is brand affinity and lasting loyalty. With a travel club offering, airlines can convert brand affinity into brand equity, add new ancillary revenue from subscription fees, give FFP members added reason to remain loyal, and strengthen and grow ancillary revenue programs.
Frequent Flyer Programs and the Travel Ecosystem
Some would suggest that credit card memberships like the AMEX Centurion are really “travel clubs” at heart because they use the appeal of travel benefits (lounge access, concierge services) to help sell non-travel products (in this case, financial services). Why would anyone pay hundreds of dollars to be an AMEX Centurion card member? It’s really simple: the value of benefits they receive in return is worth the yearly fee – and this is exactly why travel clubs are popular and effective, because the discounts and access to elite benefits are worth the price of a subscription, which usually pays for itself on the savings of a single trip.
According to the most recent loyalty census by research firm Colloquy, U.S. consumers hold3.8 billion memberships in customer loyalty programs. The travel and hospitality sector, which include airline FFPs, accounts for 1.1 billion memberships. But here’s the kicker: membership growth slowed to 15% in 2017 compared to the 26% growth rate achieved in 2015. This has become a familiar story for loyalty marketers – shoppers belong to too many loyalty programs and can’t possibly engage in all of them. Besides that, there’s the criticism of loyalty programs themselves as being too generic, undifferentiated, complicated, not valuable to shoppers and – worst of all – boring. Travel clubs can help airlines rejuvenate their FFPs and attract the right high-value members.
The original FFP construction – rewarding customers in return for their brand loyalty and purchasing frequency – has since blossomed into a broader “loyalty program” concept. But with declining growth in US loyalty programs, airlines and retailers are realizing that not every customer is meant to be a committed loyalty program member. Rather than turn every customer into a die-hard member, airlines are focusing on adding value for their most loyal members and increasing margin and spend on those loyal relationships. In this way, airlines are reversing the “commodification” of FFPs and loyalty programs in general, by adding new value through travel clubs and other added-value offerings.
Like loyalty programs in other industries, FFPs are struggling with member “churn” as travelers shift from one program to another to get the best credit card rates or other incentives. The original purpose of FFPs – to incentivize airline loyalty – has gotten lost as members fail to see the long-term benefits of flying with one airline. They need new benefits, rewards and incentives that are valuable in themselves, but that also directly improve the journey (such as lounge access or expedited visa services). Travel and lifestyle clubs can easily fill this need for airlines and their loyalty program partners.
Custom Travel Solutions for Airlines
By offering a travel club subscription on top of their frequent flyer programs, airlines can associate their brand and program with a worldwide network of elite travel and lifestyle benefits available to members at discounted rates through a private online portal. Best of all, the airline does not have to set up the travel club website or manage vendor relationships and can offer the subscription through its regular FFP channels.
Travel and lifestyle clubs are helping airlines enhance and refresh their frequent flyer programs for a new generation of “experiential” and “connected” travelers, including Millennials, Boomers and youthful retirees – all of whom value the comfort, convenience and cost that a subscription travel club affords them on every trip. Custom Travel Solutions can help airlines implement a “white label” travel club for their FFP members, helping rejuvenate their program, strengthen brand loyalty and have a direct and positive impact on passenger experience. Schedule your demo today.