Five things airline CEOs can do to unlock even more revenue from loyalty
Loyalty programs enjoyed newfound fame over the past couple of years, having bailed many airlines out of the pandemic's financial turmoil. As airlines sought financial relief, loyalty programs reasserted their value to the business, endearing many a CEO along the way.
While loyalty leaders were already aware of their programs' revenue contribution, they continue to be frustrated by the volume of untapped opportunities. If only senior airline leaders understood and addressed the factors limiting loyalty's full potential, even more revenue could be unlocked. As hero loyalty programs slowly come out of the limelight during recovery, here are five things CEOs can do to free up even more revenues.
1. Promote the Loyalty VP
Most airline loyalty departments are led by a VP several levels below the CEO. If loyalty drives more than 10% of airline revenues, as disclosed by the major airlines in the USA seeking relief during the pandemic, then loyalty should get its rightful place in the organization.
Why does that matter? For starters, to deliver that revenue, loyalty VPs compete daily with other departments for resources and prioritization. Second, talent acquisition and retention for specialized loyalty skillsets are challenging when the positions are lower level than in other industries. Finally, the decisions that must be made to drive such a huge business warrant more attention from the highest levels.
2. Go native
CEOs often have a disconnect between how they experience the loyalty program and how members do. So even if it is for just a few months, CEOs should go native and engage in their airline's loyalty program like "real" customers. What does that look like?
First, the CEO needs to get the co-branded credit card through the same application process as a real customer - no farming out the chore to an assistant! Once in hand, the CEO should frequently use the co-branded credit card to experience its advantages and limitations. The CEO should also book travel like a regular customer and be challenged to rise through the tier statuses. By temporarily sidelining senior executive travel benefits and perks, the CEO will go through an immersive experience into the loyalty program's strengths and weaknesses. Only then will the areas of improvement and opportunity drive home.
3. Invest in personalization
Airline loyalty should be all about engaging customers regularly, if not daily. And customers today expect that engagement to be personalized, relevant, and value-driven, especially among younger audiences. After all, who wants to be in a relationship with an entity that forgets your name, likes, dislikes, or even previous interactions?
Airlines have a tremendous advantage in that they sit on some of the richest customer data in any industry but haven't capitalized on it. And that just doesn't cut it for loyalty which should be all about nurturing deeper relationships with customers, not just within the airline's sphere but also with third parties that can enable everyday earn and burn opportunities. While loyalty programs were instrumental to helping airlines survive the pandemic, CEOs should know that they did so with one arm tied behind their backs due to limited personalization capabilities.
4. Give loyalty the marketing assets it needs
There's a daily battle that most CEOs probably don't know much about – internal competition for access to the various airline marketing channels. Multiple teams across an airline battle for real estate on the website, especially in the coveted booking path. Teams also battle to win placements in airline emails, lounges, in-flight videos, and even napkins! These channels are what drive loyalty revenue through member acquisition.
If CEOs want to turn on the loyalty revenue spigot immediately, they should give the loyalty team the marketing assets it needs. Loyalty has already proved to be the source of highest margin revenue, and that was likely working with another arm tied behind its back.
5. Give loyalty the technology resources it needs
Another battle airline CEOs likely don't see much of is the fight for technology resources. Airline loyalty teams have a unique set of IT needs that are very different from those in other business areas. So, ask yourself: is your airline's loyalty platform holding you back?
The reality is that most loyalty programs run on legacy technology that hinders innovation, flexibility, and speed to market. It's often home-grown and takes an army of people to maintain. More importantly, any innovative program designs typically require the loyalty team to fight for IT budget and resource prioritization against the larger organization. Loyalty teams usually lose more of these battles than they win, even if they can demonstrate accretive revenue and ROI more easily than other parts of the business.
Unleash the dragon
If CEOs weren't already convinced, airline loyalty programs earned their place in the sun by demonstrating the value and revenue contribution they add to the business throughout the pandemic. Now is the time to unleash the dragon by taking these five steps and increasing investments in cutting-edge loyalty technology so member engagement programs can generate even more airline revenues
Scott Hinshaw is an airline industry veteran and a loyalty expert. Scott's 20 year career at American Airlines included leadership roles in Revenue Management, Cargo, Digital Marketing, and culminated as a member of the leadership team for AAdvantage, the world's largest and oldest loyalty program. Scott also led a startup in the loyalty space, creating the first loyalty program for colleges. Scott joined IBS in January as the leader of the loyalty product for the Americas. In his free time, Scott is a father to his three college-age children and his two dogs. Scott and his wife Julie have been married for 26+ years. They love to travel and have Israel and Australia next on their list of destinations.