How does technology awaken Loyalty - the sleeping beauty of aviation?
Loyalty programs often do not get the attention they deserve. Most companies are surprised at how much value their loyalty programs drive. With technological advancements, loyalty programs have become more powerful than ever before. In this conversation with Marcus Puffer, Vice President and Head of Loyalty Solutions, we understand how modern airline loyalty programs surged in importance, and how they drive business growth.
Why has Loyalty become such an important factor for business success?
Loyalty programs have been around for a long time now, even more than 30-40 years. These frequent flyer programs were going after people that travel a lot. The idea was to incentivize travelers to come back, book another ticket, and use the airline's services another time. However, in the past few years, many patterns of travel have shifted. Operators of loyalty programs have started leveraging the value that they have created with these programs. This value comes from being able to address a big customer base that they have gathered over time. They have access to valuable information about these customers.
Value is also driven by opening loyalty programs to partners. For a long time, a lot of the airline revenue came through loyalty programs that were powered by partnerships with third-party companies like credit card providers. These companies used the currency of the loyalty program to create commercial value for their product as well as for the airline. During the pandemic, most airlines depended on loyalty programs and cargo (primarily) for generating cash and revenue. This led to the realization that these programs can drive serious value. In many cases, loyalty programs held more value than the airline itself. So now, the top management at airlines is truly seeing the value in loyalty programs and the customer data that they have collected through these programs.
What do you think are the changes that have created a shift in the dynamics of airline loyalty?
You can see the changes on multiple fronts. The most evident is the change in the target customer base. As discussed earlier, loyalty programs were originally created for frequent travelers. However, after the pandemic, the size of this segment has shrunk. A lot of this has been compensated by a growing segment of leisure travelers, people that may not travel as much as business travelers may.
This means that loyalty programs have to be modified to cover a broader spectrum of customers.
Another change is in technology. Loyalty programs that were created 30 years ago are powered by legacy systems. These are difficult to maintain and operate. Modern loyalty programs are dynamic and digital. Thanks to better computing power, cloud technology, and the implementation of artificial intelligence (AI), loyalty programs can serve the dynamic needs of the market quickly and efficiently. Airlines now have the ability to bring new, more relevant offers to their customers much faster. Technology has provided more visibility to loyalty programs and allowed them to hold a much bigger significance in an airline.
How do you contribute to the digital transformation of your clients and partners?
IBS Software, as an organization, has travel and transportation in our DNA. We live for connecting people and supporting our clients to facilitate travel. We want to make them more successful, and help them address their customers' needs in a better and more personalized manner.
The platform we build is the foundation of those initiatives. We allow our partners to maintain loyalty programs in different forms.We enable customer interaction and help them with managing their most important assets, that is, their customers. We also enable interactions with partners to open new revenue streams. Our objective is to be the engine under the hood of every successful loyalty program out there. In short: we make loyalty work.
How can you contribute to the differentiation of the clients?
The airline space is competitive. Competing successfully means differentiating yourself, in any form possible. It can be based on price, service, or any other factor.
In this sense, loyalty programs are a great differentiator. They go beyond the pure travel experience and help airlines and customers forge long-term relationships. Some loyalty programs extend an experience that reaches the daily lives of customers. Earn and burn programs, for instance, tie retail experiences into the airline experience. We enable our clients to deliver such experiences to their customers. We do that by providing them with an engine where they have controls and abilities to configure an offer for their market needs. We do not constrain them. We provide them with the tools to stitch together a tailor-made offer for their clients. We have done that for many clients across the globe. Regional demands differ. That is why our core platform is configurable and can integrate into client ecosystems that are complex.
This ability to customize is one of the main factors that allow our clients to differentiate themselves from the market.