Point of View

The impact of new technologies on loyalty management in the travel industry


Tech bros are mis-selling blockchain to airlines, and it needs to stop

"The great thing about Blockchain is that it allows loyalty programs to give their customers the ability to spend their points anywhere." If you're like me, you've politely nodded through statements like this, and the enthusiastic explanation that follows.

Blockchain, in this view, makes loyalty points full fungible, allowing customers to spend them anywhere. This increases engagement, which increases the value of the points, which is good for the programme and the brand.

To which my response is... are you sure about that? Because it all sounds a bit unlikely to me. Loyalty programmes thrive on trust. And their future is as, among other things, engines for collecting first-party customer data.

What Blockchain can't do for loyalty

If I put my entire programme on Blockchain, in order to let customers spend their points anywhere, many of them are just going to spend those points with any participating retailer, most of whom I won't have any kind of trusted relationship with.

I can kiss goodbye to a lot of the data I would like to have collected. My programme's value to partners I do want to work with is diminished, because I can no longer offer them exclusivity. And the customers themselves are likely to be those who aren't building up many points.

That's why it's worth them spending their points at a random retailer that's not linked to your airline, and so probably isn't offering any extra incentives to your customers. Because they're not flying often enough to build up more points and redeem something really worthwhile.

But if that's the case, how is this fungibility helping you? Sure, those customers are a bit happier. But they probably weren't coming back soon anyway. And being able to buy a discount coffee won't make them come back quicker or spend more.

We need to calm the Blockchain hype

This is all part of a bigger problem. Or rather, two bigger problems. The first is that airlines are looking for ways to digitise their operations. Everyone knows it, including vendors. A lot of vendors, many with no record of success or expertise in the travel sector, are frantically pitching their wares.

Add to that, the often breathless boosterism certain technologies attract. They are going to revolutionize everything they touch and give every company that adopts them magic rocket boosters. The metaverse, quantum computing, augmented reality — all fall into this category.

And so does Blockchain.

How to get airline tech, including Blockchain, right

The stakes here are huge. According to IDC, airlines worldwide are spending more than US$2 trillion a year — and rising — on digital transformation [1]. The last thing the sector wants, is for a large proportion of that spending to be misdirected into projects that won't deliver.

So, what should airlines do? They should work with technology partners who are dedicated to the sector and have a long history with it. These companies can't simply shrug and walk away to try another sector if they sell airlines false hopes or, even worse, vaporware.

Working with a partner that specialises in aviation technology is the best route to building and testing a realistic use-case hypothesis. Doing this avoids wasting valuable budget. It's also the fastest route to a minimum viable product and from there to a measurable return on investment (ROI).

Looping back to where we started — to airline loyalty programmes — there are some genuinely exciting use cases for Blockchain. For instance, it's very good at giving the user precise control over their data.

Using Blockchain, airline loyalty programmes could create a model that allowed them to compete with Facebook and Google as the user's single sign-on technology. This would open a whole new field of data sharing, commercial partnerships and customer relationship development.

But for this, or other genuinely useful and innovative uses of Blockchain or other innovative technologies (think, for instance, generative AI) to stand a chance of making it to the front line, two things must happen.

Airlines need to partner with the technological and the sector-specific know-how to design, develop, test and optimise for these new use cases. And the available budget and development time has to not have been already blown on use cases that are based on tech-bro wishful thinking.


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