Bond Offers Insights on Customer Engagement and the Future of Airline Loyalty

Bond Brand Loyalty is a customer experience and engagement agency that specializes in building brand loyalty for its clients. Its mission is to make marketing more rewarding for customers, richer and more resilient for brands, and to deliver profitable business outcomes to clients. It builds measurable relationships through loyalty solutions, marketing research, customer experience, analytics, live brand experiences, and proprietary technology platforms.
 
Recently, Loyalty360 spoke with Bond’s Richard Schenker, Senior Loyalty Consulting Director, and Scott Robinson, Vice President of Design and Strategy, to discuss loyalty in the airline industry, customer engagement, and pain points for airline customers.
 
How do you feel customer loyalty is changing today?
 
RS: I think what we’re seeing is that the marketplace is getting very crowded with me-too loyalty programs, and consumer expectations of brands operating loyalty programs are rising. We’re also seeing that consumers are increasingly discerning with their loyalty programs, and they’re certainly looking for an enhanced customer experience. Airlines are pioneers of loyalty programs, but yet, not much has changed in their loyalty sector as it pertains to innovation. Having said that, we’re seeing a number of things that are happening in the marketplace such as changes in load factors and carrier consolidation, and airline brands are now beginning to seek new way to differentiate and enhance their customers’ experiences. 
 
SR: What is changing is the number of programs that consumers are enrolled in. It continues to be very easy for members to join and enroll in programs. What isn’t changing is that consumers maintain their engagement with a few select programs. What is also changing is the expectation among consumers for an improved experience with the brand that goes beyond traditional “do this, get that” loyalty points mechanics. The loyalty program continues to be an important piece in the marketing mix and a way for brands to reach out to and stay engaged with their consumers.
 
Do you think airlines are actually focused on the customer experience or do you think that’s not the case?
 
RS: I would say that they’re starting to wake up to the importance of the customer experience because they recognize that there are a number of limiting factors in terms of how they draw in customer loyalty. We would certainly advocate that customer experience is the key ingredient to engendering customer loyalty. Increasingly, we are seeing examples of what we would call “the new currencies of loyalty” such as conveniences and time-saving mechanics that are being put in place so that consumers can actually realize a better experience with their airlines. Things like self-serve bag drops, food delivery at the gate, biometric self-boarding mechanics… all are in place right now creating better experiences for travelers. 
 
But they do things like making very convoluted and challenging fare structures. Nothing the airlines are doing is truly customer-centric, except for their top 20 percent. 
 
RS: Simplicity is required to secure greater customer engagement, which drives brand loyalty. We all know that these programs are relatively complex; in fact, the most complex of many loyalty programs in the marketplace. Unfortunately, there are only so many levers that the airlines can pull, and they’ve structured these programs in a way to attain certain financial outcomes to the detriment to their larger customer base.
 
SR: The airline loyalty industry has continued to add mechanics and add complexities throughout its tenure. Some programs are revenue models, others are mileage models, some are hybrid models. Increasingly, there are fees for specific elements of a service like extra bags or moving your seat forward in the cabin. There is no shortage of complexity in these programs but one of the things that we know from our study, The Loyalty Report, is that ease of understanding is one of the gateways to engagement. So, when programs are presented in a way that is simple and easy to understand, it breeds engagement, which in turn achieves the outcomes these programs are counting on, which is loyalty to the brand. In other words, choosing that brand first, consolidating travel with one brand, continuing to stay as a customer longer. Simplicity is paramount and airline loyalty programs are starting to wake up to the need for an easier and more simple structure.
 
Brands that do well have an easy-to-understand model, but programs in the airline industry are somewhat arcane. They change every day, every week. Some days you get to check in, they’ll let you check your bags one minute over and the next day they don’t. That inconsistency creates a lot of frustration. Delta is doing a good job of changing things but other airlines are still challenging and hopefully your paper can help address some of that.
 
SR: The airlines’ bread-and-butter customer has been the frequent business traveler, but in addition to retaining this important traveler segment, airlines and their programs are increasingly evolving to be more relevant to leisure travelers. So, we’re seeing things like status transfer and the pooling of loyalty points within a household. All things that are catered to allow the less-frequent leisure traveler to get engaged and stay engaged with a single airline brand.
 
RS: To build on what Scott said, moving downstream to where the critical mass is must become a focal point for airlines. Unfortunately, that less-frequent customer is very promiscuous, as they’re very price-driven. There’s not necessarily a lot of loyalty to the brand. There are a number of things that airlines can do to capture the attention of that specific customer. What we’ve seen in other sectors is the whole notion of pay-to-play loyalty. There are some great examples in other sectors where brands have built commitment to the brand by less loyal customers by introducing paid loyalty mechanics. There are just a few airlines who are doing this today. We think there’s definitely room within the airline industry to start to introduce a paid component that engenders a higher level of commitment to the brand among the masses.
 
Do you think that a paid component would have customer experience pieces in it?
 
RS: The paid value proposition should have a good balance of value and experience elements in order to justify a fee. Paying consumers will want to extract that value back in the way of savings and experience benefits. The paid program can act to serve up  discrete tastes of savings and luxury and therefore act to foster more ongoing commitment from this customer base.
 
 
How does consolidation in the industry impact choice, customer experience, and brand loyalty?
 
SR: Consolidation is no stranger to this industry. Over the last few decades, moves like United and Continental coming together, Delta and Northwest, American and US Airways, Air France and KLM… the list goes on. Consolidation is driving efficiency in the industry, and managing costs or additional costs out of the business are key objectives of these operators. This has had implications on air travel programs. Programs traditionally have counted on having an inventory of available seats for its members for redemption purposes. When consolidation occurs, load factors go up. That’s one of the KPIs in this industry as a measure of efficiency. When load factors go up, the availability of award travel seats go down. The implication of this is some of the things that we’ve already been talking about in terms of the importance of the experience beyond the redemption, such as priority boarding, lounge access, and self-bag-check-in. All of these things relate to the experience that goes beyond the award travel seat itself. Yes, consolidation has certainly impacted air travel loyalty.
 
 
Are there any big challenges airlines should address first?
 
SR: First and foremost, air travel programs need to lean more heavily on the customer experience as a key benefit for program members. The operationalization and scalability of these things are paramount. The way in which air travel programs are migrating from the traditional points-for-purchase models to enable better experiences for the traveler is the important shift that they need to make.
 
RS: Part of the challenge that we see in the industry is that there’s a lot of competing priorities within the business. The airline industry is a complex business. While there is a focus resolving customer pain points, often these get pushed aside because of lack of organizational alignment, lack of human and technical resources, competing priorities, time constraints, or the challenges related to actually fixing these issues. We would generally advocate that organizations appoint a Chief Customer Officers to sit at the strategic organizational table and advocate for the customer in a way that every decision around the organization puts the customer at the center of decisions.
 
How do we address the negative press against airlines, in the context of a discussion about air travel loyalty programs?
 
SR: The most important thing to acknowledge is that airline programs aren’t designing the seat configurations on planes. The economics of the industry are driving those decisions. It is the job of the loyalty program to make the traveler’s experience better despite all of those other potentially negative changes that are happening to legroom, elbowroom, and the number of people that are fitted into a plane. That is not the job of the loyalty program.
 
Would it be a trade-off if you take out a row of seats and people pay $15 more a seat? Is that an option or should the goal be to work around the parameters that they’re dealt?
 
SR: Brands need to work with the parameters and the economics of the industry. Again, the job of the program, inspired and instructed by the Chief Customer Officer, should look to make sure that the right benefits and experiences are infused into the value proposition to make the experience for the best customers the best.
 
What would the foundation be in the airline industry?
 
RS: It would be many of the things that you just talked about in terms of making sure that the experience is right, because the loyalty program is not going to solve for some of the foundational elements of plane configuration and so forth. Those are inherent foundational pieces that have to be properly aligned in order for a program to succeed.
 
 
What’s more important to airlines, customer loyalty or customer experience?
 
SR: That’s a bit of a false question because it is the customer experience that breeds customer engagement that ultimately leads to customer loyalty. By loyalty we mean all the things that we’ve talked about in terms of consolidating travel with one brand, thinking of that brand first for their travel needs, staying longer with that brand. So, they’re both important. One is an approach, the other is the result.
 
Do you think that other industries are more customer-loyalty or customer-experience focused?
 
SR: Customer experience is important in all industry verticals. The consumer expectation, while dining in a restaurant, shopping in a retail establishment, traveling on an air carrier—the experience is very important to the consumer today and an improved customer experience is the gateway to customer loyalty. In fact, in our study, we found that customer experience is two-thirds of the overall customer engagement equation in literally every industry vertical.
 
Should brands be looking to have a larger customer loyalty process that has customer experience in it, or should brands have an overall customer experience process that has a loyalty program component in it?
 
SR: A terrific customer experience is important for all customers. Meanwhile, some customers are more equal than others and are deserving of an enhanced customer experience. One mechanism to deliver this enhanced customer experience effectively is through the loyalty program. So, an enhanced experience, or additional benefits for a brand’s best customers, makes the loyalty program a great conduit to deliver those things.
 
 
Do you think all brands can have an emotionally engaged customer or do you think that some brands, like Travel, have it easier?
 
SR: In all customer interactions, there is a moment, there is an event, there is an experience. It is the job of the brand, or program, to make sure that the customers’ experience is easy, that their experience is effective in meeting their needs, and drives a positive emotional outcome. Because, when the moment achieves those things, that’s what leads to a great customer experience and that’s what ultimately drives loyalty to the brand. So, whether it’s an OTA or an air carrier brand, we’re removing friction, being effective in meeting customer needs, and driving a positive emotional outcome. That’s the objective.
 
The biggest thing we see is brands wanting to partner with other brands. How do the OTAs fit in there?