Loyalty programs need to stay relevant. When people aren’t traveling, they aren’t engaging with the brand. Expect co-brand credit card applications to fall. There will be fewer new customers, and perhaps even more people than usual will cancel cards when annual fees come do. Both the number of active members of a program will drop and the size of the credit card portfolio will decline as well. The volume of card spend is likely to fall in recession.
Yet loyalty programs are key to a travel brand’s resurgence. Airlines have largely neglected the basic block and tackle strategies they used to employ to fill empty seats by incentivizing program members to travel, since there haven’t been many empty seats. Times have been good they’ve used the opportunity to devalue the programs, to reduce marketing spend. Now they’re going to need to ramp that up. But to do that successfully they need to have engaged members. That’s tough to do when customers aren’t interacting with the brand, or keeping the brand top of wallet.
There are several things that loyalty programs should be doing now to keep members engaged and keep them thinking about the future of travel and earning in the program.
- Make it easy to stay engaged and earn small amounts of miles free on the ground. Miles aren’t free to a program and with large numbers of members even small mileage awards can be costly. However there’s a long history of giving out miles for engagement, and right now there’s a real risk of losing member engagement, what if it doesn’t come back? It makes sense to spend money to keep members on the treadmill. (I wrote this post before S7 Airlines came up with the idea independently.)
Since members can’t travel, why not reward them for that? Give out miles for social distancing, based on the personal level (GPS data, staying away from congested areas) and city-level data, rewarding people for being part of a community that reduces total travel. Speaking of staying on the treadmill, give points for exercise. Give points in exchange for member stories during this crisis, and for stories about where people want to travel when they’re able to again – keep them dreaming about and talking about and planning travel.
- Bonuses, bonuses, bonuses with earning partners. Less flying and lower credit card spend mean fewer miles earned. That also means less revenue for the program. Keep members engaged and bring in program revenue by running bonus promotions with non-travel partners, with the program funding the bonus. That’s good for partners, generates partner revenue, and gives members a reason to engage. Even better, gamify the promotions – something along the lines of the old US Airways Grand Slam would be ideal, with bonuses based on the number of partner transactions – to send members on a quest for greater levels of program interaction.
- Sell miles cheaply. Sacrifice margin for immediate cash, and give members the ability to travel easily once travel resumes. There’ll be plenty of seats to use miles for when travel resumes. Even under new U.S. accounting rules miles for flying (ASC 606) are booked only at a penny apiece, assuming that covers the true cost of future travel redemptions, any amount over that is still profit – and the miles won’t be redeemed immediately. Usually the biggest risk of cheap mileage sales is immediate redemption for the most expensive awards, but that’s mostly not an option for consumers now. Generate cash flow and dreams.
- Give members something to look forward to. Planes are going to be pretty empty as travel ramps back up. Work it out with revenue management to get more saver award space. Commit to lower award pricing for a period of time, or to specific aspirational awards at a discount. With parked planes, too many employees, and cheap oil charter an airline’s planes to run redemption-only flights and make them celebratory party flights.
- Reassure elites and encourage future travel. Programs haven’t wanted to say what they’re doing about status, because just extending status won’t give customers a reason to spend money later in the year (and might even make it easier to travel with the competition). Double status promotions on the other hand help goose stays and flights. So who other than Hilton wants to just extend status across the board if they don’t have to? But messages that ‘we know we need to address this’ don’t go far enough.
It’s possible though to do both, give everyone comfort they keep their status and incentivize members with the best, easiest change ever to earn high levels of status (double qualifying miles and dollars or even waiving qualifying dollars requirements) along with bonus miles or earning redemption discounts.
- Airlines should announce middle seat blocking as a new elite benefit to give their best customers comfort when they return.
Loyalty programs shouldn’t be complacent. Just because people can’t travel doesn’t mean members can’t be engaged. The marketing engine of a travel program should be marketing future travel, it should continue generating revenue for their brand, and most importantly it should be maintaining the health of its member file so that it remains an effective platform to help grow the business as soon as people are getting back on the road.
If none of that appeals to a given loyalty team think about it this way: you need to ‘do something’ now, look busy, and convince your bosses you have a role to play in the down times in order to avoid furloughs or payroll reduction. This is one time where employee, company, and member incentives are al aligned.