“The data is there; it’s about making it actionable.” – Mark Ross-Smith
Have you ever wondered how you could help airlines extract more value from their loyalty programs? Or questioned how they rake in billions from frequent flyer miles? In our recent conversation with Mark Ross-Smith, CEO and co-founder of Loyalty Data Co and StatusMatch.com, he shares an insider look into the airline industry.
Airline loyalty programs, which allow travelers to earn points, miles, and elite status benefits for flying, have become integral profit centers. These programs incentivize customers to consolidate their travel and spending with one preferred airline. As a result, they create significant value for airlines, especially from high-tier elite flyers and co-branded credit card partnerships.
The following sections of this article are key lessons learned from our conversation with Mark-Ross.
Understanding the Status Quo
Loyalty programs anchor the airline industry. But have you ever noticed that these programs haven’t evolved much in the last 20 years?
Let’s explore why.
The Loyalty Formula
Airlines cling to a formula with loyalty programs that works for them. The top 5% of frequent flyers contribute an astonishing 30% to 40% of airline revenue. These profits come from methods that focus on making customers loyal to one airline.
While other industries innovate with personalization techniques, Mark explains that “airlines are just scraping the surface of personalization.”
They stick to offering basic rewards, like points and miles. Effective? Yes. Groundbreaking? Not quite. The potential for growth and deeper connections with travelers awaits those willing to innovate.
Innovation Opportunities in Airline Loyalty Programs
In an industry where loyalty programs have remained largely unchanged for decades, the call for innovation is growing louder. But what does innovation look like in the context of airline loyalty programs, and how can airlines tap into new opportunities? Mark Ross-Smith, offers some insights.
Embracing Data and Technology
In a world where data drives decisions, airlines have a treasure trove of information at their fingertips.
The potential for growth and deeper connections with travelers awaits those willing to innovate.
Airlines can use data analytics better to understand customer behavior, preferences, and needs. By tailoring offers and experiences, they can create more meaningful connections with travelers.
Breaking the Mold with New Partnerships
Mark’s own company, Loyalty Data Co., showcases how innovative partnerships can redefine the loyalty landscape. Collaborating with different airlines, they offer status matching, allowing travelers to enjoy benefits across multiple carriers:
“You’re a Delta Platinum member… Here’s the gold status of Spirit. The chances of you flying Spirit are off the charts at that point,” he said. “Cross-airline collaboration is the future. We’re bridging the gap.”
This approach not only incentivizes travelers but also fosters collaboration and flexibility within the industry.
Expanding Beyond Traditional Incentives
While points and miles remain the cornerstone of loyalty programs, there’s room for creativity. Airlines can explore unique rewards, exclusive experiences, and personalized offerings that resonate with modern travelers. The goal is to move beyond transactional relationships and cultivate genuine loyalty.
A Vision for the Future
Mark’s insights into the airline loyalty industry paint a picture of untapped potential. While the foundations remain strong, there’s an exciting frontier of innovation waiting to be explored:
“Airlines still use personalization at the most basic level, but innovation is overall stagnant. We’re trying our darndest to change the game in the loyalty industry.”
The innovations in airline loyalty programs are more than mere concepts; they’re practical strategies that can drive growth, enhance customer satisfaction, and set the stage for a new era of loyalty.
While there are innovative ways to engage and reward customers, airlines also face challenges in implementing new strategies. Let’s take a closer look at the challenges and opportunities that lie ahead.
- Resistant to change is causing stagnation. Innovation in the industry faces several hurdles. “Resistance to change is the biggest hurdle,” notes Mark. Traditional methods continue to dominate, hindering progress.
- Airlines are risk-averse and slow to adopt and integrate new technologies. This type of work is a complex process. And the challenge may slow down the implementation of data-driven strategies and personalized experiences.
- Airlines are data rich: Airlines have access to valuable data that can be used to tailor experiences and offers. Leveraging this data can create meaningful connections with travelers and enhance loyalty.
- Thinking outside the miles box is the best path forward: Beyond points and miles, there’s an opportunity to offer unique rewards and exclusive experiences, especially ones that money can’t buy. These personalized incentives can foster genuine loyalty and set an airline apart from the competition.
Ready to Innovate in Your Company with Data?
Whether it’s personalizing customer experiences, exploring new partnerships, or crafting unique rewards, data-driven insights are key to innovation.
Pragmatic Institute’s Data Science for Business Leaders course is designed to empower you to harness the power of data.
You’ll learn how to:
- Collaborate Effectively with Data Professionals. Build strong partnerships to translate insights into winning strategies.
- Develop a Data-Driven Culture. Foster a mindset that leverages data to make informed decisions.
- Apply Data to Real-World Challenges. Gain practical skills to navigate the complexities of data analytics in the fast-paced world of airline loyalty.