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AIRLINE CUSTOMER MANAGEMENT

Aerlines

Customer Loyalty in the Airline


Business:
Towards a Blueprint for Valuable, Relevant
and Differentiating Loyalty
Committed customers or captives?
Programs
Customer
Making loyalty
travel programs
loyalty in the more
programs airline valuable,
business have suffered
relevant andas airlines have been hit with
differentiating
multiple challenges over the past few years – bankruptcies, increasing fuel prices, an increa-
sing number of competitors and deteriorating
Why today’s travel loyaltycustomer satisfaction. Assegments
within the key a result,of the industry
the market (see
capabilities
risks further commoditization, need
while to adapt
other industries continueFigure 1) – in contrast
to innovate. Many to the gaming
travel industry,
custo-
More members but less loyalty which historically has been considered an
1.
mers feel trapped, remaining loyal primarily to avoid
In today’s saturated loyalty market, only losing status and
innovation accumulated
leader. Hotels, car rewards
rental compa-
40 percent of memberships are consid- nies, and cruise lines also suffer from a similar
by: Brian Goehring, Anandered
Janardhan 8
and
active. And evaluated best practices
yet, loyalty membership lack ofindifferentiation,
companies across many
although consumer-
some have
facing
Maureen Stancik Boyce is expected to continue growing across all industries. Finally,
begun to the findings
rejuvenate were
their reviewed
programs with
recently.
experts in and outside the travel industry.
industries, perhaps to exceed 100 million per
Introduction In the airline industry, many low-cost carriers
In 2007, airline rewards programsyear, matching
had over the high
250 growth
millionof the
ThelateProblem with Current Loyalty
9 continue to evolve their Programs:
rewards programs, Added
members in the U.S., more than1990s.
any otherAs total program
industry membership
2. Across all Value grows,
and Variance is Lacking
which traditionally have been simpler and less
industries, U.S. reward program themembership in 2007
degree of active reached
member Although loyalty programs are of
participation 10 importance, clearly, today’s
sophisticated. In November 2007, Southwest
1.3 billion – including financial services
is likely (over 238off-setting
to experience million declines
loyalty aslandscape appears saturated, leaving customers
Airlines introduced its “Rapid Rewards A-List,”
members), specialty retail (overcustomers
137 million) findand grocery (over
themselves “spreadoverwhelmed
too thin” to by solicitations and unable to participate fully.
3
124 million) . Every U.S. household belongs which offers preferred boarding privileges
participate fullytoinapproximately
so many programs. However, travel pioneered loyalty programs
11
in the early 1980s,
for top customers.
12 programs. These figures show that loyalty programs are many airlines have allowed them to become commoditized, Business travelers who
important to the airline business; not only
Airline in aprograms,
loyalty financial manner
for example, while
are programs
domi- have proliferated
preferred in other industries
flying mainline and nowof
carriers because
but also in order to create a value network for (the development compete
nated by a follower mentality, leaving carriers for consumer
their mindshare.
loyalty It
programsturns out
now that
have many
a airline
choice to fly
of) new and current services in which customers and business customers stay in with the loyalty
a low-costprogram
carrier inthat
order
has toankeep their
increasingly
struggling to stand out in the crowd. Traditional
partners play a role. Some airlines have discovered recently accumulated rewards (over
similar the years):
rewards 64 percent of travelers
program.
frequent flier programs are similar in look and
that loyalty programs can turn out to be worth more than the is likely to keep their travel provider due to rewards, but only
structure, and
parent company itself. Travel providers may have
wantbecome undifferentiated
to continue 48 percent is satisfied with the value from rewards4. In today’s
assessing such value-creating options as divesting the program saturated loyalty market, only 40 percent of memberships are
to another player or to the public. In this article, we address considered active5.
FIGURE 1.
the following questions: how FigureAirline 1: Airline programs
programs areundifferentiated,
are largely largely undifferentiated, especially
especially when comparing
when comparing those ofthose
legacy ofcarriers.
legacy carriers.
can loyalty programs create
added value for airlines, Legacy/Mainline carriers New entrants/Low-cost carriers
their business partners and
US Airways
Continental
Air Canada

Southwest
Northwest

customers as well as become


American

Frontier

JetBlue
AirTran
Alaska

United

relevant and differentiating?


Spirit
Delta

Example program attribute

In the following sections, Award fees ü ü ü ü ü ü ü ü ü ü ü


results from the 2008 Miles expiration policy ü ü ü ü ü ü ü ü ü ü
IBM Travel Loyalty study Black out dates ü ü ü ü ü ü ü ü ü ü
are presented, as well as Number of partners > 20 ü ü ü ü ü ü ü ü
recommendations based on
Number of tiers >= 3 ü ü ü ü ü ü ü ü
them. To better understand
current industry trends and Coverage >= 200 Destinations ü ü ü ü ü ü ü
their impact, as well as how Gifting/transferring of points ü ü ü ü ü ü ü ü ü ü ü ü
to win in the changing loyalty Online mileage credit requests ü ü ü ü ü ü ü ü ü ü ü ü
landscape, IBM interviewed
Current focus area for low-cost
a dozen executives. We also carriers as they look to penetrate
spoke with travelers and Source: 2008 IBM Travel Industry Loyalty Study. the business travel segment

e-zine edition 44 1
Airline loyalty programs are dominated by a follower mentality, American Customer Satisfaction Index study of over 80,000
leaving carriers struggling to stand out in the crowd. Traditional consumers placed the airline industry as the very worst among
frequent flyer programs are similar in look and structure, and consumer sectors, its lowest level since 200110. In contrast, 80
have become undifferentiated within the key segments of the percent of retail customers are generally satisfied with their
market (see Figure 1). Many primary retailer11. Similarly,
low-cost carriers continue a J.D. Power and Associates
to evolve their rewards report found that airline
programs, which traditionally customer satisfaction had
have been simpler and less reached a three-year low12.
sophisticated6. In November
2007, Southwest Airlines Some might ascribe the root
introduced its “Rapid cause of dissatisfaction to
Rewards A-List,” which be the higher fees imposed
offers preferred boarding to cover fuel costs, but the
privileges for top customers7. research firm noted, “It
Business travelers who was surprising to learn that
preferred flying mainline customers are less concerned
carriers because of their about paying higher fees
loyalty programs now have than about what they see as
a choice to fly with a low- a decline in the quality of
cost carrier that has an customer service.”13 Many
increasingly similar rewards travel companies myopically
program. equate customer loyalty with
their rewards program, thus
Loyalty program spin-offs neglecting other important
are one potential path to drivers of customer loyalty
unlocking value. Exploring and advocacy. For example,
the underlying economic travelers expect, but often
value of loyalty programs, do not receive, a seamless
United is reported to have travel experience. How well
earned approximately providers are able to meet
US$800 million from selling that expectation – during
miles to partners in 2007, and critical customer touch points
American’s revenues from or “moments of truth” – can
selling miles are estimated either engender or hinder
at somewhere between US$1 customer loyalty. Instead,
billion and US$2 billion8. Yet, many customer loyalty
despite the potential financial initiatives focus on traditional
value derived from selling marketing objectives, like
points and miles to partners, travel providers need to realize this expanding membership or driving additional promotions. This
approach would entail a strategy that places a significant amount has resulted in a customer base often overwhelmed by program
of emphasis on their ability to extract value from customers – by memberships and promotions, remaining with preferred
leveraging relationships with other partners – relative to their providers mainly because they are averse to losing status and
ability to deliver value through their loyalty program. accumulated miles, not because they are true advocates.

Trends: Challenges for and Impacts on Loyalty Programs Second, competition is intensifying. While travel providers are
Travel providers need to improve their customer loyalty struggling to differentiate their customer experience and their
programs before they can hope to gain more customer advocates rewards programs, new entrants and programs in other industries
and ultimately, higher financial returns. To achieve these goals, are intensifying the competition for consumer mindshare. In
the challenges and impacts of four widespread trends must be general, rewards redemption in the airline industry has lost some
considered: appeal as capacity decreases, fares rise, carriers charge new fees
changing consumer expectations; and customer satisfaction deteriorates14.15 The value of rewards
intensifying competition; programs becomes less meaningful when customers earn
increasing consolidation; more miles, but encounter fewer options for redeeming them.
emerging technologies. Moreover, some airlines have begun to impose stricter expiration
policies, and redemption costs that maintain optimum flexibility
First, consumer expectations are changing. Travel providers, have increased from 25,000 to 40,000 or 50,000 miles for a
once leaders in customer loyalty, have failed to match the recent domestic coach class award ticket on many U.S. airlines – which
innovation found in the rewards programs of other industries. has resulted in a devaluation of frequent-flier miles16. With the
The travel industry lags all other industries in customer U.S.-EU “Open Skies” and other agreements slowly deregulating
satisfaction with loyalty program value (48 percent), compared the global market, European, Asian and Near Eastern carriers
to retail customers (54 percent) and financial services customers – typically with a far superior passenger experience – should
(51 percent)9. Recent reports reinforce the dismal state of affairs, compete even more aggressively for the international routes
especially for airlines. The University of Michigan’s 2008 that remain among U.S. carriers’ few sources of profitability17.

2
Figure 2: Despite growth in key channels, many airlines operate multiple, disconnected systems bankruptcies, alliance defections
FIGURE 3.
across their
Despite enterprise.
growth in key channels, many airlines operate multiple, disconnected systems across their enterprise. and mergers, including the
Customer touch points
announced tie-up between Delta
and Northwest, which will affect
Kiosk Web Web Call center Kiosk Agent millions of loyalty program
Enterprise-level channel management systems Airport-level systems members20. Despite the potential
magnitude of the associated
Check-in E-commerce Kiosk applications Agent applications challenges, industry consolidation
provides opportunities to re-
Check-in Marketing/offers Check-in Check-in
evaluate member accruals and
Flight change Product/content Flight change Flight change
awards. A combined loyalty
program faces the need to
Check-in IRROPS rationalize its partnership portfolio
and address potentially conflicting
Flight change or redundant existing partnerships.
Mergers could be a catalyst to
Campaigns improving program features and
Corporate systems will require more sophisticated
Departure control Finance and integration capabilities than many
Reservations systems Fares Customer loyalty accounting providers currently have. As a
Source: “Aviation 2010: Achieving efficiency and differentiation in turbulent times,” IBM Institute for Business Value, 2006. result, the integration of different
cultures, processes and systems
Airlines continue to employ “umbrella structure” alliances – can be very challenging, with substantial risk to the customer
such as Star,
Industry Oneworld and
consolidation SkyTeam, incorporatingmany
is increasing an extensive experience
providers currently have. that
As providers
a result, considering mergers and acquisitions
Inglobal networkenvironment,
a distressed of partners to broaden
2008 has been their appeal the to customers.
integration of must address
different carefully.
cultures, The effects on the rewards themselves
processes
Similarly,
rife with rumors mostofindividual
airline industry carriers
bank- maintain a setand of “satellite”
systems can must be very also be considered.
challenging, with Most merger scenarios will likely
providers
ruptcies, to capture
alliance defectionsvalue andfrom
mergers,the full travelsubstantial experience: risk toresult in capacity
the customer reductions, which would likely reduce the
experience
air, hotel, car and credit card.
including the announced tie-up between Delta For example, the top five major total number
that providers considering mergers and acqui- of available award and upgrade seats. However,
carriers each have at least five
and Northwest, which will affect millions of airline partners, at least one credit the
sitions must address carefully. benefit of redeeming a common currency on an expanded
card partner, ten or more 24
loyalty program members. Despite the poten- hotel partners, multiple car rental network with a common set of partners may offset the reduced
partners, and dozens of retail
tial magnitude of the associated challenges, and restaurant partners
The for
effects their
on the value
rewardsfrom capacity
themselves “right-sizing”
must in the eyes of some travelers.
rewards programs 18. Although such features can expand also be reward
considered. If a merger
Most merger occurs between
scenarios carriers of two different alliances,
industry consolidation provides opportunities
breadth, varying “exchange
to re-evaluate member accruals and awards. rates” between programswill can
likely add
result in the challenges
capacity become
reductions, even
which greater.
Atocombined
consumerloyalty confusion.
program Moreover,
faces thewhen need transferring would points
likely orreduce the total number of avail-
miles across partners, integration
to rationalize its partnership portfolio and challenges can lead
able to delays
award and Towards
upgrade seats. a However,
Blueprintthe for Valuable, Relevant and
and disruptions, which often
address potentially conflicting or redundant disappoint rather than
benefit enhance
of redeeming Differentiating
a common Loyalty
currency onPrograms
customers’ expectations
existing partnerships.
of a seamless experience. Broken
an expandedbrand Travel
network withproviders
a common will
set need to evaluate their organizations
of
promises may be accelerating customers’ dissatisfaction partners may withoffset on the
several
reduced dimensions
value frombefore they can enhance their loyalty
loyalty could
Mergers programs: accelerated
be a catalyst security lines that capacity
to improving do not move programs
“right-sizing” in thein ways
eyes of that
some pay off for customers and travel providers
faster, pre-boarding commitments
program features and will require more that are set aside travelers. If a merger occurs between carriers actions can help travel providers
during quick alike. Each of the following
airplane turnarounds, room
sophisticated integration capabilities than gifts that do not arrive ofandtwocar class alliances,
different embark the on improving
challengesboth the financial return on their customer
upgrades that are not available. Better execution inbecome the financial loyalty
even greater. programs and the customer experience21.
services industry may be a key part of what drives greater
customer satisfaction with those programs, while the travel First of all, look “beyond miles”: broaden the definition of
industry suffers from a changeable set of marketing promises customer loyalty. Travel providers need to emphasize customer
that can be discounted or discarded when front-line employees loyalty more broadly across the enterprise through a strategy that
interact with the customer. Inter-industry competition is heating extends beyond reward programs. The definition of loyalty should
up as non-travel companies now offer similar rewards with include a holistic view of the end-to-end customer experience
greater ease of use. American Express, for example, introduced – especially those critical “moments of truth” opportunities to
“Pay With Points,” allowing members to redeem Membership delight travelers or recover from service failures. It should also
Rewards points for any airline flight on its travel site, simplifying include the role played by front-line employees, customer-facing
redemption and avoiding airline reward restrictions19. technology, tailored processes, customer rewards, employee
7 Committed customers or captives?
incentives and a supporting information engine. Companies that
Furthermore, new technologies are emerging. The customer excel at doing this need clear C-level sponsorship (commitment
experience across key touch points typically lacks consistency on board or executive level) and management attention. For
since many travel providers’ operational processes still rely on example, United and JetBlue in 2008 appointed new chief
multiple, disconnected systems throughout the enterprise (see executives in charge of the Customer Experience.
Figure 2). Moreover, fragmented organizational responsibility
for resources, metrics and investments that impact the customer Second, choose a strategic position: articulate the role of
experience (for example, across marketing, operations, finance, customer loyalty. Depending on the perceptions and goals
IT and, of course, customer service) further inhibits a cohesive associated with its loyalty program, each travel provider will
direction for improving consistency. need to select a strategic position, or a program type (see Figure
Fourth, industry consolidation is increasing. In a distressed 3). The degrees of program scale (largely defined by the number
environment, 2008 has been rife with rumors of airline industry of partners) and operational intimacy (primarily how directly

3
FIGURE 4.
Figure 3: Customer
Customer loyalty programs:
loyalty programs: Key strategic
Key strategic positions
positions. comprehensive rewards
platform integrates many
Comprehensive rewards platform: providers, typically within a
Company is in the loyalty/rewards business “Loyalty is a cash engine” given country or region, to
simplify rewards management
Partner coalition: for consumers overwhelmed
Program scale “Loyalty is a breakeven/cash
Company is primarily focused on driving loyalty by membership in multiple
to the (travel) experience around the product flow positive proposition”
programs (for example,
Product focused: Nectar in the UK, Aeroplan
Company is primarily focused on driving loyalty “Loyalty is a cost center” in Canada and AsiaMiles in
to the product Asia). This type of program
ion
n o vat ent involves multiple partners
In stm
e Operational intimacy
inv across industries and product
types with a primary goal
Source: 2008 IBM Travel Industry Loyalty Study.
of optimizing the value of
connected the program is to the company’s product or service) customer rewards. This set of providers seeks revenue from
are the two main dimensions to be considered regarding partners and value through higher customer satisfaction with
this particular choice. The level of investment in innovation the rewards experience. The “network effect” of growth
– is closely linked to the level of differentiation a company across industries can create greater customer demand and
seeks through its loyalty program, including how to sustain therefore pricing power. The capabilities associated with a
that differentiation relative to traditional and non-traditional comprehensive rewards program include a highly scalable
competitors over time. and sophisticated platform, partner acquisition, integration
and relationship management, highly innovative new product
The abovementioned figure points out that three types of development and robust analytics to drive deep consumer
programs (so three strategic positions) can be distinguished. A insights. Figure 5 provides additional detail about each of these
product-focused program is typically tailored to one provider, program types.
with the aim of building a deep connection with the customer
9 with the customers
Committed greatest product-
or captives? or service-specific customization The third part of our blueprint, is committing to investments:
possible. The main intent is to optimize the value of the target the right level of investment in innovation. For any of these
service or product, for example, through customized amenity three program types, there are also decisions to be made about
preferences. The partner coalition type connects the loyalty the level of investment, with three primary options of (i) basic
programs of multiple providers across a logically connected investments, (ii) fast following and (iii) innovation incubating.
customer experience, such as travel. Therefore, this type of The basic investment is a minimal level of commitment aims
loyalty program engages multiple strategic partners focused to meet basic traveler expectations at the lowest possible cost
on a common customer experience. The primary intent is to to free up cash flow to invest in other more differentiating
FIGURE 5.
optimize the value Figure 4: Each program type requires distinct processes, metrics, organizations and systems.
Each program type requires distinct processes, metrics, organizations and systems.
of the total end-
to-end experience, Product focused Partner coalition Comprehensive rewards platform
enabling customers
to consolidate Strategy • Product focused • Build strategic relationships with a • Build strategic relationships with
• Be the very best in wide variety of partners within the multiple partners in multiple
awards from a single a given niche travel industry industries
travel experience by • Loyalty initiatives • Loyalty initiatives focused on • Loyalty initiatives focused on
“bundling” partners focused on company and partners company and partners
from each stage: for company • Growth by vertical integration • Growth by horizontal integration
example, air, hotel, • Organic growth
car and credit card. Process • Flexible and • Processes must be consistent • Processes must be consistent
In addition, many consistent to internally and within partnership internally and across platform
mature programs have accommodate • Processes with partnership institu- • Processes with partnership institu-
various customer tions must be monitored to ensure tions must be rigorously monitored
continued to expand
needs that promises are kept to ensure that promises are kept
their programs to
include partners that Organizations • Driven by customer • Ability to track ROI from partner- • Ability to track ROI across platform,
reward travelers focused and opera- ships, in addition to customer and in addition to customer and
tionally focused operations operations
with points or miles metrics • Structured around maximizing • Structured around maximizing
for buying non- • Structured around customer experience from travel customer rewards
travel products such maximizing experience • Culture supports innovative ideas
as flower delivery, customer from internal as well as external
mortgages and dining. experience from sources
product

Finally, the Systems • Highly integrated • High level of integration within • Expanded integration to cover
comprehensive systems within organization as well as with partner partners from other industries
organization systems • Data definitions and KPIs
rewards platform.
• Data definitions and Key standardized across platform
This type is arguably Performance Indices (KPIs)
the newest program standardized across all partners
in the market, a
Source: 2008 IBM Travel Industry Loyalty Study.

Product-focused Providers opting for this program type seek a 4


plan.

FIGURE 7.
parts of the business, FigureSetting5:aSetting
visionafor vision
theirforloyalty
their loyalty programs,
programs, successful
successful ravel
travel providerswill
providers will enter
enter the
thetransformation
transformationpath-
pathway
including the core way at different points and follow an overlapping sequence
at different points and follow an overlapping sequence of steps. of steps.
product or experience.
Operational possibilities Improve continuously with
Sustaining leadership
to execute this level of predictive analytical insight
investment is eliminating Providers may enter this

Cumulative value generated


transformation pathway Deepen customer loyalty Increasing customer trust
(sophisticated) rewards
at different points with
programs, outsourcing varying capabilities and
a program or keeping a Attain a more unified view Integrate silos
overall vision of the customer
simple in-house program
with minimal features. Rationalize capabilities
Build capabilities
“Fast Follower” is and cost
a moderate level of
Achieve strategic clarity
investment that intended and alignment
Rigorous alignment
to achieve competitive
parity and limit risk – Today Time 2015
with a primary focus on Source: 2008 IBM Travel Industry Loyalty Study.
quickly imitating the
successful program features of more leading-edge competitors. In addition, the focus should be on “continuous unification,” as
To accomplish this objective, Fast Followers will need to monitor opposed to the daunting challenge of creating a truly single view
competitive programs and invest in a flexible loyalty platform of the customer.
that allows them to make desired changes in their own programs
at a rapid pace. Finally, innovation incubating investments. This Step 4 – Deepen customer loyalty
high level of commitment is geared toward achieving sustainable Creating a culture of customer respect and recognition is vital.
differentiation through the loyalty program by introducing Several important aspects of accomplishing this goal include:
compelling program features that exist nowhere else in the using information about each customer to make customers and
industry or even other parts of the rewards market. To build this the company more valuable to each other, while decreasing
competitive advantage over time, Innovation Incubators should servicing costs; earning customer trust enterprise-wide by
consider to cultivate and launch innovative program features empowering every employee to act in customers’ best interests
rapidly by testing and piloting multiple innovations with and applying more resources to more valuable customers. It
customers to determine
14 IBM what is most
Global compelling
Business and valuable. also includes recognizing a customer through any channel, at
Services
Furthermore, they could chart a balanced investment strategy that any time; offering a compelling and consistent experience that
focuses appropriately on both the technology platform and other aims to deliver on marketing promises and recover from service
innovation-related capabilities. Also, integrated promotions with failures rapidly; creating innovative ways to listen to, interact
product by leveraging customer data mining, consumer surveys with and respond to customers; and treating different customers
and consumer input when developing critical enhancements to differently.
the customer experience fit this high level of commitment.
Step 5 – Improve continuously with predictive analytical insight
Our last recommendation, as part of the blueprint, is to strive Reaching the ultimate goal of predictive loyalty starts with
to continuously improvements. Five key steps are critical to input from three main sources: customer data from business
progress along a continuum that can improve real customer interactions and touch points, operational data from within the
loyalty. In practice, they should be viewed as iterative and not enterprise and external partners, and competitive data from the
rigidly sequential (see Figur5). broader marketplace.

Step 1 – Achieve strategic clarity and alignment Using these inputs, advanced analytics can help identify which
Before anything else, travel providers will need to evaluate cross-sell and up-sell offers are relevant and effective for
strategic positions and options collaboratively across functions individual customers, as well as assessing the operational impact
and help ensure executive-level alignment. Implementing the of promotional campaigns and identifying market trends and
strategy then hinges on developing a roadmap and timing, as competitive actions - using methods that are more automated
well as creating and enacting a risk management plan. and sophisticated than are typical today. As a result, customer
insight is honed by analyzing changes in customer behavior over
Step 2 – Build capabilities time - including when and how the competition appears to be
Central to this step is “operationalizing” the new or enhanced more attractive to customers. The final step ultimately results
loyalty strategy into the business. This task encompasses in predictive loyalty, which enables the evaluation of multiple
defining the desired customer experience, identifying the scenarios and helps predict changes in customer behavior with
supporting business capabilities and requirements, integrating advanced algorithms.
common services across applications and functional areas —
for example, via a Service-Oriented Architecture (SOA) - and Conclusion
designing, piloting, testing and deploying the new capabilities. In this article, we addressed the question: how can loyalty
programs create added value for airlines, their business partners
Step 3 – Attain a more unified view of the customer and customers as well as become relevant and differentiating?
The systems that support the customer experience need to work We conclude that the answers lie in executing strategies that
together to share information across channels and business combine a superior customer experience, an innovative rewards
processes. Travel providers will need to integrate applications program that reinforces that experience, and a supporting
and information silos where it drives the most business value. information engine that enables greater personalization.

5
Aerlines
The ultimate goal of any customer experience initiative should Times. April 1, 2008.
be to engender greater customer loyalty, even advocacy – 9 Ferguson, Rick and Kelly Hlavinka. “The Difference Engine:
defined as “consumers who recommend their primary provider A Comparison of Loyalty Marketing Perceptions Among Specific
to others, buy from their primary provider when they have U.S. Consumer Segments.” COLLOQUYtalk. August 2007. Note:
choices and stay with their primary provider even when a Percentages represent how many general population respondents
competitor has equivalent offerings”22. Using the blueprint reported a top 3 rating on a 1 to 10 scale (indicating relative agreement)
we described, airlines should be able to create more valuable, for satisfaction with the value from rewards within each industry.
relevant and differentiating loyalty programs. 10 University of Michigan report cited by Johnsson, Julie. “Airline
industry the worst in customer ratings.” Chicago Tribune. May 20,
About the Authors 2008. http://www.chicagotribune.com/ travel/chi-airline-consumer-
Brian Goehring is an Associate Partner with the Strategy & Change satisfaction- story,0,73026.story
practice in IBM Global Business Services. He has over 10 years 11 Badgett, Melody, Maureen Stancik Boyce, Laura VanTine and
of experience in business strategy consulting in travel and other Yolanda Wang. “Why Advocacy Matters to Retailers: Insights from
industries. Anand Janardhan is a Managing Consultant with IBM five retail segments.” IBM Institute for Business Value. January 2008.
Global Business Services. He has over 15 years of experience in the 12 J.D. Power and Associates report cited by Keeton, Ann. “Airline
Distribution Sector, five of those years in business strategy consulting Satisfaction at 3-Year Low.” The Wall Street Journal. June 18, 2008.
for Fortune 500 corporations. His primary focus area within the 13 Ibid.
Distribution Sector is Travel and Transportation. Maureen Stancik 14 Prada, Paolo. “Higher Fares, Fees Help Stem Airline Losses.” The
Boyce, PhD, is an Associate Partner and the Distribution Sector Team Wall Street Journal. July 17, 2008.
Leader for the IBM Institute for Business Value. She has 14 years’ 15 Keeton, Ann. “Airline Satisfaction at 3-YearLow.” The Wall Street
experience in business strategy in retail, consumer goods, travel and Journal. June 18, 2008.
transport and other consumer-related industries. 16 Analysis for 2008 IBM Travel Industry Loyalty Study; airline
company Web sites.
This article is based on a publication of the IBM Institute for Business 17 For more information about the “Open Skies” agreement, see
Value: Goehring, B., Janardhan, A. and M. Stancik (2008). Committed Associated Press. “‘Open Skies’ pact signed; allows more U.S.-
customers or captives? Making travel loyalty programs more valuable, Europe flights.” USA Today. April 30, 2007. http://www. usatoday.
relevant and differentiating. com/travel/flights/2007-04-30-open- skies-signed_N.htm
18 Analysis for 2008 IBM Travel Industry Loyalty Study; airline
Endnotes company Web sites.
1 Ferguson, Rick and Kelly Hlavinka. “The Difference Engine: A 19 Andretta, Ralph. “The Right Stuff — How marketing innovation
Comparison of Loyalty Marketing Perceptions Among Specific U.S. and business acumen drives loyalty-marketing success.” Colloquy.
Consumer Segments.” COLLOQUYtalk. August 2007. Volume 15, Issue 3. Fall 2007.
2 Ferguson, Rick and Kelly Hlavinka. “Quo Vadis: Sizing Up the U.S. 20 Grantham, Russell and Jim Tharpe. “Northwest Merger Agreement
Loyalty Marketing Industry.” COLLOQUYtalk. April 2007. Keeps Delta in Atlanta.” The At/anta-Journa/ Constitution. April 14,
3 Ibid. 2008.
4 Ibid. 21 United Airlines press release. Reuters. May 8, 2008. http://
5 Ferguson, Rick and Kelly Hlavinka. “Quo Vadis: Sizing Up the U.S. www.reuters.com/ article/pressRelease/idUS152520+08- May-
Loyalty Marketing Industry.” COLLOQUYtalk. April 2007. 2008+PRN20080508; JetBlue press release. May 1, 2008. http://
6 “Low-cost Carriers Add Lounges, Leather Seats To Woo High investor.jetblue. com/phoenix.zhtml?c=131045&p=irol- newsA
Fliers,” Lagorce, Aude. Fox News. September 25, 2007. http://www. rticle&ID=1138586&highlight=26 “Q&A with Tom O’Toole.”
foxnews.com/story/0,2933,297960,00.html MarketingNVP.com.
7 “Rapid Rewards A-List Membership.” Southwest Airlines press 22 Heffernan, Robert and Steve LaValle. “Advocacy in the Customer
release. November 8, 2007. Focused Enterprise: The next generation of CRM done right.” IBM
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