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IAG Loyalty and the Avios story

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By: Bill Hanifin, CLMP™ |

Posted on June 13, 2023

How consumers view loyalty programs during times of economic uncertainty

The Avios story began about 30 years ago, and its roots go back to AirMiles. In 2011, the Avios currency was launched after a roll up of BA Miles, UK Airmiles and Iberia Plus Points. Avios is the global loyalty currency of the British Airways Executive Club, Qatar Airways Privilege Club, Iberia Plus, Aer Lingus AerClub and Vueling Club.

Today, there are over 40 million collectors worldwide, with thousands becoming “Avios Millionaires”. The program not only rewards members but stimulates a collective desire to “do good” with many coming together to donate points to charity. In one award winning campaign, over 95 million Avios were donated to NHS charities to provide support and relief to healthcare workers during the Covid crisis.

If you haven’t checked in on Avios lately, then you may not know that this is a loyalty currency that can be earned not just through travel but also through everyday purchases. IAG Loyalty has added partners that include American Express, Uber, Nectar, and Barclays to encourage everyday spending  and Avios collection.

During late 2022, IAG Loyalty conducted a UK consumer study into loyalty behaviors to better understand the way members were interacting with and using loyalty programmes during a time of economic uncertainty and with costs of living on the rise. This research was released in Q1 2023.

The research revealed the importance of loyalty programmes to both brands and consumers during the economic downturn with 92 percent of consumers using them to make their money stretch further and allegiance to brands with existing loyalty programmes increasing for 1 in 5 people. IAG Loyalty’s  research also found that more than 50 percent said they’re actively looking for new ways to collect points and maximize the return when they spend money.

The Wise Marketer interviewed Rob McDonald, IAG Loyalty CCO to discuss the findings of the consumer study and to unpack the pioneering approach IAG Loyalty is taking to the loyalty industry.

In the three years since he took on the role, Rob has delivered ambitious strategies for growth, increasing the member base to over 40 million and building new partnerships with market-leading brands like Nectar, Barclays, and Uber. His relentless focus on the customer has resulted in significant growth in the collection and redemption of the Avios currency year-on-year—members now spend more than £40bn each year when collecting Avios. Before joining IAGL, Rob held senior positions at British Airways, Hilton, and Sainsbury’s.

The Wise Marketer Executive Interview – Rob McDonald, IAG Loyalty CCO

Wise Marketer (WM): Good morning Rob, can you tell us what motivated this research to be commissioned?

Rob McDonald (RM): There were two principal drivers for the research. First, we had experienced a solid eighteen months of significant growth, the result of a conscious plan to expand the ways people could earn points. We expanded the number of credit card options that offered Avios and created new partnerships with Sainsbury’s, Argos, eBay, and BP. In our eStore, we added hundreds of new brands and we saw an increase in the number of members becoming everyday collectors of Avios currency.

At the same time, we witnessed behavior change among members related to the macro-economic trends in the market. With the threat of recession on the horizon, people were tightening their belts and becoming more cautious in their spending. We wanted to check in to understand more about these patterns.

WM: And what did you find at the top level?

RM: We found that many members were maturing in their understanding of how to gain the greatest value from the program in their lives. Research showed that members identified that a small behavioral change allowed them to earn rewards faster and for the first-time members were placing a high value on Avios as a savings vehicle. Some wanted to save money to help with their budget, while others sought out savings on specific items.  

WM: What else did you see?

RM: We are concluding that we are entering into a “Golden Age” of Loyalty programs as brands are using loyalty programs more powerfully than ever before. As you know, many brands have similar propositions, have built excellent digital journeys, and share lots of similarities. Consider that many are also competing on price, and you can see the need for a final push to differentiate. These brands are concluding that Loyalty can be very persuasive to make people turn right or left to patronize a particular brand.

WM: What was the impact of this shift to everyday collection?

RM: We saw a trajectory of adoption for multiple aspects of the business that we had never seen before. For example, we had well over 100K users who engaged with our Uber partnership in the first few weeks. Our online shopping portal went bonkers.  Barclay and Amex are our two principal cobrand issuers and we experienced record credit card acquisition during 2020 – 2022. We have a card linking program that has grown over 60 percent in the past year and a Mastercard prepaid card that is quite popular. Collinson has helped us manage parts of the card linking programs, managing merchant relationships, and providing other services.

WM: Have you made any changes to the Avios program recently?

RM: At the end of 2022, we introduced a big change to expand our Reward Flight Saver (short haul) product, as we expanded it to include to all long-haul routes for UK and US members for a flat fee plus Avios.

As an example, for the short haul offer, members can redeem a seat from the UK to Europe for 18,500 Avios plus £1. Previously the redemption was composed of Avios plus taxes and other fees, so we simplified the offer greatly. We also doubled the guaranteed number of Reward Seats on all flights and launched our first Avios-Only flights, where every seat on select flights so it could only be booked with Avios. All of this was very popular with younger consumers, and we saw huge engagement from that profile of member.

WM: Can you share some of the findings from the consumer study that stood out for you?

RM: There were several headlines that stood out. 92 percent of Brits are relying on loyalty programs to give an extra boost to their everyday spending during the cost-of-living crisis. They are turning to loyalty programs for everyday spending to make their money stretch during the economic downturn. This was an absolute validation of my comment that loyalty programs are maturing.

More than 50 percent said they’re actively looking for new ways to collect points and maximize the return when they spend money, with 20 percent saying they were inclined to spend more with brands with loyalty programs. This told us that these programs are extremely powerful ways of effecting change. We know that people do not want to give up on precious things even in light of current circumstances, but they do still want to treat themselves and they will make rational changes in their everyday lives to make that still possible for them.

Even as the cost-of-living crisis continued across the United Kingdom this winter, we found that loyalty programs are playing a big role to help consumers during this challenging time. But we see clearly that a “one size fits all” strategy cannot exist. The complexity of trying to understand customers when there are so many influential dynamics was reinforced through this research.

WM: What did you learn about how members are using their points?

RM: People are savvy and rational in the way they collect and plan for use of their Avios, but we saw they are also willing to adjust their spending patterns to save up for an aspirational trip or a “treat” for themselves.  When spending loyalty points, 80 percent of people consider themselves rational decision makers and 20% emotional decision makers, with the latter (38% of 18–24-year-old’s and 31% of 25–34-year-old’s) likely to choose luxury rewards.

When we asked members in the study to select three things they would want to prioritize during this crisis, 65 percent chose treats, followed by their annual holiday (53 percent), then birthdays (42 percent), streaming services (40 percent) and live entertainment (34 percent).

It is clear that as household budgets tighten, people are looking for help to stretch their income and save for the experiences that can feel out of reach, and brands are responding by moving loyalty programmes to the top of their business strategy.

WM: Can you please elaborate on why you see us entering a Golden Age of Loyalty?

RM: We’re seeing more and more brands using the loyalty lever – from coffee to trainers, from the high street to streaming services – all competing in the same space. In these challenging times when money is tighter than ever, brands are in a unique position to demonstrate the value they can offer by making customers’ money go further. This is a Golden Age in my opinion because brands are exercising the wealth of information, they have on their loyal customers which gives them unique insight to create rewarding offers and experiences that ensure those customers get the most from their spend.

WM: When you sit down with a brand CMO to discuss the research, what would your message be?

RM: We have grown and responded to customers over time and our research emphasized the importance of loyalty to consumers. I would also make note of the marketing efficiency that loyalty can deliver to the enterprise. Loyalty is far more cost effective than alternate uses of marketing budget. The loyalty lever is now sitting squarely at the table for C-Suite leadership, rightly so as it had been overlooked for far too long.

WM: Will this evolution continue?

RM: Absolutely! We’re not done. We are removing pain points and have much more to do. Watch this space!

WM: Thank you!