The state of travel loyalty schemes in the USA

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By: Wise Marketer Staff |

Posted on August 30, 2005

From the customer's perspective, travel loyalty programmes usually provide a combination of 'hard' and 'soft' rewards - hard rewards being physical and measurable benefits like money or free travel, and soft rewards being treats and perks such as expedited hotel check-ins. So where is the USA's travel loyalty market heading, and what's in store for the customer?

According to a new report, 'Travel Loyalty Programs in the United States', available from Research and Markets, the rewards and benefits offered by travel loyalty programmes today generally aim to meet customer's financial and emotional needs (which include offering appealing price incentives while making participants feel special, appreciated and valued).

Until now...
Historically, such programmes have been more about price discounts and less about relationship building, but the fiscally challenged travel industry, spearheaded by the bankruptcy-prone airline industry, can no longer afford to be driven solely by offering the cheapest deal, the report says.

The report covers the main loyalty programmes offered by the major US airlines, hotel chains and car rental companies, as well as those offered by online travel sites. In some cases, the loyalty programmes are multi-layered; that is, several companies follow a points/miles accrual programme, while other programmes work with real-time discounts and customer service concepts rather than points accrual. And many of the loyalty and affinity programmes are working together in business partnerships to offer greater flexibility and a broader selection of rewards.

Approach warning
But, the authors suggest, a new approach to customer loyalty programmes may be necessary: one that continues to focus on the hard benefits through discount points and competitive pricing while also providing an increased focus on soft benefits that cradle the emotional connection between customer and company (in order to provide customers with a special sense of belonging to something that they care about).

If driven by price alone, customer loyalty programmes often attract customers who are loyal for as long as the price is the lowest (bargain hunters or "cherry pickers"), and when a lower-priced offer is introduced elsewhere in the market, this so-called loyalty vanishes quickly.

Plan for the future
So, the report says, successful customer loyalty programmes in the travel sector actually need more than just the marketing department to get involved - they need a company-wide commitment and strategy that spans all departments because they involve creating and nurturing a personalised relationship that includes every employee-customer interaction.

At the moment, travel loyalty schemes that work on an accrual system generally use either points or miles (although there are some alternative names, such as "Dollars", but these generally equate to points). Points are commonly used by hotels and car rental companies, which offer points based on spend or, in the case of hotels, the number of nights paid for during a stay. Airlines tend to work in miles, which traditionally correspond to the number of miles flown per flight, plus bonus miles for elite members, as well as awarding miles for spend on branded credit cards and other partnership programmes.

Expensive advantage?
Loyalty programme members who have more than one type of membership can often receive both points and miles for a hotel stay if they present both their frequent guest and frequent flyer cards. They could also potentially receive miles, points or other rewards from their credit card issuer as well when they pay their hotel bill.

The Wise Marketer notes that such double-dipping and triple-dipping among travel loyalty schemes is something that consumers - particularly frequent business travellers - are taking increasing advantage of, and is likely to become an expected 'norm' for frequent traveller rewards.

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