What makes airline miles worth more than money?

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By: Wise Marketer Staff |

Posted on September 19, 2006

What makes airline miles worth more than money?

Loylogic's new Loypay frequent flyer reward payment technology - the platform behind the recently launched Etihad Guest loyalty programme - is set to make one frequent flyer mile worth as much as US$100, given the right circumstances.

Loylogic has officially launched the new Loypay platform which makes innovative use of a web-based 'slider' control that is, according to frequent flyer expert Randy Petersen, "among the most outstanding loyalty innovations since the creation of the first frequent flyer programme by American Airlines back in 1983".

Loypay is a reward payment application that can be integrated into the checkout process of a loyalty programme's reward shop, e-retail store, or airline flight booking engine.

Miles and cash As a result, Loylogic's loyalty programme clients can now give their members the option to pay for any reward using Miles + Cash (which is where the slider comes into play). Members can select their preferred payment combination by moving a slider button on the redemption web page, or by entering any value in the 'miles' or 'cash' boxes on the page.

At the heart of the application is an algorithm that combines over 20 different parameters, dynamically calculating the value per mile redeemed for the selected payment combination.

Sliding scale of value This is where to US$100-for-a-point claim comes from: The more cash a programme member contributes, the higher the value of the miles redeemed (interestingly, at unchanged cost-per-mile for the loyalty programme's sponsor). The potential value of each point used in the Miles + Cash algorithm is anywhere between a fraction of a cent and a maximum of US$100. For example:

Slider to the left: Miles only    Slider to the right: Miles & Cash

Complementary technologies Apart from the US patent-pending Loypay algorithm and software platform, Loylogic has developed its Loymart rewards catalogue, and a number of other related shop, agent, and help applications.

The system is scalable, secure, and runs on servers and communications systems that are backed up by redundant systems to avoid the possibility of system failures. A combination of web services and SSL-secured messaging means seamless integration with any loyalty programme's website and third party systems (e.g. points engines, booking engines, CRM systems, and other client infrastructure).

Choice of approach The company's loyalty programme clients can choose between Loyrewards or Loyair services:

  • Loyrewards is a reward shop that's customised to the look and feel of the loyalty programme, featuring Loypay and integrating Loylogic's existing reward partners for branded goods and services.  
  • Loyair focuses instead on Loypay being integrated with an existing loyalty programme reward shop or booking engine (as in the case of a frequent flyer or frequent guest programme).

Strategic aims According to Dominic Hofer, CEO for Loylogic, the company's services aim to reinforce the value of loyalty programme miles or points while giving the loyalty programme manager or CFO better control over mile or point costs and redemption rates. The key aims of the company's services, therefore, include:

  • A higher mile or point value than competitor programmes;
  • A more attractive programme, and greater member satisfaction;
  • Increased programme revenues (sales of miles to partners);
  • Increased company revenues (e-channel sales);
  • Increased programme and company value.

Member benefits This is all achieved, according to Hofer, by giving the loyalty programme's members the power to define the value of their own miles, as well as by offering benefits that are different from competitor loyalty programmes. For example:

  • Value of up to US$100 per mile or point redeemed;
  • Member-defined Miles + Cash reward redemption options;
  • All possible redemption types (e.g. buy, bid, gamble, give);
  • Worldwide reward shipping;
  • Multi-currency reward catalogue;
  • Personalised selection of unique/innovative rewards.

Addressing FFP liabilities For frequent flyer programmes, Loypay addresses one of the biggest challenges: Airline miles liabilities are calculated based on the variable costs of a free flight. This benchmark defines - and limits - the airline's reward investment per mile redeemed, making non-flight rewards extremely expensive for frequent flyers.

In other words, a free flight between New York and Los Angeles worth US$700 requires the same 25,000 miles as a US$90 retail voucher. The value for the frequent flyer works out at only US$0.028 for the flight, but US$0.004 for the non-flight reward. And a savvy consumer will always notice the difference. Loypay was designed with this airline-specific challenge in mind. Thanks to the sliding scale of point value, frequent flyer programmes can increase their attractiveness by offering non-flight rewards at competitive mileage prices while still keeping the programme sponsor's cost per mile unchanged. Indeed, Loylogic's motto is: "Making miles & points more valuable than money".

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