Leading By Example: How the Travel Sector Can Maintain Competitive Advantage


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The travel industry pioneered the modern loyalty program. As first-movers, you have both the accolades – and the bruises – as constant reminders of what was started in 1981. Since travel loyalty programs were launched in another acute recession, it is fitting that this current recession should present another major turning point for the future state of airline and hotel loyalty strategies.

Clearly, strategic changes and sound management are paramount right now. But, what specific actions can you take to ensure that this period marks a positive turning point for your loyalty program?

In every way that matters, the select segment of customers that have chosen to engage in your loyalty program can help take the sting out of this economic crunch. The good news is that there is no industry that understands that better than the beleaguered travel sector. In fact, the lessons that airlines and hotels learned during the perfect storm of 2001 – 2003 should serve as a reminder for us now.

Here are three lessons that reinforce why your loyalty program members may be your best asset to create a competitive advantage when financial equilibrium returns:

1. Trading down doesn’t have to mean goodbye. With companies cutting back on discretionary spending and slashing travel budgets, you may not see as much of your elite road warriors as in recent years.

That shouldn’t mean you automatically turn away from treating them as VIPs. Through analyzing the past profitability of your best customers, are there some customers that should receive extended elite status for the next 12 to 18 months?

Continental Airlines did just that during a particularly rocky period for their airline. From 1983 to 1990, Continental OnePass customers rode the ups and downs of a turbulent management period lead by Frank Lorenzo. An extended union strike and a Chapter 11 filing were just part of the rough patch that loyal customers had to endure. By 1990, when Lorenzo resigned as CEO, Continental extended lifetime status to the OnePass Gold and Platinum customers that stuck by them. Today, those “lifers” still sing the praises of that good will gesture.

COLLOQUY’s own research also suggests that approach – when done selectively for your most profitable customers – may pay long-term returns. Our SegmentTalk white paper revealed that 64% of travel program members said they were extremely likely to keep using their airline/hotel as a result of their loyalty program. Among Affluent households that are likely to be road warriors, nearly 70% said they were extremely likely to keep using their travel provider.

2. Help your most educated customers make hard adjustments. The uncertainty of the coming 12 to 18 months may bring additional travel service adjustments. How will you communicate with your elite customers to make future transitions a success?

Past experience shows that bonuses and straight-forward communications about the changes will speed the adoption of new behaviors. Your elite customers will set the example and help less savvy customers learn through word of mouth. In fact, COLLOQUY’s most recent word of mouth white paper reveals that 41% of your members already have conversations about benefits and the way to maximize their program experience. Further, over 60% of your members intend to continue networking with friends and colleagues about program benefits and rewards.

Southwest Airlines adopted this approach shortly after the attacks of Sept. 11, 2001. According to Debra Benton, director of loyalty marketing for Southwest Airlines, the importance of leveraging her loyalty program during those difficult times was paramount. “After 9/11, Rapid Rewards members were a high percentage of our flying customers. The [loyalty program] database was instrumental in helping us get the word out about security changes at the airports. Members are also the quickest to adopt new technology, to use low-cost channels like our web site, and to patronize our partners.”

3. Invest for the upturn. After decades of diligently evolving and improving airline and hotel programs, the last reminder is a simple one. The industry has weathered many challenges in the past. And, your determination to continue to improve the rewards and recognition elements of your strategy will pay off once again at this turning point.

At COLLOQUY’s 2008 Loyalty Marketing Summit, it became clear that tomorrow’s travel leaders intend to do just that. In fact, Delta Vice President of Loyalty Programs Jeff Robertson recently commented on how the Delta SkyMiles program is dealing with the tough economic circumstances. “During such times, the last thing you should do is cut the loyalty program. If you have the best program in your industry, you can be pretty tough to beat. And, in our industry, our goal is to be the best,” Robertson said.

The current economic crisis calls for sound, strategic leadership in the loyalty industry. A calm hand at strategically leveraging your loyalty program will obviously benefit your own company and the health of your program. But, the lessons that the travel industry learned during the perfect storm of 2001 – 2003 can also set the tone & agenda for loyalty programs in all industries.

So, once again, the travel sector is poised to lead by example: Remember, your company’s investment in your loyalty program is a great competitive advantage – even in downtimes.

Kelly Hlavinka
A partner of COLLOQUY, owned by LoyaltyOne, Kelly Hlavinka directs all publishing, education and research projects at COLLOQUY, where she draws on her broad experience as a loyalty strategy practitioner in developing articles, white papers and educational initiatives.


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